‘Sales is like a faucet, it turns off and on. And sometimes when you think it is on, baby, it is off and gone…’ (with apologies to Billie Holliday’s Fine and Mellow).

The difficulty in today‘s retail environment is now recognised by all as a real issue. But what is making it even trickier is the unpredictability. With each passing month businesses are trying to adjust across sectors to a new reality of low to no growth. The issues are no longer regional but transcend geographies, with many of the bright spots of a few months ago now looking dull and dreary.

So in such a bear environment, what is to be done? Where do you continue to find growth?

Among the many growth tactics in the retail toolbox, one of the most commonly employed in this region is network expansion. Open more and more new shops and locations and mop up additional sales. Whether it is coffee shops or burger joints (‘kitchens’ as they like to be called nowadays), fashion stores or jewellery, there has been this unquenchable thirst for more and more shops to a point where it had become ridiculous.

I had mentioned in an earlier column that at the Dubai Gold Souk, key monies for locations were being paid in the tens of millions of dirhams. This was manifested differently among major mall developers as they routinely waved a mile-long waiting list in the face of hapless supplicants.

So as things have changed how would you respond? As I see it, there are two approaches.

Now that the markets are in a state of slumber, the appetite for expansionary growth has taken a major dent for many operators. However, people with a long-term vision and deep pockets may try to use this time to get into locations that normally would not have been available. The demand on good sites has not died away completely and mall managers are still pretty confident about their properties.

But people are not as readily buying into the dreams weaved with glossy brochures and presentations and the pressure is visible on the marginal and secondary malls. The cold will eventually reach the big ones too as more and more existing shops find it unviable to continue operations.

The other way of looking at it is to reassess expansion plans after reviewing your existing network. Where earlier chains would want to have two, three or more locations in a city, street or mall, evaluate if your presence can be fulfilled with just one or two shops. In a market that is not expanding, maybe it is better to allow demand to be met with fewer locations and lower overheads — a classic depth versus width strategy.

In the present scenario, mall owners are not really willing to let existing tenants go easily as they are loathe to lose any income which invariably happens with a change. So don’t expect any support from them in this regard. There is still however, something to say for network expansion as a means of building market share and dominating the competition.

But proceed with caution.

The times are exciting and it is going to be interesting to see the punts that people take. Besides the most obvious consideration of the company’s cash situation, a swathe of issues need to be factored within the equation — which segment are you in? Is it cheap and fast fashion, which is generally more resilient in downturns, or branded mid-market or high-end garments where the pressure builds up quicker?

Do you cater to the local market, which is here to stay, or are you mainly serving travellers and tourists, where you can expect a flat market for at least a year? Is it gourmet sandwiches which calls for greater discretionary disposable income, or quick and easy food for people on the run which will sell much more readily? Tactics are many, with no one size-fits-all approach.

There is no doubt that the current market situation is not permanent. The fundamental strengths of this market, its unique geographical position, the attraction it represents for new capital as a safe haven, its standing within the region as a hub of creativity and generator of trends and fashion is unchallenged.

To top it all, we have a government which has its ear very close to the ground and knows exactly which buttons to press and when. And this is witnessed in the fact that there is still massive and visible investment going into infrastructure construction. But each business needs to take steps to protect its own health and future.

All the best.

— The writer is a senior executive with a major retail group.