Are we in it for the long haul?

Talking to a retailer the other day I was surprised to learn that there was little concern for their long term succession planning, with respect to the current situation with the US economy, and more pertinently where the US retail sector currently finds itself.

I raised the point with a view to understanding if retailers in the region were expecting any knock-on effects from the downturn in the US and Europe and how it may effect the region.

Having written for a few weeks regarding the problems that the US is witnessing, I understand that these two markets couldn't be more diametrically opposed than they are currently.

One has rapidly declining consumer confidence and purchasing power, whereas the other is continuing its double digit year on year increases off the back of high consumer liquidity and spend patterns.

However having been through a few financially sticky patches myself as a retailer, I know that things can change very quickly, consequently I suggested to this particular one, that theirs was an admirably bullish long-term outlook.

The conversation gradually moved on, possibly because I think he began to regard me with a little scepticism, as well as the fact that he quite possibly held me in a little less professional respect than he might have done previously.

My suggestion however was not that this should be a time for concern, but possibly one during which some carefully thought through succession planning will secure their long term viability.

As a result this could well mean that they are in a more secure position than some, if these markets are in actual fact subject to some knock-on aftershocks from the US.

The US has been churning out some frighteningly pessimistic figures recently, with some of the most recent suggesting that mall vacancy rates are generally on the rise, with rents moving in an opposite direction.

Additionally there is also the trend whereby more rentable space is becoming available on a monthly basis, than that which is being leased - something which in recent times has been unheard of and which is almost certainly the main driver behind the rent depreciation.

Gold rush

My concern that I expressed for this particular retailer was that with a reliance on tourists they could well realise a slowdown in footfall and consequently sales from this consumer group if those from the West continue to decrease their non-essential expenditures - such as holidays to the Middle East.

But the point really is that there are many retailers that currently regard the Middle East as a bit of a gold rush town.

They exist because there is no one offering a better or more complete solution than them, and then once the markets become a bit tough, they'll either move on or close, with their pockets bulging.

But what does this say about the sector that we work in? Is it here simply to whimsically satisfy our short-term needs, provide little depth or longevity and ultimately collapse around us once things become a little bit tough.

Realistically these times of optimism and strong yearly growth should offer us the chance to build a more complete retail solution, one that is robust enough to survive both the good and the bad.

This should mean a strong and efficient supply chain from vendor, via the warehouse through to the store shelf, as well as a smooth and well organised replenishment system along with minimal financial commitments to stock.

My fear however is that, for some retailers the region offers a get rich quick solution with many not being interested in long-term solution planning, but more interested in short-term, high margin and high profit sales.

The writer is Head of GRMC Retail Services, Dubai.