Inefficiencies in retail sector must be addressed

These are distressing times for the retail industry in the Middle East, but perhaps not for the reasons that you might think.

As consumers we are more cost conscious and price aware, a combination which has led to a general curbing of expenditure and reduction in sales for retailers, but this has been going on for a while now.

Assuming that most, if not all, retailers have caught on to this by now, there are some more pressing issues that may lead to widespread trouble.

Firstly, there appears to be increasing inefficiencies being witnessed in the sector, where mismanagement in the supply chain means that new or replenishment stock is not getting to the shop floor quickly.

However, many stores have a great deal of stock to manage through the business and so with shelves creaking under the weight of some of it, I suspect this is more a localised issue.

Moreover, there also appears to be a general "woe-is-me" attitude prevailing in the retail sector, where retailers are struggling to come to terms with the reality of slowing sales and reduced footfall, and as such feel that we should all empathise with their position, by either giving them free rents or buying lots of merchandise.

Retailers need to become a bit more street smart, learn how to properly run a retail business, invest in planners and (quickly) learn not to be so reactionary.

However, my main issue is more of a deep-seated industry decision to only now start restructuring. For the second time, I have heard reports that relationships between suppliers and retailers have broken down because the retailers have decided that now is the time to restructure their business.

These decisions are coming 18 months into a recession and only now are businesses looking to restructure or reorganise their operational set-up - who on earth is getting paid to make these decisions?

Unfortunately I think it is probably the same people who instructed their buying teams to order too much stock a year ago when things were looking decidedly tricky in the world's economies.

In both instances, the supplier has been left with not only not knowing what to do, whether it was stock they were trying to deliver or a marketing plan they were trying to implement, but also then having to bear the brunt of the retailers' inefficiencies.

The wider and more worrying aspect of this is that although we have demonstrated that we are capable of building some of the world's leading retail destinations, on current performance we have not been able to prove that we can operate the businesses within them.

Having the world's best malls is all well and good, but if they are full of badly run retailers, then we are only halfway towards truly becoming a global retail destination. While the other global retail markets are fighting this recession tooth and nail to stay relevant, we are still moaning about high rents and the lack of footfall.

The more savvy global retailers are already coming through the bad times and have sufficiently realigned their business model so that they are on an up-curve, albeit a very slight one. Why then are our stores still full of old stock, with badly managed staff members?

It really is time that as an industry, we start to manage our retail businesses more efficiently from the bottom up.

We have to make sure that the key pillars of well thought through sales and stock plans and an efficient supply chain are at the heart of the business. With such models in operation we will then remove the necessity to resort to knee-jerk reactions.

- The writer is Head of Retail Services, GRMC Advisory Services.