Article: Bottom-Line: The Key To Surviving The Recession

By Vivek Sehgal, Supply Chain Musings

Top line growth becomes a mirage in every recession. This one is no different. Retail sales have been shrinking. Every major retailer has announced shrinking revenues for past few quarters and none project growth in the coming quarters either. In fact, the data from US Census Bureau shows that the monthly sales in 2009 have actually fallen below the levels in 2007.

Focus on the bottom-line.
That is really not an option. For any retailer to survive the current climate, they must have a laser sharp focus on costs. While cost can always be a strategy for growth, it is all the more important during a recession, because in a recession, it can become a strategy for survival. While the current recession has drawn everyone's attention to cost, it has been gaining critical importance in recent years due to reasons that are more global in nature. Here are two of the basic reasons for the new found prominence for cost even before the recession started:

• The first reason is what I term the commoditization of products en-masse. It deteriorates the brand premiums and indirectly deals a blow to product differentiation as a strategy. The face of this commoditization in America is Wal-mart and its assortment of cheap functional products that address the utilitarian functions without the brand premium.
• The second reason is the new mass markets, increasing the demand for functional products at affordable prices. These markets have been created by the increasing middle classes in the developing countries with aspirations to match the lifestyles in developed countries, but at a fraction of the cost of similar branded products.