Despite challenging retail conditions, winners continue to emerge from downturns with dramatic gains. The key is understanding your competitive and financial positions at the start of a downturn. Lewis Weinger, a partner with Bain's Retail practice, discusses how both leaders and laggards use that knowledge to pull the right value levers.
Read the transcript below.
LEWIS WEINGER: Globally, recent retail conditions have been challenging. In downturns and down times, we see much more dramatic gains and losses than in stable periods in terms of market share. And there are winners, even in tough periods of time. We looked back at the US retailers, pre and post the 2008 recession.
And in fact, in nearly every subsector, there were companies that won and grew same-store sales growth. So naturally, we were curious to understand, what did winners do differently than everybody else? And as expected, there was no silver bullet action that every winning retailer did.
But we did see patterns in the data. The patterns tied to the starting point: How well competitively positioned was a retailer in terms of same-store sales growth, in terms of market share, in terms of customer advocacy? And how well were they financially positioned? Profit margin, debt ratios, things like that.
Now, clearly, it was best to be advantaged competitively and financially. Companies like TJX reinvested in their value proposition and accelerated growth coming out of the downturn. But even companies that were disadvantaged from a financial position, from a competitive position, were able to restructure the business, focus on cost and cash flows, and become a leader from a lagger position.
So the key when facing a downturn or a crisis is to understand your starting position, because that dictates what value levers you can and should pull. Look at your competitive position. And if you have gaps from a value-proposition perspective, think more about who your design target is, which customer segments are you trying to win. And have focused investment to differentiate that target customer. And equally, in a financial position, determine how well positioned you are and whether you need to zero-base your activities, your processes and your costs.