Retailers eye M&A, emerging markets to spur growth

* European, U.S. retail industries seen consolidating

* Both seen moving more into faster-growing emerging mkts

* Web sites offer a test ground for overseas expansion

* Innovation must not fall victim cost cutting

By Mark Potter and Victoria Bryan

BERLIN, Oct 25 (BestGrowthStock) – Retailers in the United States
and Europe must consolidate and invest in emerging markets and
innovation or risk stagnating in an environment where domestic
demand will remain subdued for years, industry leaders said.

Executives and economists at the World Retail Congress said
the United States and most European countries were likely to
avoid a slide back into recession, helped by a pick up in global
trade that is being driven by demand from emerging markets like
China.

However, they warned that for the foreseeable future,
domestic demand would not return to the boom years of earlier
this century, pointing out unemployment was set to remain high
as governments seek to pay back the mountain of debt spent on
easing the effects of the recession.

That will make for tough decisions in the U.S. and European
retail industries, which have grown fat during the good times.

“The retail industry has grown too rapidly and has increased
capacity far more than demand over the last decade and now we’re
left with too many stores, too many retailers and certainly too
many shopping centres,” Ira Kalish, director of global research
at consultants Deloitte, said of the U.S. retail industry,
adding he saw a similar picture in many European markets.

“We’re going to have a shaking-out, a consolidation that
will come about through both merger and acquisition activity as
well as through bankruptcy.”

With U.S. companies sitting on record cash piles and
interest rates set to remain low, the ingredients are in place
for a pick up in takeover deals, while store groups should also
look to extend their presence in faster-growing emerging markets
like India, Brazil and Russia as well as China, Kalish said.

TAKING RISKS

Retail history is littered with examples of failed
international expansion, as store groups that have prospered in
one country fail to adapt to different tastes and cultures.

However Stuart Rose, chairman of bellwether British retailer
Marks & Spencer (MKS.L: ), said the industry now had the powerful
tool of the Internet to try out new markets at little cost.

“It’s the advance guard (for overseas expansion),” Rose
said.

British budget clothing retailer New Look is already using
the strategy, while also looking for acquisition opportunities,
company Chief Executive Carl McPhail told Reuters.

In recent weeks, New Look, which has stores in 13 countries,
has ramped up the number of markets it can serve online to 122
from 33. It also plans to launch local websites in France,
Germany and the United States. [ID:nLDE69O1HW]

In the current subdued consumer environment, retailers need
to resist the temptation to focus solely on cutting costs, said
Mindy Grossman, chief executive of U.S. teleshopping and
e-commerce group HSN Inc (HSNI.O: ).

“That’s not going to get us anywhere,” she said, arguing
that tougher times made it more important for firms to invest in
new products and new ways of appealing to shoppers.

“We have so many opportunities to reach the customer,
whether it’s in a physical environment, on television, online,
mobile, social (network sites). There is more access than at any
given point in history — we just have to do it in a way that
makes them excited and makes them want to engage.”
(Editing by Karen Foster)

Retailers eye M&A, emerging markets to spur growth