One impact of the global economic crisis on major C&T retailers has been a reduction in their return on capital employed (ROCE) and net margins by a third or more. C&T suppliers now need to assess the extent of this change in power-balance in their own trading relationships, recognise their strengths and optimise the new customer opportunities.
This can also help the retailer to fully appreciate the role and value of a C&T brand that combines good margins, efficient rotation, free credit and appropriate levels of trade investment to enrich the shopping experience via targeted in-store theatre.
Retailers have also had to cope with structural changes in the overall market in terms of the growth of discounters, convenience and online in a multi-channel flatline environment. In the UK, it could be said that the market dominance of major retailers is being challenged. C&T suppliers that have anticipated the emergence of additional and varied routes to market are becoming less dependent upon the major players, in terms of share of sales, at least.
Unless retailers generate ROCE performances of 15% or more, and net margins of over 5%, they cannot pay down debt, raise new capital, attract investors to fund business development, or even guarantee their own independence. And despite their high retail margins compared with average retail players, C&T retailers have not been able to meet market expectations in terms of financial performance. A fundamental change has occurred.