A STAGNANT ECONOMY CAN BENEFIT THE WELL-PREPARED

David Merrefield

It's nearly impossible to dwell too much on the economy and what it means for the food-distribution industry as we forge into the current year. Maybe the chief question has to do with whether the industry will move in sympathy with the economy, or if it will move in a counter direction.

So for this week's SN, we asked several well-positioned retailing and wholesaling executives to tell us what they think the condition of the economy will mean for their businesses and what it might foretell for the industry. You will find the resulting news feature on Page 1.

One curious fact about executives' observations is that many drew a distinction between how the economy as a whole might go, and how their businesses fare.

Moreover, it's strange to see that no real trend manifested itself: Some executives predicted the economy would recover somewhat this year, but that their own business would decline. Others thought their own business outlook was superior to that of the overall economy.

Why so? It appears as though executives quite correctly react more to their own regional economies than to the condition of the national economy. On top of that, they have a good ear for how their own shoppers are likely to react to regional economies.

As is often the case, the real answer to how business will unfold in the future is "it depends."

But regardless of whether executives are optimistic or pessimistic about their fortunes moving forward, a number made surprising observations of a different sort. These executives held that for various reasons the current year presents opportunities that wouldn't manifest in a more robust economic situation.

Here's a quick look at their observations in that vein, together with a little interpretation of what they might mean:

Differentiation: One executive pointed out the truism that the days of trying to meet every consumer need at every supermarket have long passed. That means stores must establish an identity. That could be by improving service, fine-tuning perishables or offering lower price points. The good news is that operators who do this will win a decided competitive advantage.

Labor: The cost of labor, and labor turn rates, are declining. This is good news, and not just because companies can lower costs. The better news is that enterprises can train workers and develop systemic expertise that will build business.

Attrition: The ugly reality is that in many markets marginal players simply will cease to exist. The condition of the economy means that operators that fail to differentiate and that fail to build internal expertise are likely to fail. Failure will come most quickly to those with little market share, but when market share is removed from one place it goes elsewhere. The good news is that it goes to those who succeed.

Technology: Finally, and on a different note, some operators took advantage of the halcyon period of the past few years to invest in technological improvements. So the good news is that they are now well positioned to reap benefits. And the timing couldn't be better.