Retail in 2011 – The Good News and Bad News

A new year brings new opportunities, but also new challenges. For retail CEOs, some indicators are pointing in the right direction, but several concerns linger.

Here are a few things keeping CEOs up at night, and some solutions to consider.

1.)    Commodity Costs. Concerns over rising commodity costs have reached a fever pitch. Consumers aren’t likely to stomach price increases, so retailers will need to find the right give & take with their suppliers.  Exclusive partnerships and rights for apparel lines at big retailers may be a good compromise.

2.)    Unemployment. The bad news? Unemployment is still hanging around 10%. The good news? The other 90% of American consumers are spending and have seen an increase in their purchasing power. My colleague, Doug Hart, calls this the “tale of two consumers.”

3.)    Currency Exchange.  Inflation is on the rise in China and threatening in other major sourcing countries. Hedging to lock in future prices will be vital to retailers’ success and security in 2011.

4.)    Retail Bankruptcies. We’ve seen the worst, but we haven’t seen the end. Rents are stabilizing, but many threats remain for small retailers and a few big names that are on the brink. Still, the availability of liquidity is at a high point, which may help struggling retailers during the down season following the holidays.

5.)    E-commerce. The 2010 holiday season saw the largest increase in e-commerce sales to date with $30.81 billion reported. For some retailers e-commerce sales are a natural extension of their brick-and-mortar sales, but it may force some hard goods retailers to close up shop. We’re likely to see one of two strategies emerge in 2011: expand by selling in new categories that fit; or expand on what sells well, to try to become category killers. And across the board, we’ll see retailers try to make stores more user friendly, cutting the clutter and creating a warmer environment.

What are your concerns for 2011 and what are you hopeful for?