Below are some additional comments from Klein Merriman, executive director of the Association of Retail Environments (A.R.E.) in response to questions posed on the state of the retail environments/store fixture industry.
"Over the course of 2010, a slow recovery in demand began to take hold in the North American retail environments industry. And with the strong 2010 holiday sales comparables the pace of the recovery could accelerate in 2011. Association for Retail Environments research indicates that sales of retail environments products increased by 9.5 percent in 2010 and we project an additional 10 percent increase in 2011. But the recovery has been uneven, sometimes agonizingly slow, and characterized by fits and starts. Many in our industry have been complaining that there is almost no visibility when it comes to future sales prospects. In most cases, retailers are very hesitant to commit to capital expenditure plans until the last possible minute. But after our members experienced a drop in sales of over 3 percent in 2008 and an unprecedented decline of 22 percent in 2009, even a slow and hesitant recovery is a welcome change," Merriman says.
"At first glance, industry growth of close to 10 percent for two consecutive years sounds upbeat. But this is until you realize that the industry has declined so dramatically that it has a long way to go to “get back to even.” As the “Retail Environments Industry Sales” chart indicates, it would take three consecutive years of 10 percent increases for the retail environments industry to get back to 2007 levels.
"The cumulative over-25 percent decline in sales over the last two years in the retail environments industry has not been matched by a corresponding decline in industry capacity. To the contrary, industry capacity may actually have grown while demand has contracted. This is because China’s capabilities in manufacturing fixtures, displays, and visual products has continued to grow through the downturn. Plus, to date there have been relatively few companies exiting the industry due to bankruptcies or closures. This major decrease in demand without a corresponding decrease in supply translates into serious overcapacity for providers of retail environments in North America," he adds.
Merriman continues, "There are some real reasons for optimism for retail environments providers. Strong sales gains two years in a row are certainly much better than what industry suppliers experienced in 2008 and 2009. Beyond this, structural factors are working in favor of our industry. Most importantly, pent-up demand for new and renovated stores should translate into sales gains going forward."
“The competitive environment has changed and retailer expectations have changed.” according to Bob Riley, A.R.E. President and CEO/President of DSA Phototech, Carson, Calif., “Successful suppliers in 2011 will need to offer cost effective, creative solutions to their clients, and be prepared to offer technology integration to the products they provide. With the emphasis on remodeling existing stores, instead of building new stores, suppliers and designers will be focusing on providing the most visual impact within the budget allowed.”
Merriman adds, "Looking back, a relatively mild eight-month recession in 2001 caused two subsequent years of weak sales in the retail environments industry. It wasn’t until 2004 that pent-up demand was fully unleashed and the retail environments industry grew by 12.5 percent. It appears that it will take even longer to fully recover from the more severe 2008/2009 recession. Two-thirds of the respondents to our September 2010 A.R.E. Industry Forecast believe it will be 2012 or later before they are back to 2007 sales levels. So the outlook for 2011 is continued growth—even if at a pace slower than most would prefer."
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