Retailers feeling the bite of the credit crunch but remain optimistic

Retail businesses admitted that their suppliers are increasing their prices (73%), they aren't expanding as quickly as they would like (67%) and are actively looking to reduce their own costs (50%).

With the ever-increasing dominance of the supermarkets and out of town retail parks, plus the heavy burden of business rates, the future of the small and medium sized businesses operating in the retail sector are feeling the pressures more than ever. However despite this customer downturn, and tough trading condition for retailers, many small and medium sized businesses (SMEs) appear to be reacting bullishly to the credit crunch. When asked if they had to start their business again in today's economic climate, 61% of SMEs would do it all again tomorrow, of which 45% of retailers said yes to the same question. The research by The Credit Show, an exhibition and conference for professionals associated with the consumer and commercial credit arena, shows that SMEs on the whole plan to expand sales in the UK on average 56% in the coming year. The study is based on detailed online interviews with 117 small and medium sized businesses. The businesses were drawn from across the UK and from a mix of sectors.

In general, the study paints a picture of an SME community in bullish mood. Just under half plan to expand into a new area in the next 12 months and a further 37% will recruit new staff. Over one in three plan to launch a new product or service and only 1% plan to scale back their operations. Indeed when asked to state their future optimism, over three quarters (78%) of SMEs said they were confident about the future of their business, with 72% of retailers also agreeing to this.

The survey highlights a real audience split with some SMEs noticing the effects of the credit crunch on their business and others seemingly untouched. For instance, the report showed that 28% say that they are now finding it harder to borrow from the bank, whilst 38% of respondents from the same survey admitted to not noticing the credit crunch.

However, there is no doubt that some SMEs are feeling the pressure of the credit crunch. For instance when asked what changes their business had noticed in the last 12 months, the top response with 56% was that suppliers had increased their prices. With other half of suppliers increasing their prices this will have a huge impact on the supply chain, affecting further businesses throughout the UK.

Despite being under pressure from suppliers, many feel unable to increase prices with their own customers, especially as many are facing weakening demand. Only 18% say customers are buying more on credit, and over half of SMEs (55%) admit that their customers are more and more frequently looking for deals or asking for discounts.

Kamala Panday, Publisher of Credit Today comments: “For some, the credit crunch is beginning to bite. However this survey shows that their hunt for growth has not been affected, no more so than with the retail sector. Businesses are now playing a more strategic game, with over half admitting to chasing slower payers more vigorously.”

“What's encouraging to see from our point of view is the increasing role that the credit control function is playing with the SME strategy.”