Shop Talk

Retailers, consumers and prices

Consumer industry eyes more cost cuts than other sectors

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clothing-racksConsumer product manufacturers and retailers have a relatively sharp eye for cost-cutting, speed and expanding into new markets, a report released on Thursday showed.

Sixty two percent of consumer and retail firms see additional opportunities to lower costs in their supply chains, compared with just 48 percent across all sectors, according to Ernst & Young‘s Opportunity in Adversity research.  That means cuts above and beyond the trimming that has already been completed.

Of course, many companies in the consumer and retail space have been able to navigate the recession better than the overall business world since people still need to eat, drink and — occasionally, these days — buy clothes and shoes.  At the same time, manufacturers in the space face the added pressure of retailers cutting back inventory levels as they try to boost margins.

Others have also seen consumer industry companies taking a closer look at their supply chains.  Carlos Niezen, head of Bain & Co‘s purchasing practice, told Reuters that smarter firms take a step back to see if they can revise their cost structures, rather than just looking for quick fixes to trim spending in the short term.  Still, in a Bain survey of 60 executives from various industries earlier this year, 85 percent said they lacked best-in-class purchashing capabilities at their companies.

Consumer goods makers try to offset the fuel cost pinch

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While products ranging from cereal to tissues cost more these days, more than a third of food and household product makers have not been able to recoup higher fuel costs by raising prices, according to survey data released this week.

Manufacturers have been raising prices to offset higher costs stemming from the rise in fuel prices and the impact on raw materials and transportation.  According to a survey of consumer goods executives at the Grocery Manufacturers Association‘s Fuel Roundtable on Oct. 7, those price hikes are often not enough.

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