He also said "We have seen to what extent they have been affected by the series of trading updates that were released at the end of 2008 by retailers in Europe and the US. Even Inditex and H&M have reported a dramatic slowdown in their growth."

Difficulties ranging from attaining credit to reducing operating costs are set to continue this year, with the weaker companies likely to fall by wayside in a tough marketplace.

Undoubtedly apparel retailers are feeling the effects of the banking crisis because so many are carrying high levels of debt. The rapid expansions that have seen over the last five years or more have been fuelled by companies' ability to raise money from banks.

It is inevitable that the global financial crisis, which is leading to the recession in UK, and US will result in much more consolidate marketplace. Whats more, larger and more resilient players like Nike, VF Corporation and Inditex Group will be able to pick up business units for a bargain prices.

Unfortunately, this consolidation, together with tighter inventories, store closures and cost reductions, are all likely to result in job redundancies typically associated with recession.

"The banking crisis will undoubtedly lead to casualties in 2009 as consumer spending continues to fall away as many predict. What we will also see is that, just as with Woolworths in the UK, even if a business or consortium wants to buy a failing retailer, the banks will be very unwilling to finance the deal. So, the traditional pattern of consolidation and takeover that we have seen in other recessions may not happen as businesses simply go under and disappear," says McGarrigle.

It was a week that will go down as one of Wall Streets worst and global stocks were sent tumbling. Eventually, three of the Iceland's largest and most highly indebted banks- Kaupthing, Glitnir and Landsbanki- all collapsed amid the turmoil and were nationalized by the Icelandic government.

The US government formulated a US$700bn bailout package for its financial institutions, but much of the damage is done for many listed companies and their consumers. However, government bailouts for car and steel manufacturers raise the prospect of these safety nets being extended to other industries too.

Looking ahead to 2009, retailers will be forced to continue to make cut backs, but they will resist as long as possible, reducing staff levels in store where they can make a real difference in winning business. For some retailers this might mean cutting back or postponing international expansion plans.

"But there are enough examples now of retailers that are seeing strong growth rates from their international operations compared to their domestic business, to show the way forward for retailers."

The BRIC (Brazil, Russia, India, China) economies remain the favoured destinations even though Russia and India have seen slowdowns in their economy. But compared to the rest of world, their growth makes them highly attractive still, coupled with the fact that the rise of property prices there has now stopped and is in decline.

The apparel industry is more prepared for a slowdown in consumer spending than they have been in previous years. Advancement in technology, inventory control and product life cycle management tools will help companies be more responsive to the economic climate. Those with the best product life cycle management and inventory system in place will fare better.

Source: AEPC Weekly