With the Christmas season now well and truly upon us, we have entered the most crucial period of the year for retailers.

With the Christmas season now well and truly upon us, we have entered the most crucial period of the year for retailers.

So December is a good point to reflect on the year gone by and consider where retailers have been successful, and where they have faced challenges.

It is fair to say that the year has not gone as well as most in the sector might have hoped for back in January. The recovery that had been anticipated at the tail-end of 2010 has not materialised, and instead we have seen a continuing low-growth climate.

Consumers have been affected, and with lower levels of disposable income available, retailers have needed to become much smarter in how they operate their businesses.

Coupled with this and some unseasonal weather, the need to avoid surplus stock going in to 2012 has led to a number of retailers running longer autumn discount periods.

The rising importance of new channels of distribution means retailers have had to adapt their models to embrace these new methods if they are to remain competitive. This is proving a real challenge for some, making them think about the size and location of their estates.

Despite these difficulties and a few high-profile insolvencies, retailers have generally responded well to the challenging environment. The current downturn has demonstrated the importance of having a strong management team at the helm that can adapt to fluctuating market conditions and maximise their opportunities whatever the trading conditions.

Bank funding is a major catalyst for growth in the retail sector, and banks have in fact continued to lend to companies in the industry throughout the downturn.

Funding for retail businesses differs somewhat from other sectors as it mostly consists of cash flow lending. Retailers usually have a quicker cash flow than other businesses, as they tend to have fewer debtors and therefore generate cash much faster.

Retailers are great collectors of statistics and deal in cash, making it possible for them to produce strong sets of up-to-date figures, which are very useful for informing decisions on funding as they can be compared against a business plan regularly to see what is working and what is not.

The strength of the management team and their business plan is the major factor that a bank will look at when assessing funding.

The ability to demonstrate a strong and well-defined strategy that shows a good understanding of current market conditions is crucial, and we like to work closely with highly adaptable teams that are backed up by strong second-tier management.

We are also keen for retailers to embrace new channels of distribution – however, we of course understand that this requires significant investment.

Looking forward to next year, it is likely that conditions will remain challenging as the eurozone debt crisis rolls on. However, compared with this time in 2010, retailers have a clearer view as to what the coming year will hold.

There will be some good opportunities next year through continued online expansion. However, the 2012 Olympic Games will be a mixed blessing – while it will attract more visitors to London many people will be watching the Games rather than shopping.

Through such actions as moving supply chains closer to home and growing their internet offers, as well as constantly reviewing estates, buying strategies and working capital cycles, smart management teams are making plans that can accommodate future changes and so placing themselves in strong positions to secure funding and seize opportunities.

  • Charles Lamplugh, Lloyds Bank Corporate Markets, Lead Relationship Director for Retail