This will be the first downturn many retailers have worked through, but there are those who have been here before. Some of retail’s most distinguished names tell Charlotte Hardie in their own words how to deal with a slowdown.

David Jones

Former chairman, Next

This is the worst retail recession I have ever known. I’m no economist but, in the past, downturns from a retailer’s perspective have been about ups and downs. They’ve been cyclical. This is more fundamental than that because it’s been caused by a collapse in consumer spending. People have been living on credit for so long, so this downturn is far more deeply rooted. I can’t see it getting better until Christmas 2009.

Luckily for my generation, many people have had the luxury of making money from property. Suddenly people were rich. That’s the big difference between then and now.

When business is good, you take on more people, business is growing and the fact that sales are going up by 20 per cent each year means you can hide expensive projects and people. In a downturn, you wipe all that out. Next had tremendous growth, then a slow year – that was the year you made your cost savings. That’s the only thing you can do. It’s about cutting costs and sitting back to think laterally about the problems.

You always need to have an older head on your board of directors. Younger chief executives are at a disadvantage but most of them are pretty clever people and call upon the older generation like me to give them a hand. This is a unique time because older managers are much more in demand, and at the same time the older customer is much more attractive.

For me, the most difficult time was the late 1980s and early 1990s, not only because there was a formal recession, but because Next was in deep trouble. The share price had gone down to 7p and we were going broke. But the big advantage I had was that everyone assumed we were going broke and everyone ignored us. We were able to get on and sort it out.

It’s about common sense. That sounds blasé, but when we set about getting Next sorted, it was about good staff, ensuring the stores looked good and getting the product right. Nothing else matters.

Lord Kalms

Founder of Dixons, now DSGi

The fact is there are opportunities for companies in a recession. My advice is you toughen yourself up – the strongest will survive.

The enormously difficult times were in the 1950s and 1960s. There were huge tax difficulties and government credit restrictions. Now it’s a free market and you haven’t got government hindrance. You’re not fighting with one hand tied behind your back; you’re fighting with both fists.

There are no excuses – you’ve got to go out there and slug it out. You need to make sure every one of your staff knows times are hard. Make sure you sharpen your prices and make sure no sale is lost.

The last thing you do is roll over. You need to be more aggressive and more competitive and you need to sharpen up your act. You need to make sure you have a unique selling proposition and fight the battle. When your business is tougher, you fight harder. You absolutely must not lose market share.

Archie Norman

Former Asda chief executive

You have to go back to the early 1970s to see [the last time there was] a combination of a lot of liquidity, a decline in the property market and a breakdown in construction, together with a cost-driven consumer squeeze. To add to that, we’re now seeing global price inflation and the UK-specific problem of an over-inflated property market.

It would take a brave soul to forecast a rapid pick-up next year. This is worse than the early 1990s. It’s different both in terms of severity and length.

Don’t think of this as a downturn; think of it as a change in the landscape. We’ve had it good for a long time and the first reaction is that it will come good again soon. That’s a mentality you want to put to one side because you’re just creating endless disappointment in the business. Of course it will get better at some point but, when it does, the landscape will be different. It’s far better to look at it like that rather than wait each week to see if it improves.

When we took over Asda, the business was so bad we didn’t need a downturn, but we stripped it down to the core. We outsourced what we could, consolidated from three head offices to one and gave people brutally realistic forecasts. Nothing is more depressing for managers than being told about a false dawn.

Sir RichardGreenbury

Former chairman and chief executive, Marks & Spencer

There are differences between the early 1990s and now, and quite significant ones. Today you’ve got a collapse in confidence in the banking system. And, back then, there was more confidence in the government to manage the problems.

It is possible to manage a difficult period well. I came to Marks & Spencer just as the 1990s recession was starting to build up. When I went into it, it was making£500 million a year. By the end of 1993, it was making£750 million a year. The good businesses will ride out these difficult times and some people will find it presents an opportunity.

Decide what your business stands for. If you’re selling low- and competitively priced goods, that’s what you have to stick to and you have to be even more competitively priced than before.

It’s the product strategy that’s important. We didn’t advertise then, but people knew we were about quality. We took the view that the most important thing was to ensure the people who came into our stores suddenly saw some incredible value items for sale. At M&S, our reputation was for selling high-quality goods at value-for-money prices. We thought to ourselves: “Whatever happens, we’re not going to cut the quality of our goods. We stand for high-quality raw materials, so we’re going to see what we can do to ease the price points downwards.” So we lowered the margins that we sold the goods at and said to suppliers: “If you can reduce your margins by a point or two too, we ought to be able to make a significant difference to the price points.”

You’ve got to get suppliers on side. We had a very special relationship with our suppliers and this was one of the things that helped make the business so successful. You can’t say to them: “You’ve got to reduce your margin, but we’re not going to reduce ours.” You say to them: “If we work together, we can get the price down and you’ll get more volume in the factories.” That’s when they respond.

Cash is king. You’ve got to look at your costs and conserve money. One thing that we looked at in particular was the hours people were working. If sales are down a few per cent, it’s not impossible to ease their hours of work by a few per cent. People have to accept that. If you do 30 per cent of your business on a Saturday and a Sunday, you can ease things back and control staffing costs.

Most of our property then was freehold. We made sure of that and it helped us hugely, because we didn’t have big occupancy costs. Subsequently, it’s all been about sale and leaseback, which has built up higher costs.

Really, retailers have nothing to complain about. They’ve had a wonderful run for years and people have been spending money like water. Those running retail businesses are a clever bunch of people. They’ve just got to do what’s right for their individual business.

John Hoerner

Former Burton Group chief executive

The last really tough trading period for the clothing sector was 1999. There was deflation in prices coupled with very steep high street rents. Rents were going up and clothing prices were going down. In the late 1980s to 1990, inflation was at 1 to 2 per cent. From 1995 to 1998 there was no inflation, but in 1999 prices were down 15 per cent. To move the business forward and ensure it survived that difficult time, we got rid of marginal shops, which required a big write-off.

The press and the City didn’t understand what was really happening. They only looked at profit numbers and how they were achieved.

Keep your sense of humour. That is my advice to retailers that haven’t worked through a downturn. Swimming upstream is harder than downstream.

When times are good, it’s not all about you, and when times are bad, that’s not all about you, either. Sadly, retailers tend to want to take all the credit for themselves when times are good and blame other factors when times are bad – like governments.

John Clare

Former chief executive, DSGi

This time it’s as sharp and as deep as anything I’ve experienced before – certainly for non-food and non-fashion. But, as yet, it’s not as prolonged. For us in electricals, the last downturn started in 1989 and we had significant trading issues for the best part of three years.

These are the times that sort out the best from the rest and the long-term winners from the losers. If you’re a strong business, while it’s still a painful time, it must be seen as an opportunity.

The tactics you employ depend on the market you’re in. Big-ticket durables get hit hard quite early and they tend to be the first to show signs of recovery. This is partly because people delay spending money on these items, then eventually they reach the stage where the products become a necessity to replace.

Don’t chase sales or market share. Lots of people do it, but it’s very expensive. It’s far better to focus on margins and, if need be, lose a bit of market share. Margins are thin in retail and few can lose 5 per cent off their top line and not struggle. If you are in a durable market and are double digits down, then I’d be concerned.

Sharpen your cost base and operational execution, and get your business slimmer, leaner and fitter. But that can be quite difficult to sustain; a lot of the things you adjust don’t always have the impact you expect because the market isn’t there. You have to wait to see the benefits come through when the market picks up.

If you’re a robust retailer this is the time to look at how you can benefit – firstly in terms of how you improve your performance, and secondly how you put pressure on your competitors that aren’t doing as well. Quite often, the answer to both will be the same.

Lord Harris

Chairman and chief executive, Carpetright

It’s as bad as 1974, but we had different problems in those days. Although there was high unemployment in the 1970s, it was fairly steady. Now it’s growing. It’s definitely worse than the early 1990s. John Major had a reasonable balance of payments back then, he didn’t have the bank problems that we’re facing now. The banks have no money.

It could go on longer than people are expecting. It’s going to be very difficult because people have more personal debt and, although inflation is lower, pay rises are a lot lower than inflation than they were in the past. The inflation is 6 or 7 per cent, but people are only getting 3 per cent increases.

Nothing’s going to be simple but you’ve got to hold your nerve. The key thing is to keep costs under control and keep your staff motivated, and you’ve got to make decisions early and make sure you’re not overstocked. People mustn’t panic.

Gerald Ratner

Former chief executive, Ratners

1991 was as bad as it gets. The Christmas run-up was terrible, so we decided to cut 25 per cent off prices. But the problem was we were already in a pre-Christmas Sale, so we were giving some stuff away. Also, we only did it on certain days. Even if you told people it was a one-off, they knew to wait for the next day to come along, so we’d get these huge spikes.

I’ve certainly learnt my lesson – this time around we’ve knocked 33 per cent off normal prices at Gerald Online and kept those prices reduced for a while. We’ve been doing that since April and it’s resulted in a dramatic increase in sales.

Your prices have to represent what people are prepared to pay at that given time. Pricing has always been a very clever, powerful tool. A lot of retailers will be focusing on marketing, advertising and image. For the middle people, which is where most of us are, I believe pricing is a paramount issue.

Equally, it’s no good being good at price if you don’t have the right product presented properly.