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There was some really good news in November last year when an unexpected easing of inflation and a rise in retail sales took us all by surprise. And it was a very nice surprise indeed. Retail has had a pretty hard time of it in the last few years. Covid, online competition, rising fuel costs, and supply issues, have piled on the pressure and, sadly, many retailers large and small have had to bear the brunt. Some well known names such as Wilco and Paperchase eventually lost the fight for customers and moved towards insolvency. Unfortunately, the November rise turned out not to be the first swallow of spring we were hoping for, and December showed a 3.2% fall in sales. This seems another unfair blow to a long suffering sector. If, as many are now predicting, the next few months bring either a stagnant economy or a mini-recession, retail will need to do even more to ensure they ride out the storm. I am sure every retailer has been thinking things through pretty thoroughly when it comes to the coming months, but here are a few ideas around your cashflow and finances that may help focus down on what can be done.
Inventory has a cost and remains a cost until it’s sold. Overstocking ties up capital and can lead to unnecessary markdowns. Implementing a just-in-time (JIT) inventory model may be difficult, but it ensures you only stock what's needed. That will reduce storage and wastage costs. Analysing sales data is well worth the time if it helps with predicting demand more accurately to prevent overstocking and understocking. Be careful of overreliance on historical data though, remember these are unusual circumstances following a series of unusual circumstances. In the end, you know your customers and you know your trading conditions so, if you are impartial about it, you should be able to match stock to sales fairly accurately.
Your suppliers could be the key to everything. Could you negotiate returns of overstocks, or perhaps discounts for bulk purchases on your more popular items, and so on? Extending payment deadlines may help but, before you go that route, make sure you are not just increasing your potential debt. Collaboration with other retailers can really pay dividends. Could you set up offers or discounts for joint sales promotions? If you have a local trader’s or retailer network group, I suggest you make a point of joining and keeping up with what they are up to.
Let me start this section with a word of warning. Not being seen by your customer base is not an option for any business. Your marketing is about letting customers know you are there, however, that doesn’t mean you just should throw money at it. What is working and what isn’t are the core questions. If something isn’t bringing in the customers, then you need to question the spend.
Small things such as a 1c reduction in heat can pay off in a big way. Would your customers even notice if the shop was running at 20c rather than 21? What about any back rooms, do you really need to heat them? Do you have the right opening hours or do you rarely actually get anyone coming in during particular times? If you are not getting customers on a Monday morning for example, why open? Think about the cost of operation in relation to the profit you make, and then rationalise accordingly.
In the end, you are there to make money. Go over your sales as if you were a shareholder in the business with no interest in anything except profit. It’s easy to fall into the vanity trap with retail sales. Turnover is just vanity; profit is sanity. Promote your high profit items where you can and if possible, increase the price (or if needs be, sell through and then drop) low profit ones. The possible exception to this is low profit items that tempt shoppers in. As long as they are then buying higher value items, these are probably worth keeping. It’s a balancing act in the end, but again, stand back and look at the cold, hard, facts. Which brings me to the final thought.
There is no point in ‘wing and a prayer’ tactics or telling yourself that things will pick up. People are feeling the pinch and cutting back on retail spending. That isn’t going to change soon, and you need to accept that. I know it’s hard when you have poured so much of yourself into your business, but it is necessary to be brutally honest. If the customers didn’t come through the door before Christmas, and they are still not doing now, then they are probably not going to do so in the early part of 2024. If you aren’t covering costs, you can’t pay wages and the bills are mounting, then act to either boost sales or take advice on what to do next.
In difficult times, retailers must be nimble, innovative, and proactive. Cutting costs doesn't always mean cutting corners though. It's about smart management, strategic planning, and making the most of available resources. If you can get the costs down, your operation more efficient and your profits up, then you should survive and even thrive in the coming months. If you can’t, call us, and let’s see what the next step needs to be.
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