PERSPECTIVES

We're sure you'll agree. Misinformation can be very harmful. Retailers surely don't need more harmful anythings!

Just last week, we came across the proverbial straw that broke the camel's back. It was a post on the Intuit Quickbooks site*, titled "Inventory Turnover Ratio." And the explanatory article was accompanied by an "Inventory Turnover Calculator."

What do we take exception to? The misleading and/or incorrect information it provides. For example, their "Inventory turnover calculator" requires two entries. 

• First, "enter the total costs involved in selling your products."

We must take exception. "Total costs involved in selling your products" is NOT the same as Cost of Goods Sold. Nor do they specify that it should be for a 12-month period of time. 

• The second entry they request: "Average inventory cost."

We must take exception. What they surely meant to say is inventory @cost. 

• Plus, they simply refer to "12 months of ending inventory balances," without specifying that it should be for the same 12 months for the previous entry.

Successfully "doing retail" has always been a challenging and fascinating and evolving exercise. As the old Chinese proverb states, “It’s easy to open a store. However, it’s tough to keep it open.”

And today, seemingly more than ever, third party organizations, more than individual entrepreneurs, seem to be drawn to retailing. Consider:

• Vendors and manufacturers who decided that they would rather open their own stores than continuing to deal with “failing” retailers. It would be so much easier.
   
• Online-only operators choosing to offer customers a hands-on experience with their product. (And then, those pesky customers were in their stores, but "Just looking, thank you." Who knew?)

These and others fit into our category of “retail-as-added-use.” "It looks easy. Why don't we open stores?"

But, retailing is not their core competency; they are manufacturers or direct marketers, or wholesalers, or importers, or whatever.

How's Everybody Doing?

The Retail Owners Institute® makes it easy for you to get a quick financial health assessment of your own stores, as well as the retail industry, and every vertical within it. 

From farm stores to apparel stores, wine stores to tire dealers, gift shops to convenience stores; all 45 verticals.

Here's how to get started.

• Go to the Retail Benchmarks page of The ROI site.


• Scroll down the page to see the links to all 45 retail verticals.


• Choose the vertical that includes your stores; immediately go to that vertical's Benchmarks page. 


• See the results for each of 6 key ratios for the past five years. To get a better look, just click each image to make it larger. 

Quite a picture, isn't it? Which ratios are trending up? Down? Any suggest some shaky times ahead? Any surprises? But most importantly, how will yours compare?

Managing inventory – arguably the #1 responsibility of a retailer – has been beset by a host of new and sometimes daunting challenges since 2020.

The last few months of 2022 only made matters worse. As supply chain issues seemed to subside, foreboding talk of a recession dominated, dampening customer spending. 

Many retailers are feeling a bit over-inventoried as a result. Similar to that sense of having a few added pounds after the holidays.

In other words, a situation that is crying out for perspective. And The ROI has you covered on that!

It's back-to-school season! 

We were struck by these comments from folks for whom "back-to-school" is more than a season. Look what a state superintendent of public instruction* had to say about the upcoming school year. 

• "The sheer burnout of the last two years caught up with everybody."
   
•  "But out of that came a genuine assessment of what matters most."

Lots of retailers can identify with those comments, don't you agree?

Or, these observations about the disruptions and uncertainties of the pandemic:

As the final third of the year approaches, there's a "new era" afoot. There is optimism in the air. 

Optimism? Really? 

Yes! And it could catch a lot of folks by surprise. 
 

Consider these "early warning signs" of approaching good news:

• Those surveys of "consumer attitudes" indicate that folks do reflect the news headlines regarding the economy – that is, respondents are pessimistic about "the economy." But when asked about their own financial situation, the responses were very positive; people feel good about their personal financial situation.

One of the real killers of a retail business can be debt. But, how much is too much?

Debt can be quite stealthy as it grows. 

• Seemingly small expense increases add up in the aggregate – maintenance costs, security, advertising, utilities, payroll, e-commerce charges, etc. 
• Vendors may be eager to offer terms, but that too is more debt. Whether or not you pay interest on it, you still are obligated to pay. And vendors would rather have an accounts receivable from you – it's an asset for them – and a debt for you.

Especially in these times of increasing interest rates, creeping expansion of debt can quickly snowball into a much larger problem.

From the Benchmark pages on The ROI site, we have selected four retail verticals whose Debt-to-Worth ratio shows a frightening situation. The technical term we would use is "spooky, real spooky."

(click on each chart to see all key ratios for that vertical)

Embracing Uncertainty: The Essence of Retailing