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Walmart's announcement that its prices are increasing due to the tariffs is welcomed by some retailers as an "everybody is doing it" cover story for raising their own prices. They can recommend that their staff just dismissively say, "Oh, it's because of the tariffs, you know," whenever customers challenge them about the price of an item.
That approach, commiserating with the customer, is likely to become widespread. After all, we all are feeling the impacts of higher prices, from the gas station to the grocery store.
But here's another idea for you to consider, an alternative to the victim mentality of the-tariffs-made-us-do-it. It all comes back to controlling the controllables in your business.
First, recognize that your sales are likely to decline (or continue to be soft.)
Therefore, you won't need as much inventory on hand. That means you can focus on raising turns (e.g., buying a three months supply instead of a four, or five, or six months supply, etc.)
By spending less on inventory, you can redirect those funds to your expenses.
And here's the key: Your largest expense, and your most valuable asset, is your front line staff, your people. Now is the perfect time to give them a raise!
Isn't it much better to spend more on your people and less on COGS? You might be surprised at how many folks would agree with that!
Helping your staff deal with the higher prices facing us all is a good thing!
Here's a post-pandemic strategy that should not be missed: higher margins! Not the entire store, of course; you must be a merchant here. But think about it: many shoppers have increased savings, reduced debt, or gotten their job back. Maybe all three. And after months of being at home, and spending on home improvement and groceries, many shoppers have pent-up demand to spend on items they have had to postpone, like for themselves. Whether that would be in a restaurant or in a specialty store, shoppers are more willing and able to spend. (And some even feel entitled to spend.)
A few years ago we were on a PBS news show about retailing's ups and downs. Several months later, one of us ran into a teacher of one of our kids. That person excitedly mentioned having seen us on TV, saying "I didn't know you knew so much about retailing." (Yep, known just as someone's parent, right?) But then this very well-educated person said the key thing: "I never knew there was so much to be known about retailing!" Well, that incident happened a few years ago when retailing was perhaps more understandable, even more predictable. Alas, those days are history! Today, nothing in retailing is quite as understandable or as predictable as before. Or as manageable!
Undoubtedly you'll agree with this. We read and hear a lot in the business press, but we treat 100% of it rather skeptically. And so it is with articles and commentary about this coming Holiday Season, specifically about retailers' inventory and margins. Nevertheless, there is considerable good news being trumpeted. Most recently, this feature article in the Wall Street Journal: "Retailers Hone Inventory for Holidays" *
Will your sales less your expense goals add up to a profit?
Or are there surprises ahead?
Do you have a way to know throughout the year?
This retailer-friendly calculator lets you project whether your expectations for sales, margins, and expenses will deliver the profit you need.
If 2020 was the year of pandemic disruption and scramble-to-survive mode for retailers, 2021 may be the year of relentless Retail Is Detail reminders. Many of you may well have benefitted from one or more rounds of PPP loans and their potential "forgiveness." Now comes the reminders that you must seek forgiveness. In writing. From the bank that loaned you the funds. And there are some time deadlines involved. Yikes. Oh, and total forgiveness may not be forthcoming. It depends. (See below for these guides* and disclaimers from the SBA.) Then there are the so-called "bookkeeping details" surrounding all this.
The basic definition of retailing is "selling to the ultimate consumer." As you know, HOW that is done, and in what location or format, continues to change and evolve. So, we were intrigued by this recent post on the Shopify Retail Blog: The Future of Physical Retail in a Digital-First World.*
To us, the blog post was essentially a wide-ranging journey of discovery(and perhaps even some new-found respect for those "physical retailers".)
Incredible value! 👀
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