PERSPECTIVES

Take A Minute. Check Out These Two Charts. What Do You See?

This shows the average annual pre-tax income (in 2022) and average expenditures, for US total, and by generation.

 

And this chart shows total US population by generation, by age in 2022.

You may be looking at the future of retailing

Granted, everyone in retailing who looks at these two charts from the Collage Group* will conclude something different. Didn’t you?!

Retailers are caught by these tough uncontrollables, whether dealing with customers or employees.

A couple weeks ago, we received another very insightful email from a long time professional friend. Because of his unique perspective on retailing, we’re sharing a portion of his note.

First, you must understand that our friend had owned one of the finest specialty stores in the Midwest for years. Then, for the last ten years, he chose to work in sales for a prominent national retailer. He’s probably forgotten more about the nuances of retailing excellence than any of us even know.

We think you’ll agree with our friend. And probably recognize your own experiences.

“Yes, lots of challenges for xxxx and pretty much any retailer these days. They are wrestling with some legacy issues as well as societal issues like Millennials’ and Gen Z's general distrust of institutional authority and unhappiness with the hand they've been dealt.”

Is This Why Many Retailers Fail?

Maybe you've also noticed it. The recent articles about how retailers now have their inventories "more in line" after the glut of excess inventory caused by "supply chain disruption."

Okay. That's good news.

But, what jumps out at us is the frequent reference to "just-in-time" inventory management.

• Really? Tell us, What is the formula for calculating "just-in-time"? 
• What time is "just-in-time"? Is it 2 turns on the inventory? Four turns? Six turns? Twelve turns? Or what?!?

Look, if you can't measure it, you can't manage it. And, if you can't manage something, by definition (and experience!) it is out of control.

Sure, It's Just Our Opinion

As we look out at the second half of 2023, we're actually quite optimistic for independent retailers worldwide. No, really!

The statistics haven't yet borne out what we are "seeing," but just wait a bit.

To begin our justification, let's look at the really Big Picture. Generally, the Covid pandemic has been wrestled down. Likewise, inflationary prices seem to no longer be a threat. The worrisome political scene has resumed its traditional state of boredom, and the major concern now is something we can't do much about: each day's weather.

So, looking at the Big Picture, we see the general population for the second half of the year to be quite serene, even optimistic. And that bodes very well for shoppers' confidence!

Convenience Retailer vs. Destination Retailer: Decision Time

Throughout the pandemic, millions of shoppers – including the older Baby Boomers – discovered the benefits of online shopping. Then, as brick-n-mortar retailers scrambled to survive, the increased availability of delivery, curbside pickup, BOPIS (Buy Online, Pickup In Store) and BORIS (Buy Online, Return In Store) was well received by a broad swath of consumers. 

We see that this has brought heightened awareness of two different retail strategies: Convenience Retailing versus Destination Retailing. 

And here's the deal: retailers now must choose either one or the other of those two strategies. You cannot have one foot on the dock and one foot in the boat. You DO have to decide! 

• That uncertain/undecided middle ground is not a viable choice. 
• Those who end up there by default – by choosing to not choose  are on their first step to being former retailers!

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?