PERSPECTIVES

From The Co-Founders

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Tips, Tactics & Strategic Insights and Commentary
from The ROI Co-Founders, Pat Johnson and Dick Outcalt
Outcalt & Johnson: Retail Strategists LLC; Retail Turnaround Experts

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A frequent recommendation for how to navigate the current economic uncertainty is to be more diligent about controlling expenses, and focus on profit. (You'll see; we challenge that below.)

Hmm. Concentrating on profits is easier said than done in today's environment, with cost increases proliferating under the umbrella of inflation.

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"How are sales?" is essentially the international greeting between retailers. 

And because of the seasonality of retail sales, most retailers will respond by explaining whether sales this month are up or down versus the same month last year, not just the previous month. 

All this is well and fine in a normal year. But, since 2020, retailers have not been experiencing anything close to normal. And boy, does that show up in the 6-month retail sales trend charts that The ROI posts each month.
  • In sector after sector, December, January & February sales versus the prior year are markedly different than the March-April-May results. In some cases, these are quite dramatic. 

Your results are likely to be consistent with these patterns.

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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.*

  • The "retail digital-first world", of course, is either the "pure play e-commerce retailers," those who sell only online, or the "brands" (what we used to call manufacturers) who have embraced the "DTC model," selling direct-to-consumer. 
     
  • And as you know, Shopify is one of the largest platforms for e-commerce businesses. Definitely a leader of the retail 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".)

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We think this may be a very different 4th of July Holiday weekend. 

It will not be just about red, white & blue window displays, or flag waving, or fireworks displays. Instead, there is a new mood, a new attitude that is emerging. 

First, we believe that all shoppers are reeling from being swamped by some major and concurrent attention-grabbing events and trends affecting all of us. Seemingly with no end in sight.

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Consider these front-page headlines and the accompanying chart (see above) from the June 6 Wall Street Journal*  "Surplus Inventory Piles Up", "Stores Are Stuck with the Wrong Items." 

Look at it carefully, and think of your operation in comparison. How do your numbers compare? Are you as shocked as we are?

How did this happen? 

Partly as responses to the unprecedented impacts of the pandemic. 

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Have you seen what the Silicon Valley venture capital firms are saying to the  startup firms they've invested in? 

While it may be tempting to smile and nod approvingly at this dose of business reality, there's a ripple effect to be aware of.

As reported in the May 31 edition of the Wall Street Journal*, "Their advice includes cutting costs, preserving cash, and jettisoning hopes that hedge funds or other investors will swoop in with big checks."  

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The playing field has shifted dramatically under the feet of retailers. 

Merchandise orders placed months ago are now proving to be "too much stuff that consumers no longer want so much of,"  as was reported rather colloquially just 3 days ago.  All this was summed up this way: "Retailers with slower inventory turns might find current conditions especially difficult to navigate." *

Now, look at the chart at the top of the page. Without being dramatic, it may be a lifesaver for your business this year. 

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photo: Greg Gilbert/Seattle Times

Recently we read of a "bookshop on wheels" launched by a college English instructor. While certainly not the first retail variation on a food truck, this one has gained praise for its authenticity. 

"What’s most surprising when you walk into Blue Kettle Books for the first time is how cozy and, well, bookstore-ish the tiny space feels."*