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Each year at this time, our thoughts turn to turkeys. No, not the ones that will adorn many dining tables on Thursday. But the "turkeys" lurking amidst your inventory. You know; non-selling, distressed, slow-moving, old, unappealing leftovers among your merchandise. But this year, frankly, our worries extend beyond the turkeys. Here are some of the reasons why.
As a result, in this environment, consumers are scaling back their discretionary purchases, and/or choosing to spend on travel, dining out, or other experiences versus retail merchandise. Not an upbeat prospect for retailers, is it?
Meanwhile, interest rates on borrowed money are higher than they have been in a generation. This could be a new experience for many retail owners. See where this is going? Some retailers could end the year awash in inventory, and rising debt, just as the shoppers choose to spend their time and money elsewhere. How to deal with that? You cannot control the economy, or the pundits, or particularly the shoppers. So, focus on what you can control! Set a targeted ending inventory dollar amount to have on December 31. No matter your size or the number of stores you have, whether your goal is to end the year with $100,000 in inventory or $100 million, it is imperative to have a specific ending inventory goal. Immediately, start doing everything you can to reduce that inventory to reach that goal!
Yes, the inventory you must reduce includes plenty of good merchandise. But that's the opportunity for you: Remember, your customers don't want cheap steak. They want steak, cheap! Especially these days. Don't dawdle! Revisit your planned markdowns for Black Friday and the Saturday after Thanksgiving. A great time to take advantage of the customers who are shopping (and shopping for bargains.)
As the calendar ticks away, keep a sharp eye on your inventory. Monitor it every day. Maybe track it on a chart, visually tracking your progress toward your goal. If it is not going down fast enough, sharpen your markdown pencil. This is not the time to worry about margins. Taking a 25% markdown in December is preferable to a 50%-60% markdown in January! For your peace of mind, especially this year, that inventory must be turned into cash. Remember, "Happiness is positive cash flow!"
Let's assume your stores have been closed for weeks now.
We recognize how conscientious you are. So, after paying what you can to your employees (and yourself), the next most-worrisome dilemma is your rent.
As you likely have discovered, a common choice for many landlords is to offer to defer your payments. But that means taking on more debt, as those payments are only being postponed to a later point in time. You need a better solution than that.
Each of us, our households, businesses and communities are in different stages of shutdown due to the coronavirus. While we cannot speak to when this will end, we do have some ideas for dealing with the "fog of uncertainty" that hangs over us all.
Remember thinking that Amazon was the most disruptive force to happen to retailing? (Well, at least since Walmart was the most disruptive....) However, the coronavirus pandemic eclipses them all. No matter where you live or do business, it is not whether, just when, COVID-19 will impact your life. Disruption with a capital D!
The Retail Owners Institute® has developed a retail strategy for "Inventory Management Going Forward." As we often do, it was recapped as an unassuming chart (see above) identifying the Five Stages of Merchandise Mix Management, from "Before COVID-19" to the "New Normal?"
YOUR GOAL: QUICKLY GET TO A FIRST DRAFT. Face it. Sales are dropping. By how much? For how long? Nobody knows for sure. But, you can make some assumptions, some educated guesses. Put those into the 3-in-1 Cash Flow Calculator.
These totally volatile times cause a lot of opinions and fears to be swirling around. Seeing "what if...?" can be very helpful. All in just minutes. On your own.
Some thoughts from Nordstrom leadership that are spot on!
That's what Nordstrom President and Chief Brand Officer Pete Nordstrom told Puget Sound Business Journal columnist Patti Payne on April 23, 2020. And what he succinctly stated is exactly the challenge – and opportunity – that is confronting all retail owners. In order to answer whether you should re-open once you can, you first must be very confident in WHAT kind of retail operation you will be re-opening. The only certainty of the aftermath of the pandemic is that everything will be different. Given that, what better time to re-imagine your business?
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