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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You've seen all the headlines. Worldwide inflation. Dire warnings of a coming recession. Big time discounts at retailers due to boatloads of inventory. Amazon doubling down on their Prime Day(s) sales. Shoppers shopping early in anticipation of rising prices. 

Shaping up to be yet another "unprecedented" Holiday season for retailers, isn't it?

And a wonderful opportunity for all merchants!

How best to start? Set the boundaries.

  • First, specify how much inventory, in total, you want as of December 31. 
  • How much by department?
  • Category?

Next, establish clear routines for monitoring inventory levels.

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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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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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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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"And the award goes to..."

No, Not About People This Time 
While we typically think of people as recipients of recognition – and we trust you already are doing that, right? –  this is a different challenge.

Ready? Here we go! Of your merchandise, which products are Award Winners?! 

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"Never miss the opportunities of a crisis."

Without a doubt, these continue to be unprecedented times for managing a retail business. The Disruption with a capital D continues, from the pandemic to supply chain challenges, employee issues, worldwide inflation, interest rate increases, etc. And now, the global economy is in more turmoil due to the Ukraine invasion and the resulting sanctions against Russia. 

Lots of challenges for business owners as they wrestle with rising costs, aren't there? 

But for independent retailers, there exists one glorious opportunity: price elasticity. Yes, raising prices. A whole new ball game for many independent retailers. 

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The #1 responsibility of every retailer is to manage and control the inventory. By doing that, you are managing margin, profit, cash flow...also known as success!

Managing inventory demands a merger of art – the selection of merchandise – and science – the quantity of merchandise at any given time. 

And here is a formula that makes the science part accessible for every retailer. All you need is a pencil to do this (remember those?) And it can and should be embraced by every retailer!

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Thanksgiving time in the U.S. is not a good time to be a turkey. 

And, the week after Thanksgiving is obviously not a good time to try to be selling turkeys, or turkey dinners. Especially at full price.

The same thing applies to your inventory! Especially with all the challenges and distractions surrounding supply chain issues, there could be lots of "turkeys" languishing in the inventory in your stores. You know; non-selling, distressed, old, unappealing leftovers among your merchandise.