One of the real killers of a retail business can be debt. But, how much is too much?
Debt can be quite stealthy as it grows.
Especially in these times of increasing interest rates, creeping expansion of debt can quickly snowball into a much larger problem.
From the Benchmark pages on The ROI site, we have selected four retail verticals whose Debt-to-Worth ratio shows a frightening situation. The technical term we would use is "spooky, real spooky."
(click on each chart to see all key ratios for that vertical)
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.
Your results are likely to be consistent with these patterns.
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".)
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.
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.
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."
Still less than $1 a day! 👀