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


ROI Co-Founders
ROI Co-Founders's Article
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Try as we might, it seems that there will be no avoiding a recession in 2023. How deep it is, and how prolonged, still remains to be seen. 

For retailers, it's not a matter of whether your business will be impacted, just how much. Alas, retail does not lend itself to being recession proof.

However, there are ways to make your business more recession resistant.

The place to start? First, find out what your Debt-to-Worth ratio is right now. That is the #1 measure of the financial strength of your business. It's a key indicator of your ability to weather an economic downturn. 

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Managing inventory – arguably the #1 responsibility of a retailer – has been beset by a host of new and sometimes daunting challenges since 2020.

The last few months of 2022 only made matters worse. As supply chain issues seemed to subside, foreboding talk of a recession dominated, dampening customer spending. 

Many retailers are feeling a bit over-inventoried as a result. Similar to that sense of having a few added pounds after the holidays.

In other words, a situation that is crying out for perspective. And The ROI has you covered on that!

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It Always Helps to Know "WHY?"

This is the time of year when most retailers are scheduled to take their annual physical inventory count. 

Along with that comes the interruption of daily lives, very serious attitudes of bookkeepers and accountants, and, of course, extra expenses. Oh yes, those!

Typically, preparing for and taking the item-by-item count involves a lot of emphasis on "Make sure to count everything. We don't want to miss anything!"  This often-loud focus is true whether the counting is done manually, by scanning, or any other means. "We must count it all!" 

Okay, but why? Why is it so darn important to count every last fish hook or candy bar or tube of lipstick?! 

It helps to know why.

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The savvy retailers know that now is the time to be putting the finishing touches on – wait for it – being ready for December 26!

Yes, this unique time period between December 26 and New Year's Day is a tremendous make-or-break opportunity. Indeed, many retailers find they net more from this time than any earlier stretch of 6-10 days!


Why? Three main reasons.

First, the many opportunities to reduce expenses "back to normal". Less advertising cost. Less staff. Fewer hours.

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There's a very important annual job for you, the owner, and all of your senior staff. It's vital, and it involves your presence.

The pressures are mounting on your stores, and in particular, your front line staff. 

  • Noticed all the "help wanted" signs in stores, coffee shops, restaurants? It's not just you; lots of (other) businesses are having a tough time with finding and keeping good help. 

    In fact, a nearby McDonald's posted a notice on its front door acknowledging that they were understaffed due to no-shows, and encouraging (imploring?) customers to be considerate to the people behind the counter who are there to serve them.

     
  •  Meanwhile, the deadlines for online orders to arrive before Christmas are fast approaching. This will lead to a surge in in-store shoppers. And more demands on your front-line staff.

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For most retailers, especially this year, reducing inventory is priority #1. With talk of a 2023 recession still in the air, lingering inflation driving up costs, and rising interest rates, cash is definitely king this year.

Time to revisit your year-end strategies for meeting your targeted ending inventory on December 31. If you are like many retailers this year, with plenty of merchandise in your stores, you know the challenge:  how best to turn that inventory into cash? Quickly! Especially without looking like a distressed merchant.

Here's one answer for how to do that. Focus on improving the productivity of each shopper who comes to your store. That is, increase the IPTs (Items Per Transaction.) Make it easier, more compelling and more fun for them to buy more items from you. 

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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.

  • All the gloom and doom talk about the economy and recession continues, affecting consumer attitudes.

  • With few pandemic or supply chain issues, many retailers have more-than-ample inventory this year, unlike the previous two years.

  • Inflation is impossible to ignore, especially for those who drive cars or shop for groceries.

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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?

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What is the definition of "value" for customers? Pretty straightforward, actually.

  • Value = benefits received for the burdens endured.

Wait. What? "Benefits received?" "Burdens endured?"

Turns out, the only single answer to "What is value?" is, "It depends." 

Don't just roll your eyes. What constitutes value for your customers increasingly is a make-or-break part of retailing.