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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It's back-to-school season! 

We were struck by these comments from folks for whom "back-to-school" is more than a season. Look what a state superintendent of public instruction* had to say about the upcoming school year. 

  • "The sheer burnout of the last two years caught up with everybody."
     
  •  "But out of that came a genuine assessment of what matters most."

Lots of retailers can identify with those comments, don't you agree?

Or, these observations about the disruptions and uncertainties of the pandemic:

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As the final third of the year approaches, there's a "new era" afoot. There is optimism in the air. 

Optimism? Really? 

Yes! And it could catch a lot of folks by surprise. 

 

Consider these "early warning signs" of approaching good news:

  • Those surveys of "consumer attitudes" indicate that folks do reflect the news headlines regarding the economy – that is, respondents are pessimistic about "the economy." But when asked about their own financial situation, the responses were very positive; people feel good about their personal financial situation.

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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. 

  • Seemingly small expense increases add up in the aggregate – maintenance costs, security, advertising, utilities, payroll, e-commerce charges, etc. 
  • Vendors may be eager to offer terms, but that too is more debt. Whether or not you pay interest on it, you still are obligated to pay. And vendors would rather have an accounts receivable from you – it's an asset for them – and a debt for you.

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)

Pharmacies & Drug StoresFlorists

Office Supplies & Statiionery StoresPet & Pet Supplies Stores

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Embracing Uncertainty: The Essence of Retailing

"The mantra of 2022 should really be: No one knows anything," opined a business reporter.* "It’s stunning how little we understand about how the pandemic has changed our lives and our country. It’s not clear whether the U.S. economy is hot or not, or if big cities will be forever scarred." 
  • "The future of our online shopping habits is another unknown. This is not just a nerdy debate. Our collective buying behavior sways trillion-dollar companies, millions of retail jobs and the health of the U.S. economy." 

  • "The uncertainty about the direction of online shopping is one of the biggest questions facing the tech industry and financial markets right now."
Well yes, of course. The tech industry and the financial markets do prefer predictability. The uncertainties of retailing always have bedeviled them. And now, with Amazon's recent retrenching, backing off some expansion, their crystal balls have turned cloudy. 
 

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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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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.