What a scenario. Shoppers buying vigorously, retailers joyously raising sales expectations, and many more anxious lenders offering "cash in 24 hours!" to business owners. Wow! Are these the good times, or what? Forgive us, but today we're focusing on the "or what?" aspect.
Retail owners are upbeat, out-going people-people. And they sure don't want to miss a sale. "Our customers and our staff don't want to be disappointed. So we'll load up on inventory. And borrow whatever it takes from whomever will loan to us." Look, we get it. After the last two years of just trying to survive, we can understand the euphoria. Retailers are all-too-eager to board that Euphoria Train. But, we also know that many retailers are smart about debt. They know it's great to have it available, but even greater to be able to pay it off. Here's help for the latter.
There you can quickly learn more about savvy borrowing, compare types of lenders, take advantage of time-saving tools. All from a retail perspective.
Quickly calculate your Debt-to-Worth ratio and Current Ratio. These are critical to know to avoid your potential train wreck.
We think many retailers will be surprised to discover how "bankable" they really are! (Which is exactly why you are receiving so many tempting offers of financing.) Meanwhile, the Euphoria Train is leaving the station.
There's still time to get on the right track.
You likely are aware of buy-now, pay-later (BNPL) programs, from Afterpay, Affirm, and Klarna, among others. It gained a foothold in online retail – "the hottest trend in e-commerce"– and has been especially popular in the UK and Australia. Now its availability to many more retailers may be accelerated with the proposed acquisition by Square of Afterpay. It is a trend we all need to watch carefully. Here's the deal. Once again, the retailer is the pickle in the middle. The benefits of increasing sales (and average transaction value) which are very attractive, must be weighed against the potential increases in hassle factors, particularly for your most valuable asset: your front line staff.
Heads up. You can take a grim situation and turn it into an advantage. Universally, there is a shortage of "good employees." While many will use that as an excuse, it can be a great opportunity for those who seize it. That's why we paid particular attention to this commentary by Ty West in The Playbook*.
And therein lies the opportunity.
You've gotten through the Holiday season, likely enjoyed some vacation time, and perhaps even have your own financial statements in hand. For many retailers, 2021 proved to be a very profitable year. Congratulations! In fact, go here to check out the pre-tax profit trends for the past two years for the median performers in 50+ retail segments. To borrow a phrase, everybody (almost) is above average!
It's a new year. And now, another new month. How about a new sense of beginning, a fresh start? Alas, the coronavirus pandemic continues to prove Dr. Anthony Fauci right:"The virus is in charge." As you have noticed, all around us there's delay. From Major League Baseball contemplating a month delay, schools and universities very slowly resuming in-person classes, or a decidedly different lineup and focus of Super Bowl advertisers, we have no choice but to continue to be patient. Isn't that the pits? As Daphne Howard reported*, "Footfall patterns show that getting back to normal requires more than flipping the "open" sign.
We often caution that many vendors are so much better trained at selling than retailers are trained at buying. In their eagerness to grow sales, and the associated promise of thereby growing profits, it is all too easy for retailers to become overbought. Instead of higher profits, they can find themselves in a cash flow crunch. And that was in Before Times, before the pandemics. Throughout 2020 and continuing now, vendors and retailers alike have increased their online capabilities. Ordering online brought new challenges to buyers and sales reps, but also saved time and improved access.
We have applauded these advances in technology, but...
ICYMI. You know, that's the shorthand for In Case You Missed It. And in fact, we had missed this.
As reported by Chain Store Age*, "The Conference Board’s Consumer Confidence Index rose slightly to 107.2 in March, up from 105.7 in February. It was the first time the metric has increased in three months." Wow! Is that ever a stray ray of sunshine! We always look to Consumer Confidence levels as a leading indicator for retailers.
Incredible value! 👀
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