The Remaking of Retail
Well you can throw out any comparisons to last year’s business as they have now been rendered meaningless. A seismic change is underway in the landscape of the retail business and it’s a whole new ballgame.
Reopening Timeline
Some stores began opening in May and most will reopen by the first part of June. This article is devoted to steps that can be taken now to ensure you maximize this critical time.
Financial
Let’s deal with the financial aspect first. Knowing your cash position always allows you to make better business decisions. Sales projections for 30-60-90-120 days out will help guide every financial decision. Cash flow reports should be updated as often as needed. I have a great form that can be made available to anyone who wants it just by emailing me. It might also be a good idea to recalculate your breakeven point to ensure your inventory planning is based in reality. Where possible make every fixed expense a variable expense so that it can be tied to revenue. Selling payroll is the obvious one here.
- Have you negotiated with vendors regarding dating and discounts?
- Have you been able to obtain some sort of rent relief from your landlord? Most landlords would rather have some rent than to see their space “go dark”.
For the short term margin is NOT the top priority… CASH is King!
Regarding business interruption coverage research your state’s regulations and contact your insurance carrier. If enacted into law certain policy exclusions which would normally prevent payment for business interruption might be overridden.
Inventory
Current Plan to Sell Through On-Hand Inventory by Category
I am always in favor of streamlining the number of vendors carried in most stores. It is clearly one of the biggest contributors to stores being overbought and slow turning stocks. If there was ever a time to reduce your vendor mix it is now.
Run a vendor report by classification and make decisions regarding the vendor matrix going forward. Group them into three categories:
- Critical vendors that you must have
- Vendors that you probably should have
- Vendors that you could live without due to poor performance or duplication with other brands
Negotiation with Vendors
When it comes to dealing with vendors negotiation will be the name of the game. In the short term things you may wish to negotiate include:
- Shifting deliveries
- Payment dating
- Available discounts
- Return privileges
- Cancellations
- Protection from online discounting
- Relaxing of MAP policies
What will be the worth of your current inventory when you reopen?
If you have been closed for two months with very little new merchandise arriving the short answer is not as much as it was when it first arrived. Since the footwear business by nature turns somewhat slower than apparel the shelf life is arguably a bit longer but the same issue remains in place. You still have somewhat dated merchandise that you have not sold mostly due to closure.
What are you going to do?
Most if not all vendors are backed up with spring inventory that was cancelled. They have the same problem that you do. This probably makes returning anything out of the question for now. You are going to have to do some level of promoting. PLEASE resist the temptation to use what I have previously termed the lazy person’s markdown. This is where everything in the store is all marked down equally say 20-30% off and has proven to be one of the least effective markdown strategies available.
Alternatively take targeted markdowns by class vendor or style. This gives you the opportunity to promote what could be the most challenging inventory first. It is especially palatable with vendors where price accommodations have been made available. Other options to consider could include shifting the major storewide clearance events back a month since there are rumblings that fall deliveries might be late anyway. This will give you time to move through more spring merchandise.
For stores that have open-to-buy for fresh goods you will be in the driver’s seat. There will be merchandise available and most likely at deep discounts making reorders a good opportunity buy.
Looking Forward
As you begin to look toward fall make sure your OTB is in line with current revised sales projections. You may need to adjust your percentage buys for initial or preseason buys fill-ins reorders and opportunistic buys. Remember the old model is dead for now: new game new rules.
Vendor Opportunities
Most retailers keep a “wish list” of vendors they would like to carry but have not been able to for competitive reasons. With several retail closures on the horizon the vendors on your list might be much more open to selling to stores that have survived.
Team Considerations
Will your team be the same upon reopening? New team members might need to be trained on virtual selling as well as in-store selling. Since Payroll Protection Program (PPP) funds cover about two months of payroll expenses now might be the perfect time to consider an incentive-based selling payroll system.
Know Your Customer
Customer behavior is likely to be changed forever. This will be even more evident in the months following reopening. Consider what you need to do to alleviate any potential customer concerns.
Key Questions
- What will be your procedure for cleaning items that have been tried on?
- What will you do if social distancing is still the norm?
- What is the process for sanitizing fitting rooms bathrooms etc.?
Consider reevaluating product display and placement on the floor.
Continue to offer special services to customers that they may have gotten accustomed to during the pandemic. These include:
- curbside pickup
- prescheduled appointments
- off-hours shopping
- BOPIS/BORIS
- live streaming events
Whatever changes you make be sure that your customers as well as your staff are aware of them.
Online Selling
What we have all learned through this event if there was ever any doubt is that online selling has undeniably sealed its rightful place in retail. Develop a marketing plan that reflects your online presence as well as the in-store feeling. Remember your website home page is your virtual store window. Make certain it looks that way. Many online shoppers won’t go any further than the front page of your website if they don’t get a good feeling just like shoppers often walk past a store whose windows don’t entice them to enter.
Stay strong and stay positive. Business most likely won’t be the same as it was before. Just remember times of crisis create opportunities. With good planning and execution you will be able to capitalize on them.
Ritchie Sayner
Summary of “The Remaking of Retail”
The retail industry is undergoing a significant transformation as stores reopen with new strategies to manage finances inventory and customer interactions. Key focuses include negotiating with vendors adapting to online selling and ensuring cash flow remains robust. Retailers are encouraged to reconsider their vendor relationships and streamline operations to adapt to evolving consumer behaviors and market conditions.
“Business most likely won’t be the same as it was before. Just remember times of crisis create opportunities.”
Real-World Examples of Retail Transformation
The retail landscape is rapidly evolving and businesses are adapting to new strategies to thrive in this changing environment. Here are some real-world examples of how retailers are implementing these strategies:
- A major clothing retailer has shifted its focus to online sales by enhancing its website’s user experience and offering exclusive online discounts. This shift has helped them maintain revenue despite reduced foot traffic in physical stores.
- A local bookstore has started offering curbside pickup and virtual book club meetings to engage with customers who prefer not to enter the store. This approach has allowed them to maintain a strong community presence and customer loyalty.
- An electronics store has renegotiated vendor contracts to secure better payment terms and discounts enabling them to offer competitive prices and manage cash flow more effectively during uncertain times.
