What Doesn’t Kill You Makes You Stronger
Since you are reading this in the fourth quarter of 2020 you have managed to endure and survive the many obstacles thrown your way during this unprecedented year. Economic shutdowns riots and protests mask mandates social distancing requirements as well as freaked out customers and concerned employees. What else can be added to the list that complicates an already challenging occupation right?
My my how things have changed
The financial ramifications of how to navigate these challenging times is surely a subject of focus as we close out this turbulent year and approach 2021 with hopes of “normalcy” whatever that means going forward.
Nowadays I often find myself longing for yesteryear. Step back in time for a moment to the golden days of retail. A time when merchants actually traveled to markets and trade shows to physically meet with vendors and colleagues to exchange ideas and buy merchandise for the upcoming season. A time when customers could enter your store and be greeted with a welcoming smile as opposed to being handed a mask lest they absent-mindedly entered minus a required face covering.
Returned merchandise was simply put back in stock and not subjected to mandatory quarantine and disinfection protocols. Yes back in the day marketing efforts were actually measured by how many customers could be enticed to shop the store during a given event or promotion. Imagine doing that today as retailers are told to restrict the number of customers entering for their safety as well as that of the employees.
Not so long ago
You could actually shake someone’s hand or give them a gentle hug upon greeting them. Trying that today in the world of social distancing and you could easily become the target of a negative social media campaign.
Gone for now are the days when you entered a retail store and were offered a cup of coffee or a bottle of water. In 2020 those pleasantries have been replaced with hand sanitizer and masks.
Whoever heard of curbside pickup prior to this year? And previously hoteling meant finding a place to stay when traveling not packing up this year’s goods to sell next year.
Believe it or not there was even a time when employees were financially better off going to work rather than depending on unemployment and the weekly government bonuses that accompany it in many cases.
I’ll admit to being a bit nostalgic but I miss the good old days of retail…2019!
It’s not all bad
Though there are many horror stories to point to this year there are several positive things that we can take away as well.
One might compare this to a forest fire that may seem catastrophic at first but over time green shoots of new life begin to appear through the carnage.
Many retailers have stretched and grown to find new ways to do business that may never have been considered.
Take for example the retailer who for whatever reason didn’t feel the need for a shopping cart on their website. Clearly without the ability to purchase online during “pandemic times” those retailers without such a vehicle were/are at a disadvantage.
What about the solidarity we witnessed as retailers vendors and landlords worked in unison for the most part as all recognized that we were all in this situation together?
Let’s not forget our government whose quick response through the PPP forgivable loans and other lending programs brought much-needed relief to many.
Retailers and Inventory Management
We have also seen retailers become more introspective with regard to their largest asset—inventory. Some have been able to pick up new lines of inventory that perhaps they couldn’t carry previously. In most cases they have realized that CASH is KING is more than a clever slogan but a reality by which to live.
A good margin percentage is important but you can’t put a % in the bank! It doesn’t mean a thing if no one is buying. Retailers have discovered that less is more. I can cite several examples where stores are selling more than last year with much less inventory and way fewer markdowns. Who would have thought?
The 80/20 Rule
The 80/20 rule is still alive and well. Often referred to as Pareto’s Principle named for the Italian economist who in 1906 created the mathematical formula after observing that 80% of the wealth was controlled by 20% of the people.
Think of your own business as you read this. Where do the majority of your sales really come from? More or less 80% of your sales come from 20% of your stock. Close to 20% of the vendors you carry supply 80% of the inventory you have. If you take an honest look at your inventory position you will undoubtedly find pockets of stock (or vendors) that you just don’t need to carry.
These areas overlooked for the most part when times are good should be identified and eliminated as they contribute little to overall profitability. Now is the perfect time to again evaluate ALL vendors based on GMROI contribution so that you have the data to make the right decisions.
Give yourself a pass this year.
Few would argue that the path to retail success would likely be revenue growth coupled with inventory turnover.
This year however for reasons that are all too obvious top line revenue growth is turning out to be a near impossibility for many. It’s human nature to compare to previous periods and want to improve but this year is an outlier. In some cases where new goods never received the exposure that they should have for reasonable sell through it may make sense to “hotel” them for next year. Clearly if done on a large-scale basis this will affect turnover just as liquidating new stock at drastic reductions has a profound effect on margin. You have to decide based on your own situation which is the best route for you.
Holiday Shopping 2020 Style
There are simply too many unknowns this year for anyone to be able to predict how Holiday shopping will be impacted. Suffice to say that the experience will be different from any other year for reasons previously discussed. What you won’t see is smiling customers and sales associates and packed stores due to masking requirements and social distancing. What you might see is earlier shoppers and less discounting perhaps due to leaner inventory levels and delivery interruptions. What you will see is an increase in online shopping. It is being widely reported that more stores will be closed on Thanksgiving—which in my opinion is a good thing! In such an unpredictable season prudence would dictate that keeping cash reserves plentiful and inventory levels lean would be the responsible thing to do.
Don’t be too hard on yourself. Play the cards you are dealt the best that you can and move forward. And by all means don’t hesitate to reach out for an outside opinion if you think there might be a better way. We are truly all in this together!
I wish all of you a Happy and HEALTHY Holiday Season!
Until next year…
Ritchie Sayner
Summary
The article reflects on the drastic changes faced by the retail industry in 2020 due to the pandemic highlighting challenges such as economic shutdowns social distancing and a shift towards online shopping. Despite these difficulties it underscores the resilience and adaptability of retailers who have found new ways to conduct business emphasizing the importance of inventory management and collaboration among industry stakeholders.
“One might compare this to a forest fire that may seem catastrophic at first but over time green shoots of new life begin to appear through the carnage.”
Real-World Examples of Resilience and Adaptation
In the face of unprecedented challenges many businesses and individuals have found innovative ways to adapt and thrive. Here are a few examples of how resilience and adaptation have played out in the real world:
- Many retailers have shifted to online platforms enhancing their e-commerce capabilities. For instance a small bookstore that previously relied solely on foot traffic launched an online store offering virtual book readings and discussions to maintain community engagement.
- Restaurants have embraced curbside pickup and delivery services. A local diner that had to close its dining room due to restrictions started offering meal kits and family-sized takeout options allowing them to retain and even expand their customer base.
- The concept of solidarity was evident in the fashion industry where brands collaborated with manufacturers to produce personal protective equipment (PPE) for healthcare workers showcasing a unified effort to address urgent needs during the pandemic.
