10 JUL-AUG 20
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 retailing – and it’s a whole new ballgame.
Some stores began reopening as early as May; many will reopen over the summer. Some will likely not reopen period. This article addresses steps that can be taken now to maximize this critical time. And I would like to give credit to Management One for the thoughts in this article – I was fortunate to attend a webinar M1 created to address store reopening which was a very worthwhile event. (Editor’s Note: See sidebar “From Management One: Retail Recovery Playbook.”)
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 break-even point to make sure 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
What is the current plan to sell through
Current On-Hand Inventory by Category
I am always in favor of streamlining the number of vendors carried in most stores; “too many” is clearly one of the biggest contributors to stores being overbought and to 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 Vendors into Categories
- (A) Critical vendors that you must have
- (B) Vendors that you probably should have
- (C) 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 and relaxing of Minimum Advertising Pricing (MAP) policies.
Worth of Current Inventory
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?
Vendor Challenges
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 temp-
The Lazy Person’s Markdown
This is where everything in the store is marked down equally say 20-30% off; it has proven to be one of the least effective markdown strategies available.
Targeted Markdowns
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.
Alternative Options
Another option to consider could include shifting the major store-wide 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 with open-to-buy (OTB) 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.
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.
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 become even more evident in the months following reopening. Consider what you need to do to alleviate any potential customer concerns. 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 and other areas? Consider re-evaluating product display and placement on the floor.
Continue to Offer Special Services
Continue to offer special services to customers that they may have gotten accustomed to during the pandemic. These include:
- Curbside pickup
- Pre-scheduled appointments
- Off-hours shopping
- Buy Online Pick-up In Store and Buy Online Return In Store (BOPIS/BORIS) policies
- 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 pandemic 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 once was. Just keep in mind that times of crisis create opportunities. With good planning and execution you will be able to capitalize on them.
Ritchie Sayner is with Advanced Retail
Strategies LLC an Affiliate of Management One
Sayner’s book Retail Revelations: Strategies for Improving Sales Margins and Turnover (2nd Ed.) is available on Amazon. He may be contacted at advancedretailstrategies.com.
From Management One: Retail Recovery Playbook
As many retailers demonstrated immense agility to pivot their businesses during the unprecedented shutdown from COVID-19 now they face an even larger task: reopening their businesses in what is sure to be a drastically altered retail environment.
With 50 governors listening to their own healthcare and economic experts and monitoring the COVID-19 spread in their states and adjoining ones there is much uncertainty surrounding the eventual lifting of “shelter in place” restrictions. Given that uncertainty Management One realized the need to create a roadmap for retailers to begin developing a strategy for reopening. So the firm created the Retail Recovery Playbook.
Pulling from over three decades of retail consulting experience the Playbook is a starting point for some tough conversations. By carefully considering the questions posed throughout this playbook retailers can begin to find opportunity in the chaos and build a strategic path to recovery.
Management One makes the Retail Recovery Playbook available free as a digital download. To access your free digital copy go to https://www.management-one.com/retail-recovery-playbook.
Just keep in mind that times of crisis create opportunities. With good planning and execution you will be able to capitalize on them.
Retail Recovery and Strategic Planning
The retail landscape is undergoing significant changes as stores begin reopening after COVID-19 closures with a focus on financial management inventory control and adapting to new consumer behaviors. Retailers are advised to negotiate with vendors streamline inventory and enhance online presence while maintaining customer services like curbside pickup and virtual selling. The Retail Recovery Playbook by Management One offers strategic guidance for navigating these challenges and seizing opportunities during this transitional period.
“Times of crisis create opportunities. With good planning and execution you will be able to capitalize on them.”
Real-World Examples of Retail Adaptation
In the evolving landscape of retail businesses have had to adapt rapidly to changing circumstances. Here are some real-world examples of how retailers have navigated the challenges of reopening and restructuring their operations.
- A large department store chain negotiated with its vendors to delay spring inventory deliveries and secured discounts on future orders. This allowed them to manage cash flow more effectively while ensuring they had the right inventory for the upcoming seasons.
- A small boutique store implemented targeted markdowns on slow-moving inventory categories such as seasonal clothing that was unsold due to store closures. By focusing promotions on these specific items they managed to clear space for new arrivals while maintaining cash flow.
- An independent bookstore introduced curbside pickup and online ordering with in-store pickup options. These services which were initially a response to pandemic restrictions became a permanent part of their business model due to positive customer feedback.
