On Data: Retailing in a Recession

In the article “Navigating Inflation in Retail: Six Actions for Retailers”, McKinsey & Company states, “Retailers face the prospect of persistent inflation, but they can meet that challenge in ways that streamline operations, retain customers, and drive profitable growth.”

Despite the decision of the National Retail Federation to continue with its original projection of 6-8 percent growth in retail sales for 2022, there remains a lot of uncertainty in today’s economy.

If, in fact, there is growth, we know that it will not apply equally to all retail sectors. This is even more likely for the jewelry business, given the record year in 2021.

Indicators of more difficult days ahead can be seen in the numbers.

Recent months have seen a decline in units sold and, for the first time since the start of the pandemic, a slight decline in gross sales despite price increases that helped support gross sales in the first few months of the year. .

Nonetheless, there are concrete actions retailers can take to help navigate potentially choppy waters in the coming months.

Here are six areas we suggest you look at to maximize returns.

1. Expect more from your inventory.
Inventory is one of your biggest costs and you may see a slowdown during a recession. However, it is precisely at times like these that you need to measure your inventory turnover and stay at the highest level possible.

Turning inventory into cash can be a real lifesaver in more challenging economic times, and there are two principles you shouldn’t compromise on if you want to do it effectively.

The first is that you should never run out of stock on your best-selling products. They are the lifeblood of your business, even as some retailers get bored with products that are often not considered “sexy enough.”

Sexy is a profitable business and well-managed inventory.

The second area is not to be shy about aggressively selling slow and/or discontinued products or brands. This is not the time to be hesitant to liquidate slow-moving products or struggle to let go of past buying mistakes. There’s a reason it didn’t sell, so go for it.

Better stock turnover creates positive cash flow, and no business was less prosperous for being profitable.

two. Have a fund for bribes.
We strongly encourage retailers to have an emergency or business savings account. You must have enough cash on hand to cover at least six months of operating costs, including payroll.

If you don’t have a kickback fund, start one today by putting a percentage of each deposit into your business savings account. You’ll be surprised how quickly this can become an ingrained habit.

Although retailers will often say they can’t afford to do this, I’d strongly say you can’t afford to No to do this.

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3. Always trade within your budget.
Retail owners understand better than most how difficult it is to create an annual budget.

However, it is a vital tool that must take into account historical sales, marketing calendar, fixed and variable costs and gross margins.

In addition, you’ll want to be sure to account for anomalies such as a large one-time sale from the previous year, an inventory reduction sale that won’t be repeated, business interruptions due to remodeling within your store, or outside construction projects that could negatively impact your business. business.

Your annual budget goes hand in hand with a cash flow projection. You should plan for months that have negative cash flow by using a line of credit and/or proactively and respectfully negotiate longer payment terms with your vendors.

Following a budget can present opportunities to identify and reduce costs.

Four. Don’t stop advertising.
When sales decline, there is often a knee-jerk reaction to cut marketing spending.

However, this can be a great opportunity to build brand awareness, and at a more favorable price, when your competitors are sitting on the sidelines waiting for the storm to pass.

Be sure to adjust your marketing efforts to meet current consumer habits. Today’s consumers shop through multiple channels, so you need to be more strategic with your targeted messages to stay top of mind.

Maintain regularly scheduled communications such as email, social media, text messaging, and more traditional vehicles such as billboards (if they work in your market) and a structured phone outreach system.

Most importantly, you need to track your marketing results; Don’t fall for the fallacy that marketing results can’t be measured.

You should measure your marketing key performance indicators (KPIs) and only continue with campaigns that are achieving your desired results.

If there’s one thing that’s frivolous from a marketing perspective, it’s this: no marketing or lousy marketing efforts will yield lousy results.

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