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| By: Christina Alvarez |
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It ain’t been good for retailers and suppliers of merchandise lately. Two years after the recession threw us a curve ball and that consumer spending plummeted (mine included), we are still seeing shopper caution, cash being conserved for the uncertain future, businesses not hiring back, and retail expansions at a hold.
True, about fifty per cent of retailers and their suppliers expect consumer spending to pick up in 2011, while others postpone upsurge to 2012 and beyond. And there is that small, dark, pessimistic minority that says it will never happen again. Don’t you hate nay sayers? But all in all, things seem to have taken an upturn.
Retailers are increasing inventories from last year, but doing so with caution. You can see lots of sales going on, indicating they don’t want stationary merchandise. My motto is “Stationary merchandise is bad… Sales are good.” Before the recession, retail environment showcased an obscene inventory fest, with merchandise flooding floors, and retailers expecting the customer to buy something, anything. As the consumer became careful with spending dollars, retailers became overstocked, unable to move their stuff, and forced to dump it. This impacted the whole retail chain, from raw materials to warehousing. (It’s probably been sucking a little bit for China also.)
Because retailers are stocking with caution, suppliers that can produce and deliver in shorter times, are high in demand. Companies don’t want to keep excess stock, but they want their merchandise when they want it. At another level, tracking has become THE thing in doing business today, with companies measuring demand and purchasing closely, while Internet is growing and growing, taking away from brick and mortar.
As retailers become leaner (less employees, less stock, more tracking) and the economy starts recovering (tell that to the 12.5 unemployed!), some have seen higher profit. Realism is no longer a literature genre but has become a retailer reality. You hear things such as “let’s be prepared for a double dip recession,” which means in retailerese, stashing profits under the mattress or squirreling away for the proverbial wintertime.
Following up on this trend, the holiday shopping season will see a smaller inventory of goods and greater sales. I particularly think that smaller inventories are not necessarily bad. Sometimes I’m driven insane by the variety of products I see in a store and my inability to choose among so many options. I can give my brain a rest this season, and get some good bargains at the same time.
So after analyzing the retail scenario in-depth (it’s called first-hand shopping), the great authorities put forth five strategies that retail chains can do to improve profits or even keep operating:
- Cash flow, baby. Do not overstock, do not overexpand, do not overinvest.
- Flexibility, flexibility, flexibility. Sales are up or sales are down, respond wisely to demand.
- More for less. Be more efficient and invest in Internet channels.
- Track your inventory and sales. Invest in software (yeah, go ahead, put some money in technology).
- Cooperate with suppliers, sharing forecasts, trends, and measurements.
As far as the so much taunted social media, there are no real indicators that social networks drive sales. But it does seem that retailers can boost sales from their own sites by inspiring social interaction, such as allowing customers to design outfits and send them to their friends, or for consumers to be able to review stores and products. (Just thought I’d throw some social media into the mix. One can hardly go without paying homage to the great digital goddess.)
