The recent demise of many familiar retailers has signaled the end of an era for retail as we know it. Though the retail sector is not going away anytime soon, the old model is changing, and changing fast. It is evident that the retail industry is in need of a transformation. With the exception of on-line and off-price retailers, the rest of the retail industry is struggling to stay afloat. Numerous store closings and supplier fallout have contributed to dampening consumer confidence in traditional retail. With leveraged retailers, rising interest rates, slowing brick and mortar sales, and the change in customers’ shopping habits, the industry is in for turbulent times. So, what can a business do to survive such a challenging time?
While brick and mortar stores fold at alarming rates, a few retailers have managed to prosper. Amazon continues to thrive and build a loyal customer base. This on-line behemoth has redefined the customer experience, leaving brick and mortar retailers incapacitated in the wake of its game-changing business plan. Off-price retailers, like T.J.Maxx and Burlington, continue to expand and connect with their customers by providing quick changing inventory at consistently low prices.
In this environment, even profitable retailers, like Macy’s, are shuttering stores. Retailers such as J.C. Penney, Sears, and Abercrombie & Fitch, to name a few, have announced multiple store closures for 2017 and several bankruptcies in the sector, including Bob’s Stores, Gander Mountain, and BCBG have contributed to the decline. A sharp increase in retail bankruptcies is expected this year, which translates to financial problems for suppliers, financing sources, and their investors.
With the industry in flux and the retail’s future uncertain, now is the time to strategize. The following are ten areas to focus on as you guide your company through the harsh retail environment of 2017 and beyond:
- Adapt to changing economic conditions, buying habits, trends, and retail consolidations, and understand the needs of your customers and connect with them.
- Invest in a digital marketing strategy to help increase visibility and drive sales.
- Focus on your product. Make sure you are giving customers what they need and like, rather than what you like.
- Examine your supply chain/logistics and warehousing costs, to achieve maximum efficiency and effectiveness.
- Watch inventory levels and monitor aged inventory. This can help you estimate product demand, learn which products move and plan new inventory purchases.
- Pay attention to your receivables aging and know when customers fall behind, so that you can take action immediately.
- Pay attention to chargebacks and other unauthorized deductions, such as shipping violations.
- Examine your supplier and customer credit terms. Constantly review and look for ways to reduce costs. Negotiate discounts with suppliers when possible. Consider choosing suppliers who offer discounts for early payment.
- Compare leasing and financing options. You may be able to save on maintenance costs if you lease rather than buy equipment.
- Rid your company of discretionary overhead and cull your workforce to keep the brightest and best.
If you can put these suggestions into practice, your company will be better equipped to survive any fallout from a diminishing retail landscape. Retailers that ignore the opportunity to evolve, disregard changes in customer behavior and refuse to leverage technology, will continue to struggle. Though declining profits are forcing retailers to adjust, it may be too late for some. As the world of retail rapidly changes, pay attention to what makes your company great, have the discipline to make difficult decisions, always look for ways to improve, and continue to adapt. With some creativity and foresight, you can successfully steer your company to a better future.