Inventrak Blog

You've probably cut prices in order to attract those who do not want to spend as much as before on their clothing, shoes and so on.  In order to survive through this tough time, you have probably also already laid off some employees or cut their work hours. What else can you do?

If you want to survive, keep making the effort and work smart. It is true that you cannot control the economy. However, you can still successfully control what you have power over. 

Learn the current need of your customers. You have already discounted your items in order to keep the level of sales volume.  What else can you do? If you own a clothing store, you should know what styles of clothing are the best sellers in your store.  Read your weekly detailed sales report and you will be sensitive to what customers want!  Concentrate on profitable products and cut other non-profitable ones. 

Learn what your competitors do. What prices do they set? How do they design their show windows? How do they demonstrate their products in their stores?  What are their featured products? This might give you some new ideas on how to win customers.  Remember, further lowering prices on your products is not the best thing to do now, because other stores could choose to lower their prices as a response, which will lead to a vicious cycle.

Moreover, perform an inventory overhaul. Your inventory is your single biggest investment. In many cases, it's what defines you. The flow of merchandise in and out of your inventory determines your success. You should be evaluating your inventory as often as possible. You need to know what you have that isn't selling, and you need to know if you've overbought a certain item. Look at your inventory level in dollars as opposed to unit count, and then look at sales, what merchandise you have received, and what is on order. Make sure you have enough inventories to generate the sales you're projecting.

Reducing existing inventory is typically done via in store sales and specials allowing the retailer to convert some of their existing assets (inventory) into cash. Converting inventory to cash is an important first step, however, most retailers cannot sustain themselves through a recession on existing inventories and therefore must place orders for new inventory under a great deal of uncertainty. This reduction in demand for new inventory sends ripples throughout the supply chain and results in larger minimum order sizes and less favorable terms for delayed payment.

The wisest retail strategy under these circumstances is to order the minimum necessary to sustain existing demand. This is a difficult balancing act as no retailer wants to take the chance of being out of a mainstay item and sending a shopper to another retailer in a competitive market. A wise strategy is to have ample supply of items that sell daily or frequently, typically these are the items that get people into the store.

Another strategy is to vary selection, offering less high end items and more inexpensive to moderately priced items for budget conscious consumers. Additional consideration is in the appearance of the store as minimal inventories can convey a negative impression to customers. Often a well stocked store implies a certain success to customers and encourages a better relationship. Optimal merchandising and use of space is one non-pecuniary means retailers have to improve their chances of success.

During tough financial times small retailers must put their liquidity ahead of considerations such as profits and markups per unit. Often retailers are hesitant to liquidate or reduce inventory at a loss per unit in tough times and therefore feel a cash-flow crunch. With no cash safety or reserves, any additional shock to their demand can make fundamental business expense payments difficult to maintain. During a recession, many retailers wind up in bankruptcy for these reasons.

Another common mistake is to not anticipate the downturn or underestimate its severity and duration resulting in changes being made too late to be effective. To withstand the tough times small retailers must be honest about their sales prospects and make difficult choices.

* The first step is to analyze the inventory for the must haves or staple items and then actively reduce the stock of non-essential items.
* Next, retailers should set limits for ordering new inventory and plan for its ongoing management, presentation and marketing.
* Finally, the key is to try and acquire as many months of cash reserves as possible that would pay basic expenses such as rent, utilities, and wages.