Passionate Preaching to Retailers

Some things we care about; some things we care about deeply. This is one of the latter.

Let's all assume that the economy is (finally!) gradually strengthening. There are many bona fide signs of that. Great, as far as it goes.

But we see that many independent retailers are rejoicing with the "Whew! Now we can can back to normal" attitude. And that is very troubling to us. What is sorely needed is a little parental discipline, namely, "Rejoice briefly and restore ratios fervently!"

We see low current ratios and margins along with troubling high Debt-to-Worth ratios. Our mantra - Priority #1 for retailers in an improving economy: Get those ratios restored!

Who knows when the next financial tsunami will come? Retailers must get stronger now! (Want to know what the benchmark ratios are for your retail segment? See the "Benchmarks: 50+ Retail Segments" at The ROI site.)

Get your ratios above the benchmarks for your industry. Then – and only then – should you celebrate being on the road to recovery. Be passionate about it!

Foolish Prediction? We'll See in Six Months

Last week (June 2) we had a catch-up lunch with a long-standing (high end) retail client of ours who, so far, has averted bankruptcy. Surprisingly, the next day we received the amazing, and accurate, note below. He copied us when he sent this note to vendors, an attorney, an accountant and key staff members. Other than getting a chuckle out of it, we thought you might find some of the thoughts quite useful...or hilarious in five months!

"Hi Ya’ll:

I had lunch with the Seattle retail consultants that I’ve used for years. Pat and Dick have consulted together for about 25 years and are nationally known and quoted in their field. Their business is to follow retail trends at a macro level as opposed to living it down in the trenches like we do.

Here are their two websites: http://www.outcaltjohnson.com/ and http://www.retailowner.com/

Pat & Dick say that, barring no huge negative event in the stock market over the summer (which, of course is possible), they predict that high end retail will bounce back in September and October and that we should expect to see 10-15% increases over the 4th quarter period of 1-2 years ago (as opposed to increases against last year’s decreases—make sense?).

They cite:

• improving consumer confidence;
• improving real estate markets;
• improving numbers and wealth generation of the stock market;
• pent up cash;
• pent up demand.

They see our (high end) customers as being psychologically affected by what’s happening rather than their pocketbooks being directly affected.

Moving forward, customers will be cautious and looking for reasons to buy “value”, which isn’t necessarily related to price. As retailers we need to do a better/excellent job of explaining why high end product is a value, ie: style, quality, longevity, uniqueness, etc.

American consumers, they believe, will not outgrow their “I deserve this” way of consuming.

They predict that in the next 18 months, there will be an unprecedented number of retail start ups and entrepreneurs who see openings in the market because of all the retail failures; one more reason we need to stay on top of our games.

Lastly, they acknowledge that there is little we can do to force our customers to buy. What we should do, however, is maintain the course so that our customers see that we are weathering the storm.

Generally, we should not be changing locations if it can at all be helped and that as small, independent retailers, we need to maintain our WOW factor which requires us to have compelling, exciting stores when customers start coming back in.

It’s all prediction, of course, though it’s educated/experienced prediction. It was a great pep talk for me so I hope it helps you feel a tiny bit better about treading water.

And to quote Pat & Dick: Halitosis is better than no breath at all!

Tim"