This New Normal Demands New Strategies

Yes, We Know. We Have Previously Advised Otherwise...

For retailers needing money, Outcalt & Johnson and The Retail Owners Institute® have long advised these 3 key steps:

1. Make your business bankable
2. Keep your business bankable
3. And never expect your vendors to "bank" you!!  

That still is very good advice.

Problem is, in today's economic climate, banks simply are not inclined to loan to retailers of ANY size, shape, or form! (We know; we've been trying to help retailers get financing, but with little or no success.)  Yet, to fund growth, successful retailers badly need loans.

What's a retailer to do?

Adapt! Be like The ROI. Recognize that, in this New Normal, some vendors(!) may be willing to be your new "bank".

Of course, there are caveats! To borrow from vendors, retailers must:

• Do all of the preparatory work that they would do for a bank loan (Get a quick overview from this TOPICAL TUESDAYS webinar.)  

• Treat this proposed transaction as formally (that is, at arm's length) as you would with a difficult bank.

• Offer to the vendors personally guaranteed promissory notes for all loans. (Yes, folks. This is not slow pitch!)

• Prepare and share integrated Cash Flow projections for the year(s) the loans will be outstanding.

• Make darn certain that you repay these loans on time, or preferably, early!

• Remember, if you disappoint your vendors, your "lender of last resort", you're toast!  

Okay, for those of you with good memories who are about to shout "What?! You're now telling us to ask vendors for loans?!!", we reply, 

"Yes, that's true. 

Time's have changed, and so have we. In retail, as in life, adapt or perish!"

Know About This? (re Amazon, eBay, Google) You Should!

Amazon's dominance as the e-commerce platform for "third-party sellers" may be showing some signs of decline. There is unrest among its "small merchants" about fee hikes, and now a class-action lawsuit has been filed by some merchants.

• "Third-party sellers alleged in the lawsuit that, by holding sellers' money longer than allowed (often well in excess of the 90 days), Amazon racks up interest and uses the extra cash to support its operations."

• "Amazon has skewed the relationship to best suit its own operations," noted one observer. 

• "The suit estimates the total merchandise value of third-party sales last year at Amazon averaged more than $160 million a day. By holding on to this daily cash flow for only a few days or weeks, Amazon is able to invest this money in money market funds, marketable securities and other investments, and utilize the cash as working capital in the operation of its business,' the lawsuit says."

• "Amazon has been hiking fees for its third-party sellers over the past year-and-a-half. The hikes are shrinking smaller sellers' margins to increasingly uncomfortable and untenable points. The fact that Amazon is a direct competitor to those merchants stings even more."  

This resentment of the online retail giant's actions by some of its third-part sellers seems to have emboldened Amazon's competitors. Consider these observations from some recent news articles and commentaries (again, not us):

• "eBay and Google have both offered to reduce costs and transparency for third-party sellers. The companies are naturally hoping to trigger a merchant exodus from Amazon."  

• "eBay said that it will overhaul fees for sellers on its online marketplace, lowering them for many sellers as it steps up competition with Amazon.com."

• "Google seems to be preparing for an e-commerce battle with Amazon and eBay."

• "A brewing conflict between Amazon.com and its merchants over fee hikes could benefit rival eBay, and provide an opening for Wal-Mart Stores and Google, which are just getting into the space."

• "This battle of the giants - eBay, Google, Amazon - is just getting started. Though many smaller retailers could be hurt by these three large companies squeezing their way into traditionally physical retail distribution channels."  

While some independent retailers will welcome the benefits of heightened competition for Amazon, we think it behooves all "third-party sellers" to be well aware that the true cost of doing business with any of these platforms is exposing all of your sales and customer data to your "digital landlord".
Here's what some experts warn: 

• "Knowing exactly what sells, for how much and to which customers, means Amazon can adjust its own assortment and set prices to undercut the competitors it hosts, all based on actual sales."

• "Through its third-party sellers, Amazon can also collect Customer Relationship Management data on customers who have never bought a single item from Amazon."  

Your customer database may well be the most valuable asset of your retail business. Those customer relationships represent yourcompetitive edge. Retailers must manage, protect and preserve this important asset, which increasingly has monetary value. 

Additionally, the sometimes very slow payments from Amazon to some of their merchants (exceeding 90 days) can cause cash flow havoc, especially for the "small merchants."

It always comes back to that other Golden Rule:

"Whoever has the gold, rules!"

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Reminder: all of the quotes above are from people not associated with The ROI.  We have compiled them for you strictly as an FYI.

The First Quarter Is Over. So, How Did You Do?

(What? You're Still Just Comparing to L.Y.? That Is SO Last Year!!)
 
So, here we are: already one-fourth of the way through the year. Went by fast, didn't it?

When most retailers reflect on how the year has gone so far, they are quick to compare to L.Y. That is, how does this year compare to how our performance Last Year? And most often, of course, retailers are only comparing sales results of this year to last year.

In the opinion of The ROI, comparing to L.Y. is interesting, but not significant. Retailers who assess their performance only against Last Year's numbers are essentially driving forward while looking only in the rear-view mirror! Scary!

What should retailers be comparing against? Their 2013 plan! 

• What are their planned (expected) sales for the first 3 months of 2013?
• What were actual sales?
• Then compare: are actuals above plan? Or below plan?    

Now comes the key step. Whether sales vs. plan are up, down, or sideways, determine "Why?" Which of these 3 causes would best explain the difference?

1. Is it because of changes in the number of transactions?
2. Changes in the average sale? (That is, average transaction value)
3. Changes in the number of items per transaction?

Now you are on a path to have some useful management information!

Understanding what drives sales changes provides great insights on how to make adjustments, or how to better seize opportunities.

Plus, your analysis of the transactions will help you considerably. 

• If sales results are better than plan, what does that mean for your buying plan? Any orders you might want to increase?
• If actual sales results are below plan, you will really want to take a close look at your inventory orders. You may want to postpone or even cancel some orders.
• Consider the impacts on your marketing plans. Do upcoming promotions or events need to be changed?
• You will also want to review your expense plans as well. For example, what are the impacts on scheduling your people?   

Have More Fun in Retailing: Be Strategic!

By measuring your store's performance against your plan, instead of just comparing to L.Y. numbers, and, analyzing the transactions, you are managing like the pros do.

More important, by looking ahead and anticipating, instead of just reacting, you will find that you are able to put the fun back into retailing!


For more ideas on managing more pro-actively, see the Managing Store Issues section at The ROI. click here to go there now