Timing Is Everything!

The current economic meltdown, while fearful, is beautifully timed for retailers!

Sure, consumer confidence is down. Businesses aren't hiring. Nobody is lending money. But so what?!

The first ten days of August - unless you sell beer - are the absolute dog days of the retail year. As long as world leaders are getting their abrupt comeuppance regarding their fiscal irresponsibility, the timing for retailers is perfect.

Consumer confidence, although presently in the tank, is fickle. In six weeks, or by the holiday selling season, it could be at the highest in years. This kind of crisis brings leaders worldwide to a new sense of urgency. And we have high hopes that they all have gotten the message.

Retailers - be grateful for this timing. And reassure others to do likewise.

Now Who's Holding Retailers Back?!

Right now, the changes going on in the economy are simultaneously encouraging and discouraging. What a time to be in retailing!

Yes, the overall consumer confidence level is rising. Finally! In fact, we are predicting that Holiday 2009 sales volumes will, in a macro sense, recoup about 50% of last year's drop. That is, if you dropped 9% last December, you likely will be up 4-1/2% this year. We're that optimistic.

But, what's so discouraging is the reticence of vital groups to get on board with this optimism. Not seeing customers come in is not the biggest hurdle right now for many retailers. Instead, the problem is that vendors, bankers, and other lenders are not coming to the party. They need to get with it: the pendulum is swinging back.

The inherent negativism of banks is holding back retailers' ability to get enough product in for Holiday. Failure to raise credit limits for retailers from now through November may, very likely, stifle the sales potential.

What a shame. A missed opportunity for recovery? Timid creditors may be to blame.

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!