Common Sense Proactive TipsLean times are certainly in our future. A few of us can feel the ripple effect as the economy shrinks. One vendor who operated for years in Mayaro shared the reason she no longer goes there with her goods, sales are too unpredictable there. She left when gross sales went from $6000 a weekend to about $2000.
After deducting the cost of transportation and the time it took to setup she took advantage of one of the characteristics of her trade; mobility. She moved her business to Tunapuna.
Every small business owner in Trinidad and Tobago knows that the drop in oil prices will eventually affect their business. Most know that soon they will begin to feel the economic pinch. In the back of the minds of most business owners are expecting the economic pinch while contemplating two questions:
- What effect will the low oil prices have on my business?
- What can I do to prepare for whatever is coming?
Let’s answer the first question. Low oil prices means a lot less foreign exchange is coming into the country’s monetary system. It means the first signs the country will experience is a lack of foreign exchange. This means that we cannot pay for the high import food bills, the extravagant need to have all the foreign fashion, automobiles and luxury goods. An article in the Trinidad Newsday this week reported the opinions of a Dr. Daren Conrad, lecturer at the University of the West Indies. The article here
The reality is that 80 percent of our goods come from foreign. It is only a matter of time before the supplies we now have are depleted. At that point if supplies cannot be replaced locally, the business is in trouble. Simultaneously, consumer demands will be for more essential goods and services. Consumers will start making lifestyle adjustments to the lean times. This will immediately affect demand and the bottom line of most retailers who stocked foreign good.
In the next few months ahead symptoms will start appearing; stores will begin to close, many with the hope of opening again when the economy recovers. Expect that merchants will make a mad dash to sell old stock to reduce inventory. A few will take their losses silently without any sales or publicity; one day the doors will be shut. At this point, time is starting to devalue your inventory; waiting any longer could turn into desperation for liquid cash.
What can retailers do?
OK, here is what we do know. We know that things are going to take a downturn in a matter of months. We can use as our evidence the plummeting price of oil and the general elections which at this point is very unpredictable. Fact is it does not matter who wins this election, it will not change the price of oil. The falling oil price is not an illusion, we must prepare.
At this point the government may still have to go begging, cap in hand, to the IMF with promises of self imposed austerity. . The reality is that as small business owners, what the government does will affect the country but it is what we do with our business that will determine whether we can ride out the upcoming economic downturn.
It is what you are willing to do now, not in the midst of the turbulence. Start thinking strategically First, you need to understand where you are in terms of your business. What are your profitable products, how profitable are they, what is the turnover rate, how can you get around the FX challenge? At this point, the relationship you have with foreign suppliers will be crucial to your survival. The predictions are that oil prices will stay low for the next 2 years.
Can your store survive for two years without foreign exchange? It could if you take steps as soon as possible to buffer the impact. There are a lot of questions you need to answer about your inventory and profitability. Most retail business owners carry a variety of retail items unaware of the profitability of each.
Inventory is a major expense to any retail business, control this and you will control a significant part of your business. While you still can access foreign exchange, you may want to consider cutting cost by making arrangements with your regular suppliers to make purchases online instead of flying to Miami or New York City. Start with an inventory audit Count and cost every item of inventory. Date inventory, the intention is to know what you have and to consider drastically reducing the price of stale inventory. This will be harder to do when hard time hit.
Second, you need to figure out what it takes to operate lean. Lean meaning, what will it take for you to operate at the barest minimum cash flow and investments over a specific time period. Fixed expenses like rent/lease are untouchable but you may be able to shave off small savings by examining your variable expenses such as phone, and other utilities.
Your biggest savings however will come from examining your operating expenses such the primary being your employees. Employee payroll represents a significant recurring expense to any business. This may be your last resort but your preparation should consider which position, if not redundant, can be handled by another employee for a small increase in compensation. Alternatively, you may want to adjust the working hours to focus on periods where activity peaks. For example, instead of opening the store at 8 AM open at 10 AM saving two hours. Or you can introduce part time work if there is a need to hold on to dedicated employees.
Be creative, each man hour you save will reduce your expenses by the number of employees you currently have. Start Now This is no time to procrastinate; one of the biggest mistakes small retailers make is to rely on hope. Hoping that you will have loyal customers because they need your merchandise is not a sustainable plan for profit. Loyalty can only be generated with effective customer service; over time. The time to start building a customer data base was yesterday, today not tomorrow. If you don’t have a customer data base start today. Probably the worst thing you can do is stick your head in the sand and say you are not in the oil business.
Here’s why it is important to you.
The economy in Trinidad and Tobago has turned the corner, the signs have been placed and they all point to a rough road ahead. Be proactive, ride the waves or wait on them to crash into your business. There will always be demand, with a lack of US dollars consumers will be forced to spend locally. Online shopping is costly, according to Dr. Conrad in another Newsday Newspaper article.
Regardless as to whether you are a retailer specializing in specific goods or you carry a large variety of merchandise; you need to prepare in the next few months. The retail concept in Trinidad and Tobago is built on the idea that the more you have the more you are able to sell. It is also true that the more you have, the more you must sell in order to stay profitable.
When demand plummets as we know it will, the more you have the more you lose. Get ready. Find our the 2 Biggest Mistakes Retailers Make Go Here