What Can T&T Small Retailers Do To Survive The Oil Crisis?

It’s Time To Get Smarter Or Die

Hard times are coming.   Small business owners in Trinidad and Tobago and eventually the Caribbean must prepare.   Street vendors feel it first. One vendor who operated for years in Mayaro reported that she no longer goes to Mayaro.  She sold kids clothing and underwear for men and women, her weekend sales dropped from $6000 a weekend, to about $2000.  That was before the cost of transporting her goods from Chaguanas to Mayaro.  She did what vendors do best; she moved her business to Tunapuna.

Let’s face it if you are a small business owner and you think that the oil crisis will not affect you, then you should get your head examined.  You are crazier than Crazy.   Today, in the back of every small business owner’s mind are two questions.

1.       How will the low oil prices affect my business?

2.       What can I do to prepare?

Let’s answer the first question.  T&T lavish economy has been supported by the Energy Sector for the last 25 to 30 years.  A lot less foreign exchange will come into the country’s monetary system.  Less foreign exchange  means that first the country will be stretched to pay  the high food import bills, high ticket foreign products like automobiles will be a thing of the past.  A lack of foreign exchange may even affect carnival. 

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 for the lean times.  This will immediately affect the bottom line of most retailers with foreign good. 

It is only a matter of months before symptoms will start appearing.  Stores will begin to close their

doors, some with the hope of opening again when the economy recovers.  You could expect a mad dash to sell old stock.  We have a perfect example with our neighbor, Venezuela.  First you will see huge sales in an attempt to reduce inventory.  Small retailers will make desperate efforts to recover their  investments; to turn it into liquid cash.   Some will take their losses with a lot less fanfare; one day, you will see a sign on the door; “Out of Business”.

What Can Small Business Owners Do?

Let’s start with what we know.  We know that…

1 The economy will take a downturn in the near future.  Evidence is the plummeting price of oil and the uncertainty of the new government being able to manage without increasing taxes and changing regulations that could possibly affect small businesses.

2,  The Budget: Our new government led by Prime Minister Keith Rowley have PNMManefesto  Here       

prepared a detail manifesto which, since winning, became the government‘s policy for the way forward.  The Manifesto presents a strategy to get goods and services to the citizens of Trinidad and Tobago.  As a business owner, view the Manifesto to see where the dollars will go and how it will affect you.  Especially, read the section on Trade and Industry.  You can see where the emphasis will be placed in the next five years. 

3 Consumer Demand determines what sells.  If you do not provide an essential product or service your business will be the first to feel the reduction in spending power.   People will take care of their survival needs before spending money on none essentials.  

 At this point, we do not know if our government will have to go begging, cap in hand, to the IMF with promises of self imposed austerity.   

But here is the reality.  As small business owners in a small country, we know that what the government does affect the country, it will affect everyone, not just you.  The difference is what you do in your business to ride out the upcoming economic downturn.  You can wait until you it hits you or start preparing now.

First think strategically, answer these questions.

·         Where are you in terms of your business? 

·         What are your profitable products or services? 

·         How profitable are they?

·         What is the turnover rate of your inventory? 

·         How can you manage without foreign exchange?

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 business survive for two years without foreign exchange? 

It could, if you prepare. 

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.

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 demand falls.   

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?  Fixed expenses like rent/lease are untouchable but you may be able to shave off small savings by examining your phone, and other utilities.  Your biggest savings however will come from examining your operating expenses such your employee’s compensation.

Employee payroll represents a significant recurring expense to the business.  This may be your last resort but your preparation should consider each position.  You may discover redundancy that can be assigned to another employee with increased compensation.  Alternatively, you can 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 introduce part time work if there is a need to hold on to dedicated employees.  Each man hour you save will reduce your expenses by the number of employees you currently have.

The worst thing you can do is stick your head in the sand and say you are not in the oil business;  oil fuels your business.  Here’s why it is important to you.

The writing is on the wall for those who want to see.  It says that we are headed for turbulent times. As small business owners we need to be proactive, ride the waves or wait on them to crash into 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. 

It does not matter if you are a retailer specializing in specific goods like ladies shoes, men’s clothing, electronics, cell phones, furniture or you carry a large variety of merchandise; you need to prepare. 

Retail stores are 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 end up losing.  Each inventory piece was cold hard cash. 

One of the biggest mistakes small retailers make is to rely on hope.  They hope customers will visit

them tomorrow.  Most never  build a database of their customers.  Knowing and being able to communicate with your loyal customers is essential to your business.  When hard times hit, that is not the time to think about customer relationship program.  That time is now.

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Trinidad and Tobago Retail Merchants - Preparing To Face The Oil Crisis

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Lean 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:

1. What effect will the low oil prices have on my business?
2. 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