Catherine Erdly of The Future of Retail shares valuable advice for navigating the pandemic.
I wanted to write about this because I’ve had so many conversations with people over the last few weeks, and particularly the last few days about the disruption and uncertainty that people are feeling in their everyday lives and their businesses.
You don’t need me to tell you what’s going on and how disruptive it is. What I really want to focus on is a few lessons I’ve learned over my years in the retail industry.
I’ve been in retail for 20 years now. In 2008 when the Lehman brothers collapse happened, I started a job two weeks after that at the Austin Reed group, which was a business selling predominantly business wear and going out clothes.
It was a very difficult time for that business. And if I’m really honest, it’s been a difficult time for most retail businesses that I’ve worked for over the last 12 years, because 2008 really marked a sea change for a lot of people in the industry.
They’d been used to the heady days of shop-’til-you-drop, buoyant consumer spending and easy access to credit. All of a sudden, that got pulled back and retailers had to really adjust and change their model.
So if there’s one thing I know a lot about, it’s about working in product businesses during uncertain times and that’s what I want to focus on. I’m going to cover seven things that you can do in your business right now to make things better.
1 - Don’t Panic
It’s easier said than done, I know, but it’s really important that you stay action-focused. When I think back to my time in retail, there were a huge number of people who put a massive amount of time and effort into feeling really resentful that the rules had changed in the game and that the things they were doing before weren’t working any more.
Those people got stuck in fear and paralysis and then there were other people who said right, okay, new reality, what can we do?
No prizes for guessing which group of people did better. So wherever possible, try and be in that action. Focus. Try and focus on one thing a day that you can do in your business.
Try and minimise the amount of time you spend watching the news. If it makes you anxious, maybe set yourself time that you check it during the day rather than constantly watching stories rolling in. I don’t know about you, but once I’m in that watching mode, NOTHING gets done!
Focus instead on what you can control in your business. And don’t try and do it alone. Reach out to other people for support - maybe other business owners who can help you by swapping ideas or just letting you talk about how you are feeling.
But keep focused on action, rather than getting stuck in the fear. Because, as Franklin D. Roosevelt said, “the only thing we have to fear is fear itself”.
2 - Focus on your product
It’s always really important for you to have the best products that you can have, but right now it’s even more important. I always say that there are three things your products need to be - unique, desirable and profitable. And right now, the desirability element is even more important.
What I’ve seen over the years is that even during economic downturns, people do spend. They still have birthdays and babies are still being born, so they’re still treating themselves and treating their friends.
There’s even this idea of actually small gifts to yourself becoming more popular during worrying times. This is called the “lipstick effect” after researchers noticed an upturn in lipstick sales during a recession because it is a cheap way to cheer yourself up.
And so there are customers out there, but it’s like their money is clenched tightly in their hand. And your job is to work out what you can do to get them to open up their hand.
Selling products is always about seduction. It’s always about finding the products that your customer really, really wants to buy. But during tough times, it’s more important than ever.
Start by taking a look at your data. What are your best sellers? What is the data telling you about what your customer loves?
But then think about your products. Are you moving them on? Are you offering your customer something new? Have you been resting on your laurels a little bit, perhaps you’ve got a bestseller that you’ve had for a while. But you’ve not brought anything new in. Can you bring something new in? Can you encourage people to spend in a different way and go back and look at everything in your business? This is now the time for you to be really, really critical and brutally honest about your products, and to ask if there is anything you can do better.
3 - Manage your stock
I’m forever talking about stock management because it’s a vital part of having a healthy business. Managing your stock during economic uncertainty is so important, it is absolutely critical that you keep your expenses under control.
You want to leave yourself as nimble as you possibly can be. That means that you don’t have extra stock you don’t need.
So if you’ve had something in your business for a while and it’s finally sold, you don’t have to replace it. You should only be re-buying in best sellers and you should be looking at ways that you can keep your stock really tightly managed.
If you’ve not done that in the past and you know that you’re sitting on too much stock, it may be the time to have a bit of a clear out of old end of lines or products that aren’t selling anymore.
Ideally, every business should have cash reserves - money to see them through difficult times, and that is really hard to do if you put all your money into stock. So if stock management was critical before it is absolutely vital right now.
4 - Avoid knee-jerk promotions
Yes, you need to clear out old stock - but a clearance event is a different beast to a promotion. At the moment you’re going to see your sales looking softer or lower than they’ve been, because we’re in a very uncertain time and nothing is worse for sales than uncertainty.
People don’t spend as much money when they don’t know what’s happening, and at the moment there’s just so much we don’t know. This uncertainty is going to have an impact on your sales.
If you knee-jerk and start running 20% off or 30% off to try and get sales going again, there is a danger that you will come out of this (hopefully temporary) situation having taught your customer that you are a promotion-driven brand.
In the future, there’s a danger that they will now be trained to wait until you go on promotion rather than buying at full price.
So I would be very cautious about putting on a blanket “20% off everything” to get sales moving because I think it will, in the long run, be damaging to your brand.
And that, in my mind, is very different from a clear out of old stock. So I’m not saying that you shouldn’t have any discounting. I’m just saying make it really targeted and focused.
5 - Have a really honest look at your numbers
The reality is that it is going to be bumpy for the next couple of months and it’s time to have a really honest look at your numbers.
For a product business, that means your sales forecast. If you don’t have the sales forecast, now is a great time for you to get one, because you need to understand what’s going to be happening in your business in terms of cash flow.
Most retail businesses will run off two to three sales forecasts. They’ll have a realistic view. They’ll have a stretch, view - what they’d like to aim for, and they will have a worst-case scenario. My role as merchandiser was often to manage what the worst case scenario was and to keep the stock under control so that if we hit that worst case scenario, we weren’t left with lots of stock. Managing that balance was crucial for helping with business cash flow.
It’s important that you do face the reality of what it could look like for your business because you can make decisions now that could help you in the future.
If you lay out what your potential sales could be, you can look at what your upcoming expenses are and work out what you need to do. On the other hand, you could be in denial or you don’t want to look at the numbers. Then it’s like when you’re not opening your bank statements because you can’t bear to look - in other words, an uncomfortable place to be.
Knowledge is power. If you can map out your business based on a realistic and a worst case, then that’s going to be a lot less uncomfortable than ignoring the problem and hoping it goes away.
6 - Be proactive
Think about what you can do to improve your business. Consider all of those areas of development that maybe you’ve thought about focusing on but you just haven’t got round to because life’s been too busy. Now is the time to focus on these areas and get future-fit.
Personally, I love a good old fashion SWOT analysis - Strengths, Weaknesses, Opportunities and Threats to help with this exercise. Get a piece of paper, fold it in half and in half again and you’ve got four sections to brainstorm in.
Strengths and weaknesses involve looking at the internal workings of your business and thinking about what you do well and where your areas of improvement are. Do you need an email list? Is it your SEO that you’ve been ignoring or your PR outreach strategy?
Opportunities and threats - these are the external factors affecting your business. Is this situation creating any opportunities? With supply chains around the world being disrupted, is now the time to offer your products out to retailers who have been unable to get products in that they wanted? What are the threats? How vulnerable are you to supply chain problems? Is there anything you can do to change that?
Now is the time to do it, because the more effort you put into making your business as good as it can be, when we come out of this downturn, then you’re going to be way ahead.
Think about using this time to get yourself fit for the future, and it will be really beneficial. Things like your sales forecasting and your stock control are basic business management principles that you can work on and improve, but then also looking at your business and being proactive about what else you can improve is key as well.
7 - Stay close to your customers
This is arguably the most important thing that I would like you to take away from this blog - it’s going to be bumpy. You’re going to feel demoralised but don’t retreat.
Be there. Think of selling as service. How could you help your customers? How can you meet them where they are right now? So if they’re uncertain, or they’re stressed, talk to them and meet them where they are. Have those shared connections - don’t pull back. The natural instinct when things are tough is to pull back and retreat. But right now is the time for you to be stepping up, meeting your customers where they are, especially your loyal customers.
Stay close to your customers and try and be a part of their experience of this situation. If you’ve got a physical retail store, what can you do within your community to be part of the solution? Can you offer to drop things off for people, can you or your store be a part of your community’s response to this crisis?
The people who go out there and really connect with people and meet them where they are will the ones who continue to make sales.
There are two opposing forces at work at the moment. One force that will lift you up is that people are getting much more focused on buying consciously and buying from businesses that share their values. The other force bringing you down is the economic insecurity and so it will be interesting to see which one will win out.
However, you are not going to be able to take advantage of this conscious consumerism, values-based retail if you’re not sharing your values. If you’re not connecting with your customers, you are missing out on your unique competitive advantage. In fact, in some ways I think that small businesses who connect with their customers will weather this storm better than big businesses. Don’t retreat. Be there for your customer. Keep showing up. Keep telling them what you’re doing and why you’re doing it. Keep sharing and keep being present.
So those are my seven things. Don’t panic, focus on your products. Manage your stock. Avoid knee-jerk promotions. Have a really honest look at your numbers. Have a really good look at your business and identify areas that you could work on to get ready to come out of this stronger than ever, and stay close to your customers.
If you have any questions, do please message me at email@example.com. I have lived this for so long now. And I know that if you are proactive and action focused, if you stay positive and you keep showing up, then the outcome will be so much better for you and for your business.
Catherine Erdly, The Future of Retail