While many retailers demonstrated immense agility to pivot their business during the unprecedented shutdown from COVID-19, they now face an even larger task: reopening in what is sure to be a drastically altered retail environment. With so much uncertainty, Management One realized the need to create a roadmap for retailers to develop a strategy for reopening. Pulling from over three decades of retail consulting experience, the Retail Recovery Playbook is a starting point for some tough conversations. Access your free digital copy at https://www.management-one.com/retail-recovery-playbook.
To begin, you can throw out comparisons to last year’s business: they’ve been rendered meaningless. A seismic change is underway in the retailing landscape – it’s a whole new ballgame. Some stores may re-open in early May. Some will never re-open. This article addresses steps that can be taken now to maximize this critical time.
Knowing your cash position allows you to make better business decisions. Sales projections for 30-60-90-120 days out will help guide every financial decision. Cash flow reports should be updated often. Where possible, make every fixed expense a variable expense, so that it can be tied to revenue. Selling payroll is the obvious one.
Have you negotiated with vendors regarding dating and discounts? Have you obtained rent relief from your landlord? Most would rather have some rent than to see their space “go dark.” Today, margin is not the top priority: CASH is King!
Regarding business interruption coverage, research your state’s regulations and contact your carrier. If enacted into law, certain policy exclusions that would normally prevent payment for business interruption might be overridden.
What is the plan to sell current inventory? Now is the time to streamline the number of vendors carried; “too many” is clearly one of the biggest contributors to stores being overbought, and slow-turning stocks. If there was ever a time to reduce your vendor mix, it is now. Run a vendor report by classification and make decisions regarding the vendor matrix. Group them into 3 categories: (A) must have; (B) should have, and (C) could live without.
When it comes to dealing with vendors, negotiation will be the name of the game. Negotiable items include shifting deliveries, dating, discounts, return privileges, cancellations, protection from online discounting, and relaxing of Minimum Advertising Pricing (MAP) policies.
What will your current inventory be worth when you re-open? If you have been closed with very little new merchandise, the answer is: not as much as it was.
Vendors are backed up with spring inventory that was canceled. This probably makes returning anything out of the question. You are going to have to promote. Please resist the temptation to use “the lazy person’s markdown.” This is where everything in the store is marked down equally, say 20-30% off; it has proven to be one of the least effective markdown strategies available. Alternatively, take targeted markdowns by class, vendor or style. This gives you the opportunity to sell the most challenging inventory first. It is especially palatable with vendors where price accommodations have been made available.
Another option to consider is shifting the major store-wide clearance events back a month since there are rumblings that fall deliveries might be late. This will give you time to move through more spring merchandise. For stores with OTB, you will be in the driver’s seat. There will be merchandise available, and most likely at deep discounts, making reorders a good opportunity to buy.
As you begin to look toward fall, make sure your OTB is in line with revised sales projections. You may need to adjust your percentage buys for pre-season buys, fill-ins, reorders, and opportunistic buys. The old model is dead: new game, new rules. Most retailers keep a “wish list” of vendors they would like to carry. With several retail closures on the horizon, vendors on your list might be more receptive now.
Know Your Customer
Customer behavior likely will be changed following re-opening. Consider what you need to do to alleviate any customer concerns. What will be your procedure for cleaning items that have been tried on? What will you do if social distancing is still the norm? What is the process for sanitizing fitting rooms, bathrooms, etc.? Consider re-evaluating product display and placement on the floor.
Continue to offer special services that customers have gotten accustomed to. These include curbside pickup, pre-scheduled appointments, off-hours shopping, Buy Online Pick-up In-Store, Buy Online Return In-Store (BOPIS/BORIS), and live streaming events.
What we’ve all learned through this pandemic is that online selling has undeniably sealed its rightful place in retail. Develop a marketing plan that reflects your online presence, as well as the in-store feeling. Your website home page is your virtual store window. Many online shoppers won’t go further than the front page, just like shoppers walk past store windows that don’t entice them to enter.
Stay strong and positive. Business won’t be the same as it once was but keep in mind that crisis creates opportunities. With good planning and execution, you will be able to capitalize.