The retail headwinds just seem to keep coming.
Retailers have endured narrowing margins and soaring rents and watched the cost of living eat into discretionary spending during a tumultuous 2023.
For several retailers, it was too much.
About 180 retail businesses collapsed in the September quarter alone; only the construction, accommodation and other services sectors had more attrition.
Yet it seems the reward for enduring is more uncertainty. Even amid surprisingly robust pre-Christmas sales, resilience is being tested from many angles.
There are several economic factors playing havoc with consumers and business operations that are likely to persist into 2024.
Consumer sentiment remains low as households stagger under higher costs of living and interest rates. Inflation is also a persistent threat. There was good news in January when the Consumer Price Index slowed to the lowest rate in two years; however, experts recognise that the most volatile factors, such as rental rates and energy markets, remain the biggest drivers.
The global economic outlook continues to be unsettled, as financial, geopolitical and other challenges weigh on confidence, force costs higher and erode margins.
Unstable political environments in Europe and the Middle East can disrupt supply chains. This instability, together with increased gas and energy prices, has affected shipping costs.
On the home front, the nation has been through three consecutive quarters of falling gross domestic product on a per capita basis, and economic growth is expected to fall between 1.5 per cent and 1.8 per cent during FY24.
For retail businesses to remain resilient in this market, they should be preparing for the challenges ahead but remain alert to where issues can be turned into opportunities.
While it may seem like every cost-cutting measure that could be taken has already been implemented, it remains important to maintain a firm oversight of costs and inventory levels.
Take the opportunity to review team responsibilities and assess whether the business has got the right eople in the right positions, or if their skills and knowledge can be better used to keep operations lean.
Set benchmarks for inventory management, including the rate of inventory turnover and tracking and fill rate. Continue to review minimum stock limits and develop contingency plans should supply issues emerge.
Building or strengthening supplier relationships creates a platform for potentially locking in discounts and reduces the risk of delays, or at least facilitates better communication around issues out of suppliers’ control, and lessens the likelihood of quality issues.
Focus on contingency planning for best- and worst-case scenarios, particularly around supply-chain management, and continueto monitor and identify alternative suppliers to keep the business moving, should disruptions occur.
As Australians navigate the increasing cost of living, they become more selective with their spending, and this is where trust comes to the fore.
A strong personal connection increases the likelihood that a consumer will remain loyal to that brand.
Fostering customer loyalty can be challenging and retailers give themselves the greatest chance of success by embracing diverse consumption methods, aligning with customer values, and maintaining a consistent quality standard.
It’s also important to leverage existing technology and integrate online and offline retail, to create a cohesive shopping experience no matter how your customers choose to shop.
Consider investing in technology that enables unified commerce across multiple channels, and caters to consumer preferences regarding shopping location, time and method.
Using technology effectively to streamline operations can free up staff to focus on other areas of the business, such as customer service.
Pricing and promotional strategies will be vital as consumers are more cost-conscious. Using technology to make data-led decisions is important in getting this right.
Business leaders should also assess how they are investing in their people.
Pitcher Partners’ latest Business Radar report revealed that 25 per cent of mid-market organisations attributed their success to having high-quality talent, while 32 per cent said attracting talent was a major hurdle.
AI, robotics and automation may make business easier, but people make the difference through the value they create, the knowledge they hold and the relationships they forge.
If the business hasn’t yet developed an Employee Value Proposition (EVP), business leaders should make it a priority. It can deliver a more engaged workforce and a higher staff retention rate, which cuts down on recruitment and training costs. It’s also an assessment tool potential recruits can use to evaluate your company quickly.
When challenges emerge in the coming year, as they undoubtedly will, retailers will need to assess a situation quickly, reorganise themselves, focus on what is working and walk away from what isn’t.
A successful year might not be double-digit sales growth in a challenging economic environment. But if they can weather the storm through prudent stock management, the correct pricing and promotional strategy, high levels of staff and customer retention, a more engaged and cohesive team and a better understanding of consumer preferences, retailers will be better placed to take full advantage when the tide starts to turn.
This story first appeared in the February 2024 issue of Inside Retail Australia magazine.
The post Survival guide: The keys to resilience and success in tough times appeared first on Inside Retail Australia.
