Mr Retail: Now That Sales Have Slowed for Many

By Mr Retail

For many of us retailers, sales have slowed down. The reality is that the days of people throwing money at you are probably over. For some, that means a return to pre-pandemic levels, or slightly better or even below 2019 levels.

Even if your sales are still up, the dramatic increase in the price of groceries, eating out, gas, and pretty much anything else, is causing consumers to get skittish.

If you have been following the news, you are reading that more and more economists are predicting a recession. Right now we are dealing with the tricky balance of the Fed raising interest rates to slow down borrowing so the economy cools…. but doesn’t cool too much.

For us retailers, it means we need to start looking at historical data, crunching numbers, and running cost and profitability projections. Here are some things to think about:

1. Are your employees making more money than they were in 2019 before the pandemic started? If they are commission or bonus based, their salary is likely to drop in the coming months, yet their expenses are higher than 3 years ago. Have you thought about that? How are you going to handle it?
2. Have you dived into your 2018 and 2019 numbers? Sales, and expenses by category? Have you compared your gross profit now to back then? Have your fixed operating expenses increased?
3. I would then plug in the sales over the last 2 months and try and create sales projections based on what you are seeing now in your store. I would also do a 10% and 20% sales decline from the last 2 months to see where you stand.
4. After you have crunched these numbers, what do they tell you? Do you need to look at ways to lower overhead? And at what sales volume will you need to make the next round of changes? You want to be proactive with this instead of saying in six months “oh crap, what happened?”
5. Were you around in 2007 and 2008 to remember that recession? If so, revisit what you did to stay afloat.
6. I would not make any major purchases at the moment. In my store, we are preparing for a recession, so if it doesn’t happen, I will have lost a few opportunities, but will still be afloat. But, if I change nothing, I may not be around if a recession hits. In short, be wise, not foolish.
7. Lastly, look at your net profit margin in 2019. If your expenses have gone up and your average gross profit has fallen, with all else being equal, you might already be running at a loss.

Finally, you can take this advice and do with it what you wish. I can tell you that being prudent and wise with the “backside” of your company is extremely important right now. It will help to ensure a healthier future for your company. And that is what we need. A healthy mobile electronics industry filled with healthy retailers. I wish you nothing but the best.

About Mr Retail
Mr Retail offers opinions and information on car audio retailing for CEoutlook. He wishes to remain anonymous. He has owned a retail store in this country for over 20 years now. Mr Retail loves what he does and loves the 12 volt industry and is happy to share his hard won expertise.

Photo credit: National Retailer Federation