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Independent store owners need to know about retail and digital disruption

Retail Disruption and how it impacts Retailers

As an expert in store liquidation sales that helps independent retailers form and execute the exit plan of their business, I know this lesson well.

Take my client Marie, a sweet lady with a small natural foods store, realized that she was not prepared for the sharp drop in her business after her foot traffic went away.

When she decided it was time to close her business she was scared and knew nothing about how to close a store.

Marie’s fear came from having no exit strategy and no plan.

She was afraid of making costly and painful mistakes almost to the point of feeling paralyzed.

I’ll tell you how Marie’s situation ended up later.

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Let’s take a look at the state of retail in our most current unforeseen situation.

Retail and Digital disruption, as an expert in store liquidation sales that helps independent retailers form and execute the exit plan of their business, I know this lesson well.

In the past quickly changing circumstances because of  the pandemic have led many corporate and small independent retailers to close stores indefinitely.

This forced customers to keep their shopping to only the most essential items.

With several signs of a pullback from customers even before the unforeseen situation of the virus hit close to home.

– Sales growth showed already dimming customer interest – some very important questions emerge

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How low will the dip in customer mood be?

  • How long will it last?
  • Will the pandemic spark a recession?
  • And a huge looming question that is getting very little attention is will this forced shopping behavior change become a permanent one?

Some experts have chimed in stating, “The consumer has never been tested quite like this.

“The first question is how long will this situation be here, and then how long will it be in the psyches of people.”

The built up demand will ease the impact on retail and on the economy, but it can be unnerving.

My question is how many of these independent retailers will be able to withstand the shutdown and be able to reopen and be operating as “business as usual”?

This is a monumental task for some especially when it comes to retaining their employee and getting merchandise through the tattered supply chains.

I believe there will be a big struggle getting most Americans to go back to their old spending habits and will live a bit closer to the vest from left over fear from the shutdown.

“While customers may return, some may find joy in less consumption” Thomai Serdari, a professor of luxury marketing and branding at New York University’s Stern School of Business.

Store before final store closing sale
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From a consumer perspective, it’s easy to imagine a scenario that is very plausible:

Customers will certainly spend less money during a stay at home time period and realize that maybe they don’t need so many things in their life.

This of course may happen after months of the country getting back to functioning again.

Many people have lost their jobs and are going on weeks of no money coming into the house.

This whole event will have waves of impact for a while on the retail market and the independent retailers have to be prepared to ride those waves in the coming months.

This is the time to really look at your business and put an exit plan into place for when you need it.

Coupled with the retail apocalypse, the retailers suffering the most right now, as it has been for the last few years are the independent retailers.

They simply cannot compete with large retailers and the deep pockets required to stock, advertise and compete online.

Currently, thanks to their vast supply of products, which include food and household products, large retailers like grocery stores and also mass merchants like Costco, Walmart, Target are pretty well protected from retail’s immediate problem, experts say.

But independent retailers, specialty retailers and department stores and the shopping malls they are in, face great uncertainty.

Any of those already on the brink, say analysts could see their turnaround efforts cut off.

“We think the pandemic poses the largest problems for companies with US brick & mortar exposure, low EBIT margins, and high debt.”

UBS analysts led by Jay Sole in an email, adding that independent specialty stores and department stores are especially at risk, but less so off-price stores.

“Despite its brick & mortar exposure, the off-price channel likely gets an advantage from industry consolidation, inventory dislocations and increased trade-down.

Part of our bear case is the pandemic catalyzes a recession which moves customers into value channels.”

If this bodes true then as I stated earlier people will be holding onto their money and when they do spend they will be opting for the cheapest and fastest way to get it.

Translation, ordering from Amazon or another online retailer.

Many independent retailers need to take heed now that the “built up” demand will likely not be seen in their stores.

UBS analysts have called this current situation “uncharted territory” and also said that a recession is most likely and noted that “essentially all major retail markets are affected to some degree.”

According to Nick Egelanian, president of retail development firm Siteworks, the effects of an epidemic on retail are difficult to predict and probably will come in waves.

The steady slowing of many sales for the independent retailer over the years has been a painful drip and now the faucet is turned off completely.

The smart retail store owners will get the information now on how to be able to successfully exit the business as the next months unfold.

Mr Egelanian added that the public health recommendations around people gathering have been revised multiple times in recent days.

“And it is changing everyday which changes retail everyday.

People are not going out to eat, they’re not hanging out together, they’re not going to larger shopping malls.

People are driving less right now so even gas stations will have less revenue.

Long-term ramifications will be greater than most people realize.”

How are small retailers coping with this newest retail dive?

Many independent retailers are forced to close, without their larger rivals exemptions as an essential business, and their financial cushions.

Although they may not realize it this is valuable time to take a true inventory of where they stand with their business and what is the best way to move forward in this new economic climate.

Many were left stunned by the current retail apocalypse hit and will pay the price in the next few months.

Last week, Jennifer Rockwell was working in her second hand apparel shop in downtown Portland, Maine.

After closing down just days before she was scrambling to figure out how she could sell online.

Her store, and is all set for the spring fashion season and normally sees few shoppers who come in to discover her latest items.

Except for her two huskies this week, the store was empty. 

“We were going to continue with business as usual as recently as last friday.

I think we were naively thinking” she said in an interview. “We were being diligent about wiping surfaces and we were letting people know.

But by the time Sunday came around, at least one of my employees let me know they were uncomfortable being around the public.

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This will forever change the “in person” shopping experience.

Even after this current situation subsides there will be lasting change because behavioral changes will have been made.

You may not see masks and gloves on shoppers for years to come but I know that the physical store will somehow always have a “risk” of in person contact with it.

Independent retailers are looking for any help possible and it remains to be seen what loans and assistance will be available.

Immediately smaller retailers will not be helped much by the quick checks that will come from Congress.

Many financial experts agree that the stimulus for individual consumers may make them more willing to spend will benefit the whole economy.

However, if you’re stuck in your home you’re not going to use that money on a physical local business that right now is closed.

Customers are  more likely to spend it online on several sites or Amazon.

And those businesses don’t need the help right now dominating the market.

There is no doubt new customer habits are forming during this unusual time as they have evolved over the last 10 years with more people choosing the online option.

While small businesses have benefited from the “buy local” movement and consumers desire for unique experiences that affinity most likely will be changing.

Consumers are creating new “muscle memory” for how they think and act on shopping. Independent retailers that have looked away from the coming trends will now be forced to take a hard look at their business.

Remember my client Marie who was an independent store owner that had a small health and natural foods store?

She was so scared because she had been losing sales and knew she had to close but had no idea how to do it.

She told me that making a mistake in closing her business was so painful she felt she couldn’t decide anything and was in complete overwhelm.

I am sure due to this latest retail impact many others are feeling just like Marie did.

  • I assured her when she booked her private consultation with me that I was an expert in store liquidation sales and she was in good hands with me.
  • I assured her if she listened to everything I told her to do she could close her store profitably with her head held high.

She told me she would trust me with the store she had put her heart into building and I would need to hold her hand through the process.

I kept my promise and Marie was thrilled with her sales results.

I know that the latest retail disruption is frightening for many small business owners.

I hope that you take the time to really evaluate your business and get the information on your options if you have decided to close your business.

You get one shot to do it right. Make that shot count.

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Instead of trying to manage it on a day-to-day basis, it was almost easier to make the decision to close.

Rockwell does not have the financial cushion that larger chains have to pay their workers for at least a few weeks.

Luckily, years ago she and her business partner bought the building they are in.

She was able to pay her employees for the first week of closure and then they are able to access the unemployment system.

Not something she ever thought she would do, she is contemplating e-commerce.

“I’m so ingrained in brick and mortar that I can’t make that switch so quickly,” she said “I instantly got overwhelmed trying not to go crazy, trying to take photos.

I’m seeing some of my other business friends trying too and I can tell it’s tricky.”

This is something that independent retailers often think of doing but are not equipped or in a financial position to start an online store.

This is like starting a whole new business.

Many have no idea the time, effort and cost it takes to make a transition like this and they wind up being in far worse circumstances then when they started the shift to online.

Jennifer said she remains cautious, because the store was able to weather the Great Recession and other bad seasons, but feels like this unforeseen situation remains unpredictable.

“Just understand that especially one or two person operations, everybody we all live on incredibly small margins” she said.

“We are still paying bills, but our income is over for now.

Thinking we would be selling into the summer, I bought stuff on my credit card.

And we’re coming out of our slowest time of the year after the holiday.”

This is one of the thousands upon thousands of stories of independent retailers across the country that paints a very clear picture of what these independent retail owners are facing.

They all operate on very tight margins and most have been shuttered for weeks with no end in sight.

Small retailers sales were hovering around 5% to 10% above last year, but that has flattened out, according to data from data platform Womply and small business tech.

“We’re seeing mass carnage basically,” according to Womply VP of Corporate Marketing and Communications Brad Plothow said in an interview.

This current situation is and will continue to be especially hard for businesses that depend on a physical presence meaning all brick and mortar stores.

Think about the days and weeks that people have been told to social distance and be afraid of touching surfaces.

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Store Closing Liquidation Sale

When small retailers start a business they don’t ever plan to close these businesses.

Therefore, few if ANY have an exit strategy for their business.

  • In times of unforeseen situations, much like the virus outbreak, it really shows independent retailers that having an exit plan is a must in today’s uncertain times.
  • Small retailers were suffering before this time period and now it is an even bleaker future for most of these beloved mom and pop shops that are the engine to our economy.
  • The evidence is crystal clear that independent retailers must have an exit plan when the life cycle of their business for whatever reason comes to a close.

Prior to this most recent “retail apocalypse” event independent brick and mortar stores were already coming to a painful grinding halt with consumers migrating their shopping behaviors to Amazon and other online delivery sites.

Many are now calling this the final death blow to independent retailers as they currently exist.

I have been sounding the alarm for years for retailers to look at the life cycle of their business and prepare a plan for the changing climate.

Many did not listen and are now going to be forced to make some tough decisions about the future of their business.

The overall lesson is no matter what is happening in the retail climate, you must always be prepared.