Less Is More, Sometimes
By Marc Weiss - CEO, Management One
HOLIDAY RUSH TOPS ALL EXPECTATIONS; Scarcity of Items Reported in Many Categories -- Retail Stocks Being Exhausted
The above headline was from the NY Times December 5th, 1943
Indeed, history does repeat itself, and now retailers are watching it play out in real time. Fortunately, we are not living in a World War scenario, but we do face challenges in acquiring products while demand is high. This confluence of events is leading us to:
Higher Initial Markups
Higher margins
Lower markdowns
Less on hand inventory investment
= And this all equals more available cash
We have been talking about scarcity for 4 years now as a merchandise strategy and it took a supply disruption for Indie retailers to make it a reality. Nike, Adidas, and Yeezy have been doing it for years. So has QVC. Limited goods, limited supply, can drive up demand. Starbucks has done it (remember the Unicorn Frappuccino?) and Girlfriend Collective did it with a free pair of $100 leggings, for the cost of shipping. All you have to do is share a link to its website on Facebook. This campaign sold 10,000 pairs of leggings in one day, and created buzz and did a great job of marketing their brand.
Here is an email from the CEO of Backcountry where the CEO has turned the concept of scarcity into a buying incentive for their customer base, while establishing trust and transparency in the process.
Every cloud has its silver lining and one thing we have observed is that retailers that have done a great job on their purchase order management have also been the most successful in landing the merchandise they need.
Q4 Takeaways
A real feel-good moment is to check your balance sheet and compare your cash to your short-term liabilities. Now project out your purchases and sales between now and the end of the year, and add it to where you are today.
This is a good time to begin doing some tax planning. Meet with your accountant and do some projections. M1 clients should include their Retail Experts for additional ideas and insight. Some retailers wrote off part of their inventory overages from 2020 and retained a balance to write off in 2021. This might be a good time to fund that Profit Sharing program you always wanted to do, or if you have one, expand into a cash balance account.
And now to close, let's go back in time again to 1943 from The NY Times. Some fun facts for those of you who love to beat yesterday.
Onwards and Upwards.
Marc