April 08, 2008
Down Market Survival: Chase The Trends
There’s no denying it – we’re in a down market. But the first rule of a down market is that there’s a guaranteed opportunity for growth in the future. When business is trending down it’s pretty easy to see which categories are holding; these are the low-hanging fruit. A category that’s not dropping as quickly may be an indicator of a future trend, especially if the category has been holding for a 90-day period.
One opportunity that we’re seeing right now is in the men’s knitwear business. This is an area that has been out of trend for a long time and now it’s holding up. The traditional men’s denim business is also faring relatively well. In women’s, we’re seeing strength in skirts, and the top business is sure to follow. Remember to take a look at how product mixes work together to produce trends.
If you see trends like these in your business the first thing you need to do is a market survey to see why the category is growing and if there is something behind the trend. Ask your customers and colleagues if they are seeing the same trend to make sure it’s not a fluke. Then you want to look at your turnover and margin goals and ask yourself whether this is a product that you can buy in-season. Normally, what will lead you out of a down market is product that you can buy immediately, in season.
If the trend is something that you can respond to in season, you’ll want to increase your planned turn and make sure you are not overbought in other areas. Getting out of down cycles is a chasing process. You need to find your opportunities and put yourself in a position where you are chasing inventory to improve cash flow and increase margins. It’s all about gross profit dollars. You want to be in a position where you are chasing gross profit dollars rather than running from payables.
A down market brings with it other opportunities, particularly in real estate. If you are looking to expand, this is the time to negotiate lower rents on prime locations. It’s also a good time to check out your competitors’ staff. There’s likely to be some unhappy employees who are great sellers but who aren’t being given anything new to sell. This is your chance to approach these sellers. Tell them that you are chasing product and you need someone who’s dedicated to growth. You may get them to come over to your team, and bring their big customer books with them.
It may be tempting to hunker down when things get rough but that’s not how you survive in a down market. Take a look around at the opportunities within your own store and make some strategic decisions.
Posted by Steve Pruitt at April 8, 2008 07:23 PM
