Locally owned small retailers can earn 50 percent or more of their total annual sales during the critical holiday shopping months of November and December. The business choices made during this important period can have devastating effects on cash flow for the entire year.
The U.S. Small Business Administration surveyed several business counselors from the Colorado Small Business Development Centers and SCORE to compile this list of the top six hurdles small retailers face during the busy holiday shopping season:
Lack of inventory control. Inventory control is crucial for all small retailers, especially during the busy holiday sales months. It’s important to remember that inventory equals profits, and knowing how much product to order, when to order it, and what items to order can make the difference between having cash in the bank or aging inventory on the shelves.
Hiring the wrong employees for critical positions. There’s a cost to hiring the wrong people for key positions. Small firms tend to have less layers of management between the owner and employees. Consequently, new hires must be able to perform with less direct supervision and motivated to get the job done right the first time. Avoid this issue by writing a detailed job description and training new employees on how you want them to represent your business.
Undercapitalization is a lump of coal no business wants or needs. Cash flow is the life blood of all small businesses. Cash flow allows a business to make payroll, pay suppliers and keep its doors open. Business owners can immediately increase cash flow by collecting accounts receivable in a timely manner; not keeping too much cash tied up in unnecessary inventory and eliminating unprofitable account relationships.
Not embracing online sales and social media. A recent U.S. Census Bureau report shows that more than $75 billion in e-commerce sales were made during the second quarter of 2014 — a 5 percent increase over the previous quarter. A 2013 study conducted by Forrester Research Inc. showed that by 2017, nearly 60 percent of all U.S. retail sales will involve the Internet. As more consumers make holiday purchases online, it’s imperative that small retailers develop a retail web presence. Leverage Twitter and Facebook to promote one-day sales or plug special product lines and high inventoried merchandise.
Not delaying the employee office party and social events. It’s sales crunch time from Black Friday until Christmas Eve. Office parties can cause distractions at a time when the business needs to be especially productive. Too much food and drink can not only cause a nasty hangover, but also sidetrack employee and management focus. Consider moving the company party until after New Year’s Day and call it the annual thank-you event.
Innovation and creativity lost. Historically, locally owned small retailers beat their big box competitors by providing outstanding individualized customer service. Black Friday creep has pushed large retailers into flooding the market with lost leader pricing on a wide array of holiday products. Small retailers should take the offensive by selling creative and innovative products that can’t be found at the local mega mall. Create a unique customer experience that will draw shoppers to travel outside of their comfort zone and discover that out-of-the-ordinary shopping district with 10 trendy stores, not 100 traditional chain stores.