A window of opportunity for retailers to improve profitability
The challenges for retailers are many as we ease out of lockdown and chief amongst these are to reopen, keeping staff and customers safe. As accountants we would also say that our next priority is to help you to return to profitability.
Yet, you can't simply pick-up where you left off. The impact of the pandemic has changed retail, some might say forever. Others say it was well on the way to being changed fundamentally anyway and the coronavirus has simply accelerated that transition.
Insufficient cash flow to get through the disruption of the past year has exposed the often hand-to-mouth existence for some retailers. For many more, new pressures, such as the cost of Covid-19 compliance and a decrease in customers' disposable income, could make the situation even more precarious in future.
So at this time, it is crucial that retailers reduce non-productive costs to maximise profitability and to consider how best to reallocate other costs.
Consideration might be given to the cost of offering a different customer experience and/or revising your product range. Perhaps you need to streamline your operations, or alter staffing levels. We would also recommend a review of stock levels and frequency of replenishment, as well as to re-evaluate how to best use space in-store. You may need to make your supply chain more robust too, where it may be vulnerable to disruption from virus outbreaks or financial pressure in countries with less substantial support for business.
These all have associated costs, which in many cases will mean decisions have to be made as to which costs can be absorbed, which can be reallocated and which can be legitimately passed on to the customer without impacting on sales, and still offer the customer value.
We are all hoping that this easing of lockdown continues and there'll be no further waves of the virus, forcing new restrictions. Yet, whether you are in fashion or furnishings, wellbeing or DIY, right now, while there is customer demand, we consider it wise for retailers to view this period as a window of opportunity to return to profitably by re-evaluating and where possible reallocating costs.
To pay closer attention to your costs, profitability and your accounting function in this post pandemic era, contact GSM today on 020 7935 3793, to discuss your preparedness for the opening of the high street again, where our 103 years of retail accountancy experience will serve your business very well indeed.