An interesting article in The Economist about retailers having to order for Christmas and being undecided about strength of the consumer spending. It implies that there is some sort of disconnect between consumer sentiment, and how parsimonious the retailers are being toward inventory.
Since this weekend I'm doing orders for July, I can sort of answer that paradox.
I think of it a cash-flow problem, not a level of sales problem. Roughly speaking, unless you want to use up cash reserves or borrow money to cover your cash-flow, you can only order the amount of product in any given time frame that you can pay for: which means that you have to order on the LOWEST estimated sales, not the highest.
At least, that's what I do. And then do reorders if they become necessary.
There are times when I push that model. When I have a strong feeling that sales are going to go up; or many months of evidence of an upward trend.
Right now? Not so much. In fact, it's feeling a little iffy. I did see an increase over seven months, but it was beating up on probably the worst seven months since the Great Depression, so all that really said is that we'd probably hit a bottom.
Nothing is more stressful than ordering a ton of material in anticipation of big sales and then not having the big sales happen. Much easier to order for a lower estimate, and then try to get timely reorders. Being a small store, I can be pretty agile these days. I've also purposely moved away from the model I used early in my career --when I ordered just about everything in advance.
I didn't have a whole lot of choice back then. I had to preorder most of my product earlier because 1.) I needed the extra discounts from ordering early, and 2.) there was no way to get the product if I didn't.
Most of the gray hairs on my head came from ordering huge amounts of material and by the time the material arrives, no one wants it anymore.
These days I'll give up the occasional discount, and risk the occasional lack of inventory, to avoid that.
The big mass retailers are less agile, and have to order direct from the manufacturers instead of from middle-men (which is one of their competitive price advantages) but which means they have to order early, and in total.
Like I said about last Christmas, and the Christmas before. When the stores run out of a certain product, that will probably be that.
I think the biggest reason this slowdown has been so much less stressful than past slowdown, despite in some ways being a more severe slowdown, is that my neck isn't extended out there quite so far. I've got moderate amounts of material coming in, and I'm able to order for the month I'm in, based on the sales of that month.
A big sigh of relief.
2 days ago