"The average duration of a bear market since 1950 is roughly 418 days."
Four Tips to Managing your Retail Business through Fluctuating Demand
As a business owner, you are likely familiar with the ups and downs of demand in your industry. When demand is high, it's a great time to be in business. Still, it can be challenging to maintain profitability when the market drops off. So how do you navigate your retail business through these fluctuations? Here are a few tips.
Changes In the Business Cycle
The main factors that contribute to changes in the business cycle are business decisions, interest rates; consumer expectations; and external issues, such as trade, supply chains, etc.
When businesses increase production, they increase supply and encourage rapid expansion. Conversely, when they decrease production, supply drops, and a contraction usually results.
Fluctuating Demand
Several factors can shift the demand for goods and services, causing a different quantity to be demanded regardless of price. These include changes in tastes, population, income, prices of complementary goods, and expectations about future business conditions and the price of goods.
l.- Focus on variables you can control
As a business manager, you must focus on what you can control. When demand fluctuates, this means some fundamental business decisions have to be taken. For example:
- How should we price our products?
- What advertising campaigns are most effective?
- Are layoffs required? Cuts to benefits? Reduce labors?
- Do we put future plans on hold? Or move forward?
Each business experience changes in the business cycle differently.
Data-based planning is the logical way to face economic challenges head-on. Understanding what picture the metrics paint about day-to-day operations is vital, even when they show that your company may be struggling.
ll.- Know your current financial situation
Get rid of your debt.
Experts recommend paying down debts (and not taking on new ones) when markets begin to fluctuate. This is particularly helpful if you have high-interest loans. Once your debt load is paid or reduced, you can focus on saving or, have credit room available to help keep your business afloat should you need it.
Establish a backup to your emergency fund
Financial experts generally recommend having enough saved to cover three to six months of expenses. Still, it would help if you aimed to put away whatever amount makes you feel the most secure. So today, take some time to figure out how you might be able to save more money or reduce costs in the coming weeks.
Search for Additional Income Streams
Passive income sources include investing in mutual funds, selling products online, teaching online courses on sites, or other side hustles where the earner doesn't have to participate. Passive income provides unearned residual income with minimal time and effort.
Small-Medium sized retail businesses should consider:
- Increasing their Ecommerce Footprint: increasing your business's online sales could lead to untapped potential
- Setting up affiliate relationships: affiliate marketing is a scheme in which a company compensates partners for business created from the affiliate's marketing strategy
- Social retailing: social retail platforms allow businesses to connect with their customers more personally, fostering loyalty and customer retention.
Telephone Order & Home Delivery: Consumers running mobile searches are 39% more likely to call a business. Since the majority of shoppers use search engine queries on mobile devices, this represents a vast quantity of calls to brick-and-mortar stores
lll.- Solidify stable revenue streams
Knowing your business's profitability metrics, such as the difference between profit and profit margin, and how it trickles down into your product assortment.
- Profit is the money a business makes after paying all expenses.
- Profit margin is calculated as net income divided by revenue.
- Profit margins are expressed as a percentage and measure how much money a company retains in earnings.
The goal is to ensure you are selling the right balance of products that will bring you the highest level of overall business income.
Continue to Add Value to Customers
- Define the value you offer to your customers: Know your customers! Knowledge of the value you deliver to your customers gives you greater control over, and confidence in, your pricing. Interview your customers to find out how they view your products and services.
- Create a range of low- to high-value product offerings: Bundle your products and services–and establish prices at appropriate prices. This enables you to appease both cost-conscious and value-conscious customers without cutting prices.
- Control costs and reduce inefficiencies: Streamlining your company’s processes and expenses. Resist the temptation to reduce prices to generate immediate sales. Over the long term, this will not improve your business's financial position.
lV.- Reward Loyal Customers
Encourage Customer Loyalty & Have a Basic Reward program
Loyal customers are your most valuable asset during a recession. The loyal customer base already has an emotional connection to your store or brand, so they should not be treated like strangers. Thus, small business retailers should have a rewards system that encourages repeat business and loyalty.
Research data consistently provides evidence that loyalty programs reinforce customer retention and increase the probability of attracting new customers:
- The probability of selling to an existing customer is 60-70% compared to a 5-20% chance of selling to a new customer. (Altfeld sales reports)
- 77% of consumers say they are likely to stay with a brand that has a loyalty program. (Bond)
- 70% of consumers are more likely to recommend a brand if it has a good loyalty program. (Bond)
The goal of loyalty strategies and a reward program should be to provide each customer with lifetime value!
Keep your Customer Rewards Program Simple
Small businesses or independent retail stores do not require a sophisticated loyalty program. A small business loyalty program could include(Smartbiz):
- Membership discounts: Percentage discounts for members or repeat business
- Referral discounts: rewards for referring new customers
- Punch card rewards: give rewards after a certain number of sales.
- Seasonal or special occasion gifts
Lastly, it should be noted that: Customer loyalty is reinforced by satisfying emotional connection, a consistently positive experience, great customer service, and continuous product and improvements!
Demand for your products may fluctuate and recessions will happen! However, as a business owner you can take steps to ensure profitability during high and low demand periods. By focusing on variables you can control, knowing your financial situation, solidifying stable revenue streams, and rewarding loyal customers, you'll be well-prepared for the ups and downs of retail demand.
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