Why Rising Retail Sales May Signal Optimism for Some, the End for Others
Posted 03-08-2010 at 01:39 PM by Albert Fong
Last year with the terrible economy, the retail sector offered a glimpse of where everyone and everything else was. While you may not have understood GDP or the manufacturing index, you could simply go to the deserted shopping mall to get a first-hand look of the economic pit that we had dug. For those in the logistics and transportation industries, the low inventory levels, empty warehouses and disappearing suppliers signaled tough times ahead.
2010 has been better than 2009 if ever so slightly. Even with unemployment still hovering around 10% nationwide, people are beginning to spend again. If you want further proof, look at the sales figures for February, and you’ll see what I mean. Companies such as Target, Nordstrom’s and McDonald’s all report rising sales, the best in two years. In the supply chain, that means inventory levels are poised to ratchet back up again. More consumer demand means the need to have more items on hand. And with the need to stock more items, this leads to more demand by companies to manage their inventories. You can see the impact as stock prices for logistics and transportation companies rise as well.
Having said that, consumers are still struggling with high unemployment, and purchasing decisions are increasingly being made based on price rather than service. To survive, businesses will need to deal with shrinking margins that will shrink even more. However, the harsh reality is that many businesses who have been running inefficient operations won’t survive on razor-thin margins. Struggling during a downturn is difficult, but it’s even more so emerging from a recession within a highly competitive landscape. While some stayed put, others were building up their arsenals. These arsenals not only positioned them to survive on low margins through better efficiencies, but potentially provided them with additional revenue streams.
Looking back at the Depression in the 1920s, examples abound of companies who took risk and succeeded. Most notable is consumer product company, Proctor & Gamble. Instead of throttling down its advertising efforts to cut costs, the company actively pursued new marketing avenues. Soap and candle maker Schaeffer Manufacturing expanded its product offerings to include industrial lubricants, while beer brewing company, Yuengling Brewery diversified by opening a dairy farm to manufacture ice cream.
While rising sales are great for some, others will certainly be lost along the way. Are you thinking ahead? Are you nimble enough to diversify your offerings or develop additional revenue streams? How your company answers those questions will speak volumes.
2010 has been better than 2009 if ever so slightly. Even with unemployment still hovering around 10% nationwide, people are beginning to spend again. If you want further proof, look at the sales figures for February, and you’ll see what I mean. Companies such as Target, Nordstrom’s and McDonald’s all report rising sales, the best in two years. In the supply chain, that means inventory levels are poised to ratchet back up again. More consumer demand means the need to have more items on hand. And with the need to stock more items, this leads to more demand by companies to manage their inventories. You can see the impact as stock prices for logistics and transportation companies rise as well.
Having said that, consumers are still struggling with high unemployment, and purchasing decisions are increasingly being made based on price rather than service. To survive, businesses will need to deal with shrinking margins that will shrink even more. However, the harsh reality is that many businesses who have been running inefficient operations won’t survive on razor-thin margins. Struggling during a downturn is difficult, but it’s even more so emerging from a recession within a highly competitive landscape. While some stayed put, others were building up their arsenals. These arsenals not only positioned them to survive on low margins through better efficiencies, but potentially provided them with additional revenue streams.
Looking back at the Depression in the 1920s, examples abound of companies who took risk and succeeded. Most notable is consumer product company, Proctor & Gamble. Instead of throttling down its advertising efforts to cut costs, the company actively pursued new marketing avenues. Soap and candle maker Schaeffer Manufacturing expanded its product offerings to include industrial lubricants, while beer brewing company, Yuengling Brewery diversified by opening a dairy farm to manufacture ice cream.
While rising sales are great for some, others will certainly be lost along the way. Are you thinking ahead? Are you nimble enough to diversify your offerings or develop additional revenue streams? How your company answers those questions will speak volumes.
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