high street trouble
More bad news for the UK high street. The Times (Saturday 5th November) reports that:the retail sector has been hardest hit by liquidations. In the second quarter total business liquidations were up 14% on last year, and that retail collapses were up 17.5%. The third quarter rise in liquidations was slightly higher, but the likelihood is that the proportion of those that were retailers was even higher.
Because I have been seeing this very real problem every day since January I am not taking the news lightly.The first step we have taken to safeguard Jabberwocky against economic downturn is to again focus on margins. It is tempting to slash prices when sales are falling to try and stimulate demand. To me however, this is very bad business. Not only do you run the risk of triggering a price war, you are locking yourself in to requiring more customers to cover your overheads. If customer numbers continue to fall, you are left unable to increase prices again, but unable to cover your costs. The proverbial rug is pulled from under your feet.
Instead, we actually increase some prices, dropped a few low margin products and launched some high margin alternatives. This helps to ensure that even with a reduction in customer flow the better margins would enable us to cover spending. We have also re-focused on product quality, so that we don’t loose customers to those businesses that do choose to slash prices.
We’ve also taken some larger decisions in order to consolidate our position. I have started the process of shedding some assets in order to clear the majority of our debts. Eliminating loan repayments and interest charges is a major factor in this decision, although the majority of the funds will be used to expand our higher margin operations.
I really feel for retail business owners at the moment. There is nothing better that watching your sales increase, and nothing worse than watching them diminish. All I can say is that the shoppers will return, eventually, and we just need to knuckle down and ride it through the best was we can. This is not the time to be making rash decisions and silly mistakes, so think clearly – and for the longer term!
posted by Paul Fisher @ 11:24 am
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