Three signs that it's time to close the retail outlet
14.06.2016 11716

Three signs that it's time to close the retail outlet

This year will be a test of strength for shoe retailers, - all market participants say this.

Many companies, not only in Russia, but also in other countries, in particular in the USA, are revising their strategy under the influence of the economic crisis. One of the most popular tactics that allows an enterprise to stay afloat is optimization of its retail network.

American Citi Research analyst Paul Lejez believes that in the current situation, when consumer behavior is changing, and shoppers are increasingly buying goods online, many retail players have too wide retail chains.

In his report, Paul Lezhez cites several reasons for retailers to think about the need to reduce their retail sales.

The first reason is the lack of profit. We often hear that the management does not close the retail outlet when the cash flow is interrupted or in the case of a slightly positive cash flow. But a retailer would not open a store just to cover their expenses, so why would he leave a store open in the same situation? - asks Lezhez.

It may be difficult for the retailer to part with the store from an emotional point of view, this situation is especially typical for small companies, or when it comes to closing flagship stores. Sometimes management still hopes for something or feels remorse over having to lay off a large number of employees. Nevertheless, analysts warn that the work of the store requires working capital, they must generate return on invested capital - "break-even is not a reason to keep the store open."

The second reason is the growth in the number of stock balances. In 2016, a major problem for brands and retailers is the rise in inventory stocks as a result of an unusually warm winter. Many companies, trying to get rid of the product, were forced to carry out large-scale promotions, which provoked a decrease in business margins. Large inventory leftovers are another reason to think about whether to keep the store running, says Lejez.

“If you are thinking about whether to close a retail outlet, it makes sense to pay attention to the working capital / commodity ratio. After all, if there were no store, the money could have been directed to other purposes, ”the expert says. If a company has multiple stores that do not meet a certain cash flow, the business must account for the millions of dollars in inventory that would be freed from closing unprofitable retail outlets. In addition, experts note that high rental rates were another reason for the recent bankruptcies of retailers in the United States. In such a situation, leaving the store working, just to keep it, means taking on a heavy burden.

This year will be a test of strength for shoe retailers, - all market participants say this.
Please rate the article
Euro Shoes Exhibition

Materials on the topic

Shoe business management in 2021: what to look for

The past year was a shock for most, a new starting point, the beginning of the end or a complete transformation of the retail business. One of the main results - 2020 literally pushed online retail, intensive digitalization of sales channels, ...
27.04.2021 6205

Marketing for a retail shoe store. How to incentivize customers to buy with gifts

In this article, SR expert, business coach Evgeny Danchev talks about how to conduct a marketing campaign that will be equally profitable for both the company and ...
19.01.2021 7453

How does mystery shopping help expose the gaps in your store's service?

Today, the lack of quality service and a customer-oriented atmosphere in the store is bad manners. Companies that did not care about their customers, did not think about their feelings and emotions before, during and after shopping - ...
19.01.2021 5486

Top trends in shoe store window dressing this fall and this winter

Autumn-winter season 2020/21 for fashion retail is special, which we will remember for a long time. Almost all companies were forced to revise their budgets - they cut current spending, cut costs as much as possible. AND,…
30.11.2020 12385

What changes are needed to make the work of sales staff and line managers more effective?

The results of shoe sales are now influenced by the factor of deferred demand: two and a half months of self-isolation is a very long period for buyers. Any market or consumption model of people on it is a system, and by all the properties of systems, they ...
13.10.2020 10633
When you sign up, you will receive weekly news and articles about the shoe business on your e-mail.

To the beginning