Material Retail Dumps

Welcome to Material retail dumps episode 12 - this episode is going to be a bit of a hot topic, we are going to talk about the Recession that is supposedly coming and how you can best prepare for it, whether it comes or not.
So let's jump in.

We’ve all been hearing about the recession that is coming, inflation is high and not coming down, interest rates are high, home prices are starting to fall and most importantly to us, we are starting to see some cracks in spending at small businesses.

I just want to note, that nobody, including myself, knows what will happen to the economy, for all we know, inflation can drop like a rock really quickly and people's nerves will settle.

The one good thing the economy has going for it right now is that people still have jobs and are getting paid better than ever for their work, thus giving them more money to spend.

For the purposes of this episode, let’s just assume that we are going into a deep recession and sales are going to fall off a cliff. What now?

Who will this recession impact? If things don’t change, the recession will impact businesses that do not provide necessary services to customers. Your local supermarket? They'll do okay, but the clothing store down the street? Maybe they won’t do as well. People may say to themselves something like, my winter wardrobe is fine, so instead of buying 20 new items this year, I’ll just buy 4 new pieces.

Okay so now that we’ve identified who will get impacted, as a business owner, or decision maker you can decide to wait it out and see what happens, or you can prepare. We love to be prepared so here are 5 ways you can prepare for the potential recession. I know we can go super deep into these topics, but let’s focus on one actionable idea from each section. You can then think through other ways you can achieve the same results.

First - Double down on your customer connections
We all know that people spend money with businesses and business owners that they feel connected to. So we want to strengthen the connection with your core customers. As we move into the holiday season, we suggest throwing a few holiday parties or girls' night outs. Buy some champagne and chocolates, give out some free gifts and smile. You can host a great event with a couple hundred bucks. Host the event at a time you know your customers are most likely to show up. For example, if you are in an area with a lot of offices, make the event on Thursday night from 5-8PM so people can come and enjoy after work.

Next - Watch your buys - This one is huge. Do not overbuy, your biggest cash sucker is your inventory, at any point you may have 50 to 200 grand in inventory sitting in the store, now is not the time to have record inventory levels, be careful not to overspend, the last thing your store needs is a high inventory level and all the sudden business grinds to a halt.

Third - Markdown merchandise - We all have merchandise in the store that shouldn’t still be on the shelves, get rid of it. Be aggressive, 50 60 70% off. Buy one get free, - this rack is $10 - Take this as a challenge to take your stale merchandise and turn it into five grand.

Fourth - Get access to more money - Everyone is different but one thing is clear, if you need money, it’s going to be really hard to find it. That being said, if you try to open new lines of credit, or 0% APR when things are really good, you’ll find willing lenders, even if you don’t use the money, it’s good to have the option available to you so that when you do need the money you can use it as a bridge to when business picks up. You want to be super careful not to take money that comes with personal guarantees but sometimes you need to.

Lastly - call your landlord. I don’t care if you pay $5 a month in rent or $20,000 - Pick up the phone and call your landlord, or ask your attorney to do it. Let them know that business is bad and you need a break on the rent. Do everything you can to work out some type of deal. Every dollar you save is a dollar extra that you’ll have. Everyone will have a different lease and landlord so you don’t know if it’ll work but the worst-case scenario is that you have the call, and the landlord says no, you don’t lose anything if that happens.

Thanks for listening and I hope this helps you get through both good and bad times. Stay tuned for Episode 13 - We’ll have a super special guest, a Material Retail Employee.