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Retailers: only cut your cloth to measure

Phil Mullis

26 May 2017

The latest retail sales statistics revealed yet more uncertainty, despite experiencing a small increase during April. With inflation and increased costs on the way, many retailers could be left wondering how they should make the most of their stretched budgets.

To cut or not to cut

Retailers need to consider whether to increase investment to drive future sales and profits, as well as cutting their costs accordingly. Sensible cost management is to be applauded but there remains a temptation in straightened times to cut all costs without considering driving investment – after all if you are trying to reduce overheads that is a sure fire way to freeing up cash, right? However, does overhead reduction stunt revenue and profit growth – it could well do. Yes, investing in input processes is a cost, but in the long term your business is much more likely to be better off.

Considering alternatives

For example, what if you reduce your staffing, but then you are short for busier periods, such as summer time, Christmas or even just a normal Saturday. How could short staffing impact your bottom line in the long term?

You could also decide to compromise on product quality and for some items this may matter less than others. But, again, how does this reflect on your customer’s experience and could this even deter them from coming back to you?

Location, location, location

There could be more attractive solutions to cutting costs without over-economising. For example, could you consider secondary locations, outside of the city centre or further away from your competition? Of course, footfall may not be as good, but you might find you have more of a captive audience. You’d need to consider whether there would be any impact as a result of those changes.

Whilst there is a risk that the expenditure might eat up profits, there is a greater risk that those who don’t invest in future-proofing their businesses will fall behind.

If you are a retailer and you could benefit from some advice relating to your business, please contact the retail and wholesale team at Wilkins Kennedy, who will be happy to help.

About Phil Mullis

Phil Mullis

Phil joined the firm in 2008, became a Partner in 2012 and heads up the Retail and Wholesale sector team for Wilkins Kennedy. Phil advises companies, predominately from retail, fast moving consumer goods (FMCG) and food brokerage companies. He is passionate about helping the small guy win out against the big guy with bottomless marketing budgets. It is fair to say that most people see Phil as an unnatural accountant – it’s not about the numbers for him, it’s about working with the people and helping them grow and realise the potential of their business.

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