Has the Sky Really Fallen?

The National Retail Federation's annual convention is taking place this week in New York, and one of the roundtable sessions was called, "The Sky Has Fallen, Now What?"

For the uninitiated, the NRF is the industry trade group for the world of corporate retailing, and to be fair, this past holiday selling season has been called the worst since 1969, and retail bankruptcies are expected to continue unabated through the first quarter. Still, has the sky really fallen?

Perhaps it has for the world of corporate retailing. Peter Solomon, founder and chairman of Peter J. Solomon Company, an investment bank in New York, recommended during the NRF session that retailers focus on nothing but cash. "I wouldn't worry about anything else for the next year," he said. "You are selling on a survival basis and you have to survive... Don't worry about investing and if you survive, you'll somehow figure it out a year from now."

I wouldn't for a minute disagree with Mr. Solomon that cash is king in this environment. If you have cash, you can look to tomorrow. If you don't, you're looking into the abyss. Nor would I necessarily disagree with his advice to his corporate retail audience, many of whom are staring at business models that have led them onto the slippery slope of competing strictly on price over a basket of commoditized products.

Consider, however, the December sales results of Buckle, Aeropostale and Hot Topic. Amidst the doom and gloom, these specialty retailers generated comp-store increases of 13.5 percent, 12.0 percent, and 4.3 percent, respectively. Each are narrowly focused on a carefully defined fashion apparel niche, competing not on price, but by appealing to the distinct lifestyle and aspirations of their customers.

Yes, cash is king. But for small, entrepreneurial retailers, this is a rich moment, full of opportunities, for fresh thinking and innovation. Customers haven't stopped spending; they're just spending less, and are more discriminating about what they are spending their money on. Clearly, across much of their basket value is critical, but for creative entrepreneurs there is a real opportunity to captivate customers with stores, products, and experiences far removed from the me-too world of corporate retail.

The sky hasn't fallen. At the moment, there may not be a lot of capital available for rapid expansion of new retail ventures, but the time is ripe for many small, entrepreneurial retailers to incubate new ideas, develop and refine new strategies, and engage and captivate new customers. The innovators of today will be the ones addressing very different retail roundtables in the future.

When Times Are Tough, Don't Go It Alone

These are difficult, unprecedented times. The constant drumbeat of negative news concerning retail sales is unsettling enough, but the day-to-day reality of many smaller retailers is truly frightening. The almost daily, unrelenting drop in traffic counts, transaction counts, and sales cause many to wonder where it's all headed. Small retailers who have never thought twice about their long-term viability feel now like they're fighting for survival. The dismal holiday shopping season was supposed to be the best time of the year.

For many small retailers, they've grown their business by listening to their customers, carefully assessing their opportunities and following their instincts. Their growth has been organic and has led them to a settled understanding of their business and the marketplace around them. In this daunting environment, however, the earth feels like it is moving beneath their feet. The margin for error is slim to non-existent. There are many more sleepless nights.

As we embark on a new year, it's essential that small retailers stick to sound, proven fundamentals, while developing sound strategies for re-invigorating their business, if not redefining the core business strategy and market positioning.

This is not the time to go it alone.

Amidst all of the uncertainty, small retailers have a number of resources that they can call on for perspective and guidance. The relationships they've established with their accountants, lawyers, investment advisors, and insurance agents can provide a valuable take on both local conditions, as well as a heads up to potential issues within each provider's specific area of expertise.

This is also the time for small retailers to partner with another experienced retail professional. Two heads are better than one. In many ways, the challenges a small retailer faces are unique from other small businesses, and that's even more true now. Having an informed, experienced outside perspective inevitably helps any small retailer complement their skills, spot potential problems before they become significant, and help anticipate and plan beyond the urgencies of the immediate moment.

An excellent direction to turn for this type of help is SCORE. Many SCORE chapters have retired retailers willing to provide their insight and perspective. While they may not be able to address every issue a small retailer might have, or be prepared to become too involved, they are a good place to turn first.

In this environment, however, many small retailers would benefit greatly with working with an experienced retail consultant, coach, or adviser. In down times like these, many small retailers think that engaging this type of assistance is an extravagance that they can't afford. In almost every instance, however, the investment will be well worth it in helping to protect cash flow in the near term and position the business to best capitalize on the opportunities that will be there when the rebound occurs.

Navigating these challenging economic times will not be easy for anybody. This will test the mettle of even the most seasoned merchant. Nobody can be sure when the turnaround is coming. Now is the time to be sure that you've got the perspective and guidance that you'll need to make the very best decisions.