Last year, I wrote an article about making the right investments in your business to help secure its future. Now, nearly two years into the pandemic, I don’t think I fully appreciated just how difficult, yet imperative, that directive turned out to be.
While 2020 was a difficult year in and of itself, 2021 was equally as humbling year for everyone. And while I’d like to believe we’re out of the woods, the reality is the data says retail will continue to struggle with inventory, logistics and labor as consumer demand squeezes an already delicate, just-in-time global manufacturing ecosystem well into the second quarter of 2022 — if not beyond.
Abroad, logistics problems continue to badger our key industry. Your manufacturing partners still face challenges, albeit significantly reduced, in securing raw materials to produce goods. Container prices are still above $20,000 in some cases, and you’ve probably heard of larger retailers chartering their own shipping containers.
Here at home, we’re facing unprecedented shortages in our trucking industry. The most recent industry figures show current consumer demand for retail products would require an additional 30,000-60,000 CDL truck drivers, not including backorders. Additionally, this would require some 15,000+ new trucks as more and more states tighten restrictions on vehicle emissions and overall environmental impact.
Key shipping ports such as Long Beach, Los Angeles and New Jersey are facing labor and infrastructure challenges with no immediate solve in place. Renovating and expanding ports is a multi-billion-dollar effort for which individual cities and states will require assistance from the federal government.
Product shortages, driven by these factors, will continue through the second quarter of this year. As we saw in 2021, new product introductions will be scaled down and pushed back, and opportunity buys on closeout products will be limited.
So, considering all of the above, here are three pieces of advice on how to navigate this year.
1. Negotiate everything
These challenges aren’t just about manufacturers and logistics, they have been impacting you as well. Every retailer I’ve spoken to this year has shown me how their cost to buy, sell and store product has skyrocketed. When it comes to negotiating, 2022 will require you to be more aggressive than ever.
First, understand your key manufacturers saw significant shift of their business, regardless of who they are or what type of product they sold. None of them escaped without wounds in market share shift, which they will undoubtedly try to mend this year. As an independent, you are their most valuable customer – never forget that.
Negotiate your shipping costs. Negotiate on sell in, sell through, incremental marketing, inventory finance terms, early pay discounts, volume incentives, bundle promotions, store events. If you can show it will drive incremental sales, make sure you’re compensated for it.
Be diligent, but, most of all, be fair. Everyone has their limit, and deals brokered in the spirit of an all-win scenario will generate long-term gains.
2. Use data, not emotion, to drive your merchandising decisions
There is a reason every national retailer now employs economists, and it’s the reason why most retailers implant these individuals within their purchasing and buying teams: Data matters.
This can be as simple as understanding your current mix of product from entry level to premium, to making better decisions based on local, regional, and best-selling SKUs from a particular brand or product category.
How does, for example, your margin profile compare to your competition? Are you underpriced and losing margin dollars? Are you overpriced and losing revenue? When you negotiate with your vendors or distributors are you revisiting your negotiations using data to demonstrate a return on investment?
For retailers I talk to, the thought of leveraging data to make better decisions seems overwhelming. They’re busy driving a truck, cleaning a bathroom, doing taxes, or one of the dozens of other jobs it requires to keep their doors open.
This doesn’t need to be something you do on your own. Nationwide Marketing Group created resources like PriMetrix, the Assortment Rationalization Tool and others to help you think and act like a national retailer without the investment in time or human capital. Please – engage your MSM or Nationwide account manager to understand how to use data to drive better decision making in your business.
3. Product availability is (still) king
If you haven’t been around Nationwide long, you may not know our core purpose is to help you thrive on your terms. It’s the reason why we work with seven of the best distribution companies in the country and why our group programs and benefits extend to all of them. Together, these partners help us create the largest selection of brands and programs in the industry.
I was disheartened last year to see independent retailers required to buy from a single source, which often could not keep pace with consumer demand. Or there were instances where retailers were able to buy from a second source, but they paid a steep price and lost critical funding needed to run an independent business.
2021 was the first time in the history of Black Friday where the number-one driver in consumer buying decision was availability — not price. This year is going to be more of the same, which makes it critical for your business to have multiple sources of product to stay in stock.
If the past year taught us anything, it’s that retailers need to continue to expect the unexpected. But if you can double down on those investments, remain steadfast in your commitment to your consumers, and employ the resources available to you from your group, you’ll be well-positioned to weather this ongoing storm and come out the other side an even stronger company for it.