Margins need to be the main focus for small independent retailers looking to stay afloat in what is shaping as another tough year, retail experts say.
As the nature of retail continues to change it will be increasingly important for small retail operators to closely manage their margins, chief executive of the NZ Retailers Association John Albertson says.
"It's one thing to get a sale at any cost, but it's more important to make sure you can cover your overheads."
All retailers - SMEs or large chains - should be starting to move away from thinking about costs in percentage terms and think about them in straight dollar terms, he says. "After all it's the dollars that pay the bills."
The retail sector is looking at growth of about 3.5 per cent - or 2.5 per cent adjusted for inflation in 2013, Albertson says. "So it is going to be another tough year, the problems aren't going to go away.
"But I think we have to accept things are never going to go back the way they were. Too many things have changed in the way customers interact with retailers."
To that end Albertson says the other key issue for small independent retailers is engaging with e-commerce. "A lot of small retailers at least have a website which is good, but they need to listen to their customers. If their customers are telling them ‘we want to purchase your products online' you must listen to them and do it."
The advantage SME retailers have over larger multi-national chain stores is they can often respond to customer demands much more directly and immediately.
"A small retail owner can often get up in the morning, see an opportunity and be doing something about it by lunchtime. Customers are often dealing directly with the business owner. That means the retailer can be more nimble and more focused."
Chris Wilkinson, managing director of retail consultancy First Retail Ltd, says while small retailers may have the agility to implement change quickly, they often lack the resources - such as advertising and website budgets - which larger companies can use to impact the market.
Meanwhile, larger chains are beginning to recognise the advantage flexibility can give a small retail business and are looking at ways to respond - with changes in everything from hours and staffing to the look and the feel of their stores, Wilkinson says.
Overall he says a "satisfactory" Christmas sales period has left behind a degree of optimism, with signs of some improvement also coming out of retail markets in Britain and the United States.
"We have clients across almost all sectors with the majority much more bullish about this year than they were last."
Richelle Leahy-Mullins, owner-operator of Flourish Floral Design in Auckland's Onehunga, says being an independent small retailer gives her endless flexibility and creativity in how she goes about drawing in customers - but it does come with extra pressure.
"You do have to keep constantly thinking about giving a customer a good deal but still being able to pay the rent and the bills. I want to be able to give my customers a good price, that's one of the things that will keep them coming back, but I also need to be able to make some sort of profit, so I can keep the business going."
She says an online presence was essential for her business, which she started just two months ago, so she has a website and Facebook page, and both will be key in her goal for 2013 which is to spread the word about Flourish.
The website links to large well-known operators such as Interflora which means Leahy-Mullins' small, local floral business has access to national and international delivery networks. "I do get a lot business through that," she says, but the key is still getting customers through the door of her shop in suburban Auckland.
"I just tried to think about what I'd like if I was the customer. I do get lots of feedback about how beautiful it is in here; how it's actually just a nice place to be, so that's great."
She's also extended her stock to include jewellery, handmade chocolates and handmade cards - items that complement the flowers - to give customers extra reasons to visit.
To make the most of difficult conditions, retail consultant Chris Wilkinson says the key areas of focus for small retailers in 2013 should be:
Do everything you can to improve your online presence. That includes ensuring a contemporary e-commerce website and strong social media representation.
Reach out to customers – don't expect them to come to you.
Tune your offer to today's market – expectations are changing. Retailers need to recognise and respond to this.
Make sure your offer includes "stepping stones" – product ranges at price breaks to ensure affordability through to premium selections.
Return to offering services such as lay-by. Savvy consumers across all demographics are using this to manage their spending now.
Make shopping trips an "occasion" filled with experience, service and old-fashioned hospitality.
- © Fairfax NZ News