A recent small study showed a dip in income this year for a majority of independent gift stores – and I’m sorry to say that ours falls into that category.  Our decline is modest, but we had really hoped that we’d see an increase in 2023 as we put the pandemic behind us.  Instead, COVID has continued to be a steady presence, and shoppers have not been coming out in record numbers.

Whether this is due to the economy, changes in customer demographics, extreme heat caused by global warming, or online shopping (read Amazon) is hard to say. But it seems timely to revisit something I wrote in this blog almost 15 years ago:

The mantra of American business has always been “bigger is better,” and the focus even for many independent shopkeepers has been on increasing the store’s gross sales figures from year to year.  That may be very difficult to do in today’s economy — but the good news is that a decline in sales does not necessarily mean a loss of profitability.

The key to surviving, and even thriving, when sales take a dip is to make sure that you have “right-sized” your business for this new reality.  If you are making a small profit at your current sales level, and do nothing to change your inventory and expenses when sales decline, you will see that profit disappear.

But the “small is beautiful” slogan that VW used to promote the Beetle (and which followed the “small is beautiful” ethos outlined by E.F. Schumacher) can apply to stores as well. You may be surprised to find that your store can be more profitable, and perhaps be less stressful for you, at a lower level of sales income.

Start by looking at what you predict your sales to be for the year, and then adjust your budget so that your staffing and other variable expenses such as advertising reflect a realistic percentage of what you expect to take in.

It is also important that you plan an open-to-buy budget that will help you bring your inventory level down to a reasonable level for your new sales goal. If you expect $500,000 in sales, you should not have $500,000 (at retail) in inventory on hand as your average inventory.  You will probably need to turn some of your inventory into cash in order to bring down the total, and also to free up money for new merchandise.

In facing the reality of a smaller retail operation, it may be tempting to not take risks and try new lines.  But whether on a large or small scale, it is your creativity as a merchant that will lead to success.  Realizing that the downturn is not your fault will hopefully help you ride the tide of change without downsizing your enthusiasm.

Happy Retailing,

Carol “Orange” Schroeder