How to Deal with a Drop in Sales

Deal with a Drop in Sales

It’s going to happen sometime. Your sales are going to drop. Maybe it will be a short time period or maybe a longer one. How do you cope?

December is a critical month for most businesses. In the specialty ski and snowboard business it is essential. Lack of snow during the month equates to a drop in sales. No snow during the holiday break means a further drop in sales as well as a drop in participation. It is hard to make up those sales in the following months.

Another issue is that most retailers have is that they received all their winter merchandise by December and are committed to paying for it. You can’t send it back to your vendors; you have to deal with it.

Ways to deal with this.

One of the first ways to deal with this is to go over your cash flow management plan. If you planned out your year and have updated the expenses you will know how much money you are going to need to cover the expenses and inventory purchases.

Once that is done, it is time to start planning action steps. Immediately review expenses, labor costs, and merchandise purchases to find places where you can cut back or eliminate costs.

In the expenses department in might include revamping your advertising costs, addressing phone use, cutting unnecessary purchases or lowering utility use. Talk things over with your staff and see what ideas they may have to immediately reduce costs.

Labor expense is a typical place most businesses start cutting back. This might be appropriate if you are over staffed. However, it can produce the opposite of cutting costs. If your business depends on your sales people to take care of the customer and make sales then it can be important to keep those people. Particularly if you have a number of experienced and trained sales people. Ask them what opportunities they see that could help boost sales.

Adjust your staff scheduling during this time and have your best sales people working the busy times. Send some people home early on slow evenings especially those people who are not as strong in sales.

Something else to address is inventory purchases and accounts payable. Talking to credit managers and trying to get some extra time to pay for the products you already have can help manage cash flow over the short term. Look at your on orders and cut out any reorders, back orders or late deliveries then examine the next season’s orders and see what you might not need.

So, now you’ve trimmed expenses, what next?

The most obvious is increase sales. Many businesses will choose to run a sale or drop their retail price to entice customers to buy. This immediately reduces your margin on those products. Since the gross margin dollars are what we live on this type of action might increase sales but lower income. It could make the situation more difficult. However, it could also drive some sales so there is a balance there.

Perhaps there are some other ways you might increase sales without putting all your products on sale. This is the type of discussion to have with your sales staff. In one of our discussion the staff came up with giving the customer a pair of ski poles when they purchased a pair of skis and bindings. This was a low cost way of increasing the value of the purchase for the customer and resulted in closing a number of sales that might not have happened.

Selective markdowns are another way of dealing with low sales. Here are a few ideas to think about.  Markdown your ski jackets by a small percentage but not your hats or gloves. Do outfit prices like “buy this jacket and pant and get 25% off the hat and gloves”. “Purchase a new pair of ski boots and get a one free day demo of this year’s performance ski of your choice” is another way to drive some sales.

The biggest opportunity that you have is with the customers coming in your door. Try to find out what might entice them to purchase an additional item. I’m sure that you can find many ways to do that.

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