Times have been tough for Australian retailers as cost-of-living pressures force consumers to tighten their belts. In this article, we look at how retailers can set themselves up to start 2024 in the strongest possible condition.
As we near the close of 2023, there have been some considerable challenges within the retail sector. There’s the constantly shifting legislative environment to consider (with several hoops to jump through just to maintain operations), fragilities in the supply chain to navigate, and low consumer sentiment as the summer holidays draw closer.
Moreover, costs are high. Insurance premiums, power bills, fuel prices, high interest on loans, increased rent – the list goes on. This, however, is not a doomsday message for retail businesses. There is a light at the end of the tunnel as long as your business proactively manages risk as we enter 2024. If you take the correct steps now, you can secure your cash flow, reduce your risk of exposure to bad debtors, and protect your business going into 2024.
Let’s explore some tips, tricks and tools your business can use to reduce risk exposure to begin the new year in the right way.
Surveying the retail risk landscape
We know that a number of retail businesses are doing it tough, as are several companies in other sectors. In CreditorWatch’s November Business Risk Index analysis, data highlighted that the average value of invoices has declined by 34% year-on-year across the board. There has also been a 57% increase in business-to-business (B2B) defaults since the start of this year.
Unfortunately, the Australian Bureau of Statistics (ABS) backs up this cautionary feeling in the air. Retail trade research throughout 2023 found, in no uncertain terms, that this has been a historically low year for underlying growth in retail turnover. The cause, ABS analysts suggested, has been thoroughly dampened consumer spending.
The factors causing this consumer spending slump are many and varied. For starters, the interest rate environment is prohibitive for many households, who have had to cut right back due to increased repayments on their mortgage. Moreover, inflation is high, rents are increasing across the nation, and utility prices have risen. Many people just can’t spend as they’d like to. Within this context, businesses have had to divert more revenue towards loan repayments while still grappling with increased overheads of their own.
To cap it all off, the Australian Tax Office (ATO) has a renewed post-COVID vigour for chasing down unpaid taxes, many of which were left unaddressed for several years while we dealt with some extenuating circumstances. The impact of this enthusiasm is beginning to ripple throughout the business community, especially within smaller businesses with lower margins.
All of this has led the CreditorWatch analytics team to predict a significant increase in business closures as we look towards the first two quarters of 2024.
Entering 2024 the right way with proactive risk management
The good news is that there are steps you can take to actively reduce the risk of trading partners that may default or even close their doors. You can avoid the potentially devastating impacts of the default or insolvency of a major trading partner if you understand the creditworthiness of those you do business with ahead of time.
- Regular credit checks
The easiest way for retailers to ensure they proactively protect their company from risk is to conduct regular credit checks on suppliers. Regular credit checks empower you to assess the financial health of your suppliers. By understanding their financial standing, you can identify potential risks before they become liabilities.
Credit checks provide you with full transparency around the payment behaviour of your suppliers, allowing you to make timely and informed decisions concerning payment terms, collection procedures, and the viability of continued business. Instead of waiting until trading partners start defaulting on your invoices, regular credit reporting offers you the power to notice the warning signs early.
- Personalised customer engagement
It’s no secret that consumer expectations are changing. Retail pharmacy businesses that want to remain competitive in 2024 must consider personalised services and cross-channel engagement to allow additional avenues for revenue growth.
Consider the integration of online platforms with in-store experiences. An example might be a pharmacy website or mobile app that allows customers to create profiles when checking out. Then, the next time the customer visits a physical store, the platform will push notifications for in-store promotions and discounts. This multi-layered approach enhances the customer experience and enables the pharmacy to accrue data on customer preferences and behaviour. The gathered information may allow for more targeted and personalised marketing strategies in the future.
- A new outlook for the new year
There have been some sobering statistics that we’ve outlined here, but also some significant cause for optimism for pharmacies and businesses generally within the retail sector. What we know for sure is that you need to innovate to stay ahead.
Customer expectations are changing, reflecting an increased desire for personalised services, digital purchasing options, and a greater focus on corporate social responsibility. However, with these challenges also come new opportunities to secure greater revenues and growth.
Those retail businesses that embrace innovation will be the most likely to succeed, and that applies equally to customer experience, product development and credit risk management. Your company has to keep pace in order to reach its goals. With regular credit checks and customer due diligence, you’ll be well-placed to enter 2024 with a renewed sense of positivity and hope, and a careful eye for trading partners that may spoil the fun.
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