A new year is a time to reflect and re-evaluate. In the current climate of decisions being made, reversed and changed, 2023 is set to present new challenges to those trying to plan. Jewellery retailers will have to factor in changes in demand, managing their teams and the cost of living as well as supply chain issues and price increases. However, it is not all bad and with change comes opportunity, so here are some ways to tackle challenges in the coming year.
Look at how it has performed during 2022 and whether your original objectives are on track. Think about the short, medium and long term and work backwards. Do you want to stay in the business for many years to come or are you looking for an exit? Once you know where you are headed, build the plan to get you there. Create a forecast for at least the next 12 months that can be reviewed on a monthly basis. This should include not only your profitability but also the cash requirements needed to deliver the plan.
As things change, the plan may need to adapt. Set aside at least an hour each month away from the business, either alone or with your advisors. This will allow time to reflect, review and take a helicopter view, providing an opportunity to think strategically rather than operationally about your plans.
In a retail business one of, if not the most important assets are your team. Currently, many of them are very concerned about all aspects of their life. Be sure that you are doing everything to support them and incentivise them during working hours and also outside of work. This may not necessarily mean handing out money – encouragement, support, recognising achievements and listening will be vital to keep your team together. Replacing them may be harder than you think and potentially damaging for the business.
One thing that the pandemic has taught us is that there is clearly the potential for a genuine Armageddon scenario for a retail business. Next year could yet throw up some additional challenges that have not been forecast or witnessed previously.
When planning you need to think about potential increases in finance costs, as interest rates are forecast to rise. Continued volatility in the currency markets will affect the cost of inputs and rising raw materials costs taken together could all increase your cost base further. Businesses will need to plan for these rises and look at what that means for cash requirements to retain sufficient reserves to be able to pay the bills.
It is now more important than ever to stay on top of economic, policy and tax changes. Ensure that you have access to the latest information and surround yourself with people or advisors that can keep you informed of potential implications for your business.
While the reduction in the value of the pound has meant increased costs for those buying in US dollars, this does also present opportunities. If you a potential customer who has a bonus paid in USD or a wholesale customer that transacts in USD, buying from you is now cheaper than it was a few months ago.
The jewellery sector in the UK has always been admired for quality, design and innovation. Marketing activity could be focused on driving export sales or B2C transactions with individuals paid in USD. How are you going to attract these customers? Build that into your marketing plans, but keep a close eye on the fluctuations so you can switch activity back at the appropriate time.
“Create a forecast for at least the next 12 months that can be reviewed on a monthly basis”
It is vital that you take control and ensure that you are managing the business and it is not the other way around. When looking at all of the areas outlined here, it is key to review every cost within the business, from the costs of production to fixed costs, and build in as much flexibility as possible.
Do you need to utilise space for non-core or non-revenue-generating areas of the business? If you were to consider outsourcing back-office services such as IT, HR, marketing or accounting, would this reduce costs and also reduce the requirement for space to house these functions? In addition, this could build flexibility into the cost base that allows immediate reductions if the economic or business circumstances were to change. Being adaptable and ready to take advantage of opportunities as they arise will be the key to a successful 2023.
As appears in the December 2022 edition of Retail Jeweller Magazine where leading voices in the jewellery sector share their views.