Going Back to Work!
Exciting, But Not Business as Usual….
As businesses around the country begin to reopen their doors to the public, there is relief…and apprehension. Going back to work means that we can once again serve customers, produce income and return to some sort of life outside our homes.
For at least the time being, going back to work and serving the public will also bring many new hurdles and challenges; we are responsible for making customers feel safe as they shop and ensuring employees are safe while they work. In addition to all the necessary changes to the shopping environment, it is also very important to address the new costs of doing business.
In the custom framing industry, many suppliers are slow to re-establish the same level of service they provided before the pandemic. Service and delivery are two areas where suppliers are struggling to resume normal operations. This means that costs are going up. Like retailers, distributors suffered huge financial losses over the past weeks. They reduced staffing and suspended services. Now, as they emerge from closure, many will need to rebuild with new hires and train them to be proficient at their jobs.
Meanwhile, it becomes more expensive for retail shops to operate. The obvious cost increase is the shipping of products now that deliveries have been suspended. Large and heavy supplies are very costly to get shipped. It is vital that shops recoup those shipping costs during these times, or profits will diminish quickly. These are not slight adjustments. Shipping costs today run 30 to 40% of the cost for an entire order. If pricing is not adjusted to recoup these costs, cash flow will be reduced too much. If you are buying from a supplier who had previously delivered materials, but now uses an expensive shipping source, you must add at least 30% to your pricing. However, as you know, this will significantly raise prices and put you at risk of losing sales.
Perhaps the best solution would be to ask distributors to reduce their pricing to you by about 15% until they start delivering again. This seems logical. “Free” delivery is not really “free”. Distributors build in the cost of delivering materials to your door in their pricing. Now that they are not paying drivers and maintaining trucks or paying for fuel, their operating costs have been reduced. Logically, they should be willing to reduce prices and offset the increased shipping costs you are incurring.
I suggest calling these companies and asking for this discount before raising prices. It should be something companies are open to doing and it could allow you to retain profits without passing on higher costs to your customers.
Shipping costs will not be the only area of operation to see increases. There will be many more. Now is the time to look at every operating expense on your profit and loss statement. Compare today’s costs with what you have paid in the past and see if you can get them reduced. If not, you will need to adjust your pricing to ensure that cash flow remains adequate.
As time goes on, business will begin to look like the old “normal” more and more. During this time of transition, it will be very important to monitor everything closely and adjust as needed. The good news is that many shops I work with are reporting great business as customers are anxious to use our services again. By paying attention to operating costs, we can use these busier times to rebuild lost revenue.
“By paying attention to operating costs, we can rebuild lost revenue.”