Ian Portsmouth: Welcome to the Business Coach Podcast, an advice-oriented series that tackles the top issues and opportunities facing Canada’s small businesses. I’m your host, Ian Portsmouth, the editor of Profit Magazine and we’ve developed this podcast in cooperation with BMO, Bank of Montreal.
Will I have myself a merry little Christmas? That’s the question Canadian retailers are asking themselves as the 2009 Holiday shopping season approaches and they have reasons to be concerned. The recession has knocked the stuffing out of many retailers this year and even though consumer sentiment is improving, the economic outlook remains mixed. What will it take to achieve retail success this Christmas and beyond? Joining me to provide his thoughts on the matter is one of Canada’s most celebrated independent retailers, Andy Buyting. Andy is the President of Green Village Home and Garden with locations in Moncton and Fredericton New Brunswick. Green Village is the largest Home and Garden Center in the Maritimes and Andy is a past winner of the Business Development Bank of Canada’s Annual Young Entrepreneur Awards. He is also the entrepreneur in residence and primary contributor to myretailer.ca, a website dedicated to retail management issues. And finally, Andy is the author of “The Retailer’s Road Map to Success” which was published in 2008. Andy, thanks for joining the Business Coach Podcast.
Andy Buyting: Thank you for having me.
Ian Portsmouth: So Andy, how do you thing 2009 has been for the average Canadian retailer and perhaps you can just slip in how 2009 has treated you at Green Village?
Andy Buyting: I think the 2009 season has been a rough one, probably the best way to describe it for everybody. I know the first half of the year was certainly very though for independent retailers as well as the national chains. I know they share similar numbers to what, you know, we share as independents. I have been speaking to a lot of colleagues, speaking to a lot of people in business across the country, a lot of people saw their top line sales decreasing by some 2%, some, you know, upwards to 10% this year and a lot of it had to do with the economy and also depending on the industry that you are in, the weather certainly affected things as well. It’s been a tough year overall. It is getting better though.
Ian Portsmouth: Well, that’s good to hear. Who has managed to buck this trend? We know that in recessions, discount retailers tend to do a little bit better than everybody else, if not a lot better. Has anyone else managed to defy the recession in the retail segment?
Andy Buyting: The biggest one is what you alluded to, it is the discount retailers and the ones that can really show value for the money spent. And I think it is more important than ever before, is consumers now more than they have in the last six, seven years are looking for value in their purchasing. So as an independent retailer, it is very important to see that, to recognize it and to cater to that. That’s why the discount retailers are gaining ground, where the more independents, more speciality retailers, some of them are really having a though time.
Ian Portsmouth: Now let’s talk a little bit about the dollar recently, it was at parity, it fell far away from parity, went back to parity and it has fallen away again and by the time our listeners hear this podcast, who knows where it’s going to be. All that uncertainty, that volatility really causes some trouble for retailers and as we saw in the 2008 Christmas season when the dollar picks up a lot of strength, Canadian consumers sort of expect to see American pricing in Canadian retail outlets. So, how should Canadian retailers manage these various aspects of the loony’s rise and fall?
Andy Buyting: You know, it is a difficult one and with independent retailers, often times we’re vulnerable to the fluctuations in the dollar and it’s because we typically will make our purchases often times, if it’s from U.S. suppliers and by the time we receive it and pay for it, we could be looking at a totally different cost structure because of the dollar. I know ourselves, and I encourage everybody that is running an independent retail store, to really look at hedging the dollar. And it is something that in a more stable economy is probably not needed and probably, very few people are actually doing that. But nowadays, it is getting more and more important to be able to accurately predict what your cost base is going to be. And that’s why, ourselves, for the first time, we are looking at hedging the U.S. dollar on major purchases simply, it is the easiest thing that can be done to, you know, accurately predict what your cost base is going to be. Because, I look back at the 2008 Christmas season and like many retailers, you know, you purchase Christmas goods but you don’t pay for it, often times you have booking terms but you don’t pay for it until closer to Christmas. And last year, in 2008, we were purchasing when the dollar was at parity, but by the time we were paying for it, we were paying 20, 25 sometimes 26% premium on the dollar. And as independent retailers, like my accountant says it best, he says, if you want to be in the commodity business, get ride of your store and just buy a computer. As retailers, we’re not in the commodity business, we have to take that risk out of our business model so therefore, we have to be able to hedge the U.S. dollar and pay for U.S. bills in, actually U.S. dollars that are agreed upon at the time of purchasing.
Ian Portsmouth: Now, I think having a successful Christmas season depends on doing many of the things that you have to do through out the rest of the year. You want to have a unique product, you want to have good customer service, you really want, as an independent retailer, be able to differentiate your offering from those of bigger stores, especially big buck stores. So why don’t we talk about some of the biggest mistakes that independent retailers make that cost them Christmas sales. Are there a couple of sort of pet peeves that you have?
Andy Buyting: One of the biggest things is we have to recognize that we are in a different time right now. The biggest mistake I see independent retailers do is, you know what, 2005, or 6, or 7, we were successful doing it this way. Well, the rules of the game have changed. So you can’t do things and assume that, we’ll go through the season the same way we have in the past. It’s a different economy out there. We have to, more than any other time in the last decade, we have to show value for what we are selling as independent retailers, our average prices might be higher than the national voice, which you expect and consumers expect that as well. But you can’t be outrageously priced. You have to, more than any other times, really show value. So if you are going to charge $10 for an item, or whatever the price might be, it has that value in the consumer’s mind that it is worth $10.
Ian Portsmouth: Surely, that’s going to apply through the first half of 2010. Are there any other things that retailers need to do to get through while there is probably going to be some pretty soft months in early 2010?
Andy Buyting: Everybody has to watch their cash reserve, cash is king and you need to make sure that you have resources available when you need them. You know, if you are strong financially, go out and if you can get some more credit, then do that, even if you don’t use it, get your credit now because if we are going through the winter months, and comes March 2010, you start to run low on cash, that’s what kills more small businesses than I think almost anything else. You’ve got to have that availability to cash and resources when you need it.
Ian Portsmouth: Can you point to any big trends that you think will influence retail in 2010?
Andy Buyting: Well, the one thing, making sure that you’re showing value for your product. The other big trend, one thing that did influence retail this year positively was a federal government home renovation tax credit. With the loss of that, we’re probably going to see some changes in demand for home renovation products. So we’ll see some trends away from that. The home renovation guys, they are expecting softer sales next fall. So if your business did cater to that segment of the market, that could utilize that, then you want to watch that. Beside that, you know, luckily in Canada, we’re much better off than most other nations in the world and the economy is coming around. So we are much better off but still, it’s going to be a slow, in my opinion, it’s going to be a slow road to recovery. And you just want to be conservative, you want to show value, make sure you have the resources to survive the storm and see the next day.
Ian Portsmouth: That’s great advice Andy and that’s all the time we have. Thanks for joining the Business Coach Podcast.
Andy Buyting: Thanks for having me.
Ian Portsmouth: Andy Buyting is the President of Green Village Home and Garden with locations in Moncton and Fredericton in New Brunswick. You will find his blog on retail management issues at myretailer.ca.
Well, that’s it for another episode of the Business Coach Podcast. Be sure to check out other episodes, which you can download from BMO.com, profitguide.com and iTunes. If you have any comments or suggestions about the podcast, then please send them to me at email@example.com.
Until next time, I’m Ian Portsmouth, the editor of Profit Magazine, wishing you continued success.