A Christmas story for retail suppliers to heed

As we end 2016 and set our minds to 2017, we should spend some time and cogitate, think deeply and seriously, around what have we learned from our past year to allow us to grow in the new year. However, the very mention of “deep and serious” around the festive season may be a bit too much.

So I thought it may be worthwhile sharing a Christmas story of my own, which is based on an Australian business I have been working with over the past three years. I’ll change the names to protect the innocent. The main character looks a little like a young Father Christmas, and sometimes has similar behaviours to Ebenezer Scrooge, before the Christmas ghosts appeared to him in Dickens’ A Christmas Carol. But he has managed to lead his business, and all his employees, through some very trying times. We’ll call him Arthur.

Arthur runs a factory and also imports products for sale into large Australian retailers. Has done so for a decade. As a refugee from corporate life, he chose to use his redundancy and savings to buy into a business when he left his last corporate job aged 56. Too young to retire, too old to get back into corporate life, he ran some big factories across most states within Australia. I’d guess most readers of this blog have bought products from the factories he ran.

The Ghost of Christmas Past

It’s Christmas 2010 and the world of retail is starting to change in Australia. Things are getting tougher for all Australian retailers, so it’s obvious that things will get tougher for Australian suppliers too—especially those with warehouses, factories and staff in Australia.

The high Aussie dollar and rise of overseas online shopping appears to Arthur as the Ghost of Christmas Past. The Ghost says to him:

“Arthur, 91% of your $10 million business is sold into traditional Australian retailers. The Aussie dollar is killing your profits. These retailers’ sales are being eaten by new international retailers and pure online retailers from the US and Europe.

“These large Australian retailers, in order to survive themselves, are going to push as many costs back on you as they can. Inventory holding costs, terms of trade and advertising costs. You need to find new retail customers and learn how to go online direct to shoppers. Unless you change your business ways Arthur, you’re goin’ under.”  

Over the next four years, the words of the Ghost of Christmas Past came true. The Aussie dollar hurt his margins and traditional retailers did push back on Arthur and his business, and his profits were wiped out. 

He had begun to change his business ways, but the transition was tough. He started selling to a new, and growing, international retailer. He built a direct-to-customer online model, and he designed innovative new products. And still his bank came to within weeks of shutting him down. 

The Ghost of Christmas Present

The Ghost of Christmas Present is a much happier soul. He appeared to Arthur in the Christmas cold of the Dandenong Hills in Victoria last week and said:

“Arthur. You’re a little ripper. Your business now turns over $20 million, and only 30% of it is with large Australian retailers. You’ve grown your online direct-to-customer business to 15% of your new larger business.

“As I walk around your new factory location you still employ the same number of elves, but in a combined factory and warehousing space half the size you had before. It looks like you’re making a profit again, and your new products are growing sales every month.”

The Ghost of Christmas Yet to Come

The Ghost of Christmas Yet to Come will appear to Arthur on a Skype call next week and say:

“Arthur, I am the Ghost of Christmas Yet To Come. Keep doing what you’re doing, and we should be able to sell the business to new owners in four years’ time, around your 70th birthday. And then you can finally retire. Hey, nobody said running a business was easy!”

To paraphrase Dickens’ last line in A Christmas Carol: “Arthur had no further talks with ghosts, and it was always said, that he knew how to keep Christmas well. May that be truly said of us, and all of us! And so, as Tiny Tim observed, God bless us, every one!”

Enjoy Christmas.

Kevin Moore is a retail expert and the chairman of Crossmark Asia Pacific Holdings and Mirador Retail Technology. He is also the founder of TheRoadToRetail.