Today we hear several cases of leading corporations shutting down some of their stores nationwide. The companies tout different reasons on why they decided to operate on a less physical footprint. All stores, products, and retail outlets have life cycles. This article provides more insights on how futuristic businesses can remain adept at death situations, just as they are to birth and midlife. What remains a challenge for many retailers is to manage this closures in a manner that maximizes their profits and revenues. Leading market insiders argue that many businesses that have undergone several foreclosures could have handled it much better than they currently did.
The business death life cycle
When retailing, most firms undergo a cycle of birth, midlife and eventually death. Studies reveal that few companies have figured out a suitable way of managing death. When death is properly managed, several benefits avail themselves. For one, it boosts profits significantly lowering the capital costs, while reducing the complexities involved in operations. These strategies improve the business concepts during the early and midlife phases.
Difficulties experienced during liquidation
In most places, the liquidation sale is to take place within 60 to 90 days. During which the owners are required to forecast anticipated demand and arrive at a certain markdown price level for each store. This might be very difficult when the closure involves a company with thousands of stores.
Smart ways to go about liquidation
Deciding which targeted store sells collective inventory during liquidation. There remains a big difference between store multipliers as some generate higher revenues during liquidation when related to those generated during a similar period in the previous year. Retailers should purposely forecast their multipliers during the liquidation period so that they can transfer inventory from the low multiplier stores to those with higher multipliers.
The perfect opportunity to close a store depends on the legal restrictions, particularly the upper limits, length of liquidation, and the stores that managers may close when saving on operating expenses. With time, most retailers have identified innovative ideas that help them navigate through these complexities. Today there are large firms that specialize in liquidation. Through the liquidation process, new firms are capable of reaching new markets and demographics by using unconventional advertising methods and bold signage methods.
Market researchers have discovered that retailers often offer steep discounts towards the close of their liquidation to sell off their inventories in the liquidated stores. This is despite the fact that they would have gained more if they retained their products and sold them in other markets or donated them to charities. It is also noted that early in the liquidations, the amount that managers discounted was inadequate. Alternatively, the managers did not transfer enough inventory from the low multiplier stores to the high ones in a timely fashion.
Most leading financial institutions that handle and oversee liquidations base their collateral loans on the ability of a retailer to speedily liquidate their inventory base. The increase in the liquidation value of your firm’s assets will also raise the amount the lender is willing to give out as collateral.