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The ‘Golden Quarter’ has never been more important for retailers

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With the festive trading season beginning, Amanda Dorel, regional director for Wales at Lloyds Bank, considers the outlook for the nation’s retailers as they approach their first ‘Covid Christmas’.

October often feels a little too soon to be talking about Christmas. I, for one, am among those who might roll my eyes at seeing festive products lining the shelves before Halloween. However, for Wales’ independent retailers, Christmas will have been under consideration for months – even against the backdrop of the Covid-19 pandemic.

The ‘Golden Quarter’ of October to December has never been more important to the hopes of businesses up and down the country including our many SME retailers. Reviewing market performance since March, it’s clear that the pandemic has pushed sales further in favour of those, often larger, brands who can offer either a faster online service or a more Covid-secure experience instore.

The ‘Great British Staycation’ undoubtedly provided many smaller retailers with a timely boost over the summer. However, the reintroduction of local lockdowns and travel restrictions in recent weeks is a timely reminder that the economy is evolving quickly and business models must too.

A great example of a local business taking this approach is Pet Place. The pet retailer saw a massive increase in online sales in the early months of the pandemic and utilised a £1million emergency loan from Lloyds Bank to shift its business model to meet demand. Having done so, it’s now re-investing in its five stores and the communications systems that link them to ensure it’s able to continue to operate at full speed through further restrictions.

For those operating on the high street though, it’s likely to be stop-start winter as we get used to the ‘rolling lockdowns’ being considered by the government. The restrictions on people traveling into large shopping centres from elsewhere will further dampen already below par footfall. Physical retailers must therefore be ready to seize on any opportunities Christmas presents.

Fashion retailers, for example, will need to consider their stock levels carefully as well as the lines they are looking to promote. Many large, multi-national retailers, are anticipating lower appetite for partywear this year as people opt for a quieter Christmas with social mixing less appealing or, indeed, possible. On the other hand, the greater time spent at home is likely to see more interest in big ticket homeware items, gadgetry and toys, meaning stores should consider their stock and pricing more carefully than ever.

All this uncertainty will of course bring its own financial considerations and chief among them will be working capital. A well-managed cashflow status is key to supporting overall resilience and building sustainable growth. Scenario planning and forecasting different levels of demand will help to determine whether there is sufficient liquidity to cover planned operations and investment by retailers over the quarter.

Cost control will also play a big part in this, so carefully tracking outgoings, including any discretionary seasonal spend, is crucial. As well as cutting costs, it’s worth considering whether it’s possible to defer them, in order to preserve resources for this cash-heavy period. Retailers can also explore different financing options to change the profile of any essential payments, helping to ease immediate cash burdens and bolster flexibility.

Maintaining regular communications with suppliers and investing the time in understanding every part of the supply chain will also help inform good stock management – ultimately helping to avoid tying-up more cash than is needed in stock.

There are a number of specialist tools available to help local businesses manage their cashflow. At Lloyds Bank we offer a bespoke working capital management tool that can assess a business’ current position and benchmark it against its peers. With those insights in hand, it becomes far easier to make improvements in areas such as invoicing, tracking late payments, stock control and extending payment terms.

As we’ve already seen this year, we can’t always predict what’s coming down the line. However, following good working capital management principles will help ensure independent retailers are in the best possible position to deal with the challenges and opportunities a ‘Covid Christmas’ presents.