LOW HOLIDAY MARGINS MAY CREATE AN EBENZER SCROOGE OR TWO

With the unemployment rate at a threatening 8.6% nationally, consumers have still managed to turn out in the usual drones to fill malls and shopping centers this holiday season.  The National Retail Federation has reported an upgrade in their holiday forecast sales figures to rise 3.8% to a staggering $469.1 billion.  A promising retail season always alludes to resurgence in both the economy and employment, but this may not be the case.

Retailers are reporting strong sales figures across the board, though luring holiday shoppers with the motivation of deep price cuts will take a nasty toll on end of year margins.  There is always a mix of trend setting new merchandise flowing off of the shelves for the holiday season, but retails typically use this peak period of consumerism to flush old inventory out of warehouses and prepare to run skinny for their end of year audits.  By making margin concessions to incentivize discount retailers to take large bulk orders for out of season product, the annual averaged margin will ultimately be the one to take a beating.  With the top line shrinking at the end of the year, retailers and wholesalers alike take a scrutinized approach to opportunities existing within their cost structure and bottom line makeup.

A very real and always apparent cost cutting strategy at the beginning of each fiscal year is for companies to turn to layoffs to “trim the fat”.  Little do they know that they might not be cutting fat, but be cutting out the muscle and lifeblood of their organization.  Layoffs within any organization effect more than the employees turning in their badges.  An office environment that is already enduring certain amounts of stress from financial shortcomings could experience an ever greater amount of stress and anxiety from their existing workforce.  With the threat of termination now looming above their heads, employee moral can take a sudden and drastic turn.

Employers do have to make the hard decision when cuts need to be made, but it shouldn’t be at the detriment of their staff.  An easily effected area that so many companies fail to examine is the relationships that they have with external parties.  Companies are too quick to reach into their own pockets to look for holes when services they receive on a daily level may be overpriced and unexamined for decades.  A simple renegotiation of terms or use of market professionals to re-examine supply chain costs can account for massive savings and subsequently eliminate the need to turn to layoffs, and set the stage for long term profitability.  Decreasing margins do have marked effects on any companies overall profitability, but it is the responsibility of business executives to honor the loyalty of their employee base and examine cost savings potential that might be right under their noses.