Dealing with Downturns: Practical steps
“For the retail-end we concentrate on seasonal events - weddings, anniversaries, receptions, and banquets.” Bianca Marton, Bianca Marton chocolates
After Brexit we thought it might be worth publishing something on overcoming unexpected economic events. Then Donald Trump was elected and we thought, no, let’s wait a bit until things settle down. Then Theresa May demanded an un-needed general election (she had a majority after all) and pretty much threw the government under a bus. Retailers, in short, are having to deal with downturns both predictable and unexpected. So what does a small independent do to plan for the unexpected? We’ve picked a very specific example to illustrate some potential strategies.
Bianca Marton Chocolates is an award-winning artisan chocolate business which makes and sells chocolates from its shop and kitchen in west London. Marton starts from the point of carving out a niche to compensate for small size; she makes only dairy-free chocolates and as such sells a lot to vegans and people with particular dietary requirements both in person and on her website at http://www.biancamarton.com/.
This loyal following and specific area of expertise insulates her, to some extent, from competing purely on price and helps in times of economic pressure.
The chocolate business is definitely seasonal, she explains, which may not be apparent from to outsiders. The key is to know when business is going to fall off a bit and plan. “Summer is time to prepare for the next season, develop new flavours and products, arrange for maintenance and repair, re-organise and improve,” she says. “For the retail-end we concentrate on seasonal events - weddings, anniversaries, receptions, and banquets.” There is also the possibility of a little diversity in what the business actually does during the lower seasons. “We also offer chocolate making courses, which are great for families with children off school.” Planning for quiet times, even if you don’t yet foresee any, is a key building block for retail resilience.
A lot of businesses are dependent on particular sorts of buyers and the chocolatier is one of them. Monitoring what the customer actually wants is essential, particularly when as in Marton’s case you make everything by hand. “We keep expanding our product range, and offer different/new products regularly,” she explains. “This we can do very with minimal cost and risk, which is good, as new product introduction takes time. Customer are keen on new products, but the buying cycle is rather long: notice - keep watching and checking back - trial buy - repeat buy, which may take months to build up.” Keep your product range fresh to keep your existing customers coming back, you may rely on them more in a challenging climate. It’s much cheaper to retain those who have bought with you before, than to have to continually replace them.
Understanding how the buying cycle works in your own business is essential if there might be downturns. Marton has to adjust her own business planning to take account of this long process during which a product will appear to be losing money. And if she’s exposed to the customer on the one hand, she has to watch for fluctuations in the cost of supplies on the other. “Cocoa is, and will always be imported, and exchange rate has a high impact on the price,” she comments. “On top of this, there is a noticeable inflation, and the prices of most of our ingredients have already gone up considerably. Cost of labour has increased as well. We make high quality/luxury chocolates, all of them in the upper price brackets.” A dip in overall disposable income from the customer can prove damaging. Try your best to plan in time for new ranges to start becoming profitable and plan in a range of possible cost scenarios based on exchange rate fluctuations.
“Economic uncertainty is not a good climate for consumers,” she continues. But what do you do about a thing like that? “Our products are all locally made on the premises in London, which has a strong appeal to tourists as well as local customers,” she explains.” We emphasize this point along with the general quality, and the speciality of providing great tasting dairy free and vegan products. These have a wide cross-border appeal. Really push your unique offering, and make it clear to consumers why what they buy from you will be special. People choose more carefully where to spend money, when they have less of it.
Finally it’s essential to understand you’re in a business rather than a family. Ruthlessness can be your best friend. “We have already scrutinised our product and service range, and cut the less profitable areas,” explains Marton. “We discontinued very labour intensive, slow moving products, and stopped offering a coffee shop type setting, which was not profitable. Don’t buy based on personal preference, choose what you know your customer will value enough to part with cash for. Go to the trade shows with a careful plan and a good understanding of your best-sellers.
The end result is or should be an efficient business based on reliable product offerings that will weather any storms. “Our current range of products is streamlined and tested,” says Marton. “We are now concentrating on establishing our brand, and generating more sales. Primarily expanding online sales, and gaining new corporate clients.” Think about totally new income streams and test the new market by speaking to potential customers before you take a major risk.
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