Are you ready for recovery?

Inside Out

By Ray Allegrezza -- Casual Living, 10/1/2009 12:00:00 AM

Quick…what’s worse than no business?

How about a business that turns itself around and, in the process, catches you by surprise? From where I sit, that’s a situation lots of us could find ourselves having to deal with.

Here’s why. Since August, we’ve been at four major industry shows: The Tupelo Furniture Market, the World Market Center’s Las Vegas Market, High Point’s Premarket and most recently, the Chicago International Casual Furniture & Accessories Market.

While each one has its own scope, focus and niche, there was a common thread that ran through each event: Buyers wrote orders.

I think the reason they put pen to paper was based on their perception that the business is finally beginning to improve.

And truth be told, there are a number of indicators that this may actually be the case. As I write this, the average rate for a 30-year fixed was a very compelling 5.04%. As one might imagine, that rate, which seriously rivals the recent record low of 4.78%, caused mortgage applications to jump by 13%, according to the Mortgage Bankers Association.

Also, first-time home buyers hoping to take advantage of the government’s $8,000 tax credit before it expires next month are pushing sales of new homes in the right direction.

Consumer confidence, another good indicator of the nation’s mindset, is also on the mend. After hitting an all-time low of 25.3 in February, the Conference Board said that the index had reached 53.1 in September.

Assuming all of this continues, there’s a good chance that we will see sales of home furnishings continue to improve.

So, why am I waving a red flag?

While I am not an alarmist, I’m waving that flag to make sure that you are ready for what seems to be a spike in business.

As we all looked to trim fat to become lean and mean, one of the things that saw the knife has been inventory levels. Retailers, looking to hold onto as much of their cash as possible, have kept their inventory levels razor thin. Suppliers and importers understandably also kept their inventories as low as possible.

Having interviewed a number of executives who recently got back from China, I’m fairly certain that many of the major factories in Asia made their adjustments by reducing workforces and by cutting their production significantly.

Mix all of these elements together — historically low inventories, reduced production and what seems to be an improving market — and there is a strong likelihood that we might find the shelves fairly bare just at the moment she decides to venture out of her home and into your store.

Having discussed this with many of you during the Chicago market, I know this is already becoming problematic.

Gloster’s Charles Vernon believes that if the business comes back between 5-10%, he and others, who have already taken steps to boost their efficiencies, will be fine. However, to my point, if the business comes back more than that, we could all be scrambling, he acknowledged.

Bew White of Summer Classics thinks this has the potential to be a serious problem, especially if retailers flood suppliers with last-minute early buy orders.

Jamie Lowsky of Pride is also keeping a watchful eye on what could be a serious issue. He and others are planning to minimize any interruptions of supply by having made significant commitments to inventory.

Everyone, however, can play a role here. Suppliers can do their part in minimizing this challenge by being in stock. Retailers need to remember that calculated risk is a part of business. It’s time to step up to the plate and place your orders.

Faced with the dynamics of today’s market conditions, I think retailers who wait until the 11th hour to place their orders may be in for a rude awakening.

While I’ve never claimed to have all of the answers, I can tell you this: You just can’t sell from an empty cart.

But here’s the good news: If you position yourself properly, you won’t have to.