THE slump in sales brought on by the cold midwinter, a notoriously challenging months for retailers, will see small and medium-sized enterprises (SMEs) feeling the pinch, says Rene Botha, area manager at Business Partners.
However, careful preparation and strategic sales tactics could help SMEs beat the chill, she said.
Botha said, “The dip in retail sales we saw in 2021 was exacerbated by the spate of unrest in several provinces. This year, we are contending with the knock-on effects of the Soweto shutdown, impacting a number of SMEs.
“But what we also know is that our country’s entrepreneurs are incredibly resilient. We therefore encourage them to think creatively to find ways to overcome some of the difficulties that the off-season presents,” she said.
Retail sales trends, which serve as useful indicators of customer behaviour, showed that seasonally adjusted retail sales fell from R80 million in April last year to R73m in July, last year. Stats SA data showed an almost 9 percent decrease, with sales rising steadily during the second half of the year.
This year, while retail sales rose 3.4 percent year-on-year in April, rising inflation and petrol hikes were predicted to place household incomes under increasing pressure.
According to the most recent quarterly SME Index, conducted by Business Partners, the main challenge that small businesses will face in the next six months relates to cashflow.
Botha said this has been the status quo for a number of years, except in 2020 when issues around restrictive Covid-19 regulation became most prominent. Given this finding, she said effective cash-flow management should be the priority for SMEs this winter.
“The basic principle, when it comes to managing your cashflow efficiently, is to increase the flow of revenue and keep expenses to a minimum. Touching on the second part of the equation, SMEs can take a closer look at reducing some of the hidden costs that come with the colder season.
“Instead of spending money on office heating, allow staff to work from home over this period, and switch to energy efficient appliances. On the revenue side of cashflow, you can offer incentives for early payments on clients who order in bulk,” Botha advised.
Another tip that Botha offered for small businesses was to examine where cash could be removed from the equation completely by participating in the barter economy.
The practice of making bartering deals with other businesses has been leveraged by companies in the South African media industry, as well as travel and hospitality for a number of years.
Globally, the barter economy was providing several cashless solutions to trade. Although this trend is yet to take hold in South Africa, in Botha’s opinion, there were valuable lessons that local SMEs can take from businesses that bartered.
Expanding on how this could work, Botha suggested SMEs could barter with freelance marketers or smaller agencies to exchange marketing consultancy services for goods and services like coffee, beauty therapy, discount vouchers or interior design services.
“During cash-strapped months, sometimes the best idea is to think beyond cash,” she said.
Thinking strategically about the way you run your business during the off-season could also include reviewing the product or service delivery model.
The e-commerce boom, catalysed by the pandemic, led experts to predict that South Africa’s annual e-commerce growth could stabilise at around 8 percent over the next three years.
With South Africans spending about R76 billion online in 2021, SMEs could leverage this trend in the months where brick-and-mortar sales drop.
Expanding on this idea, while Botha also urged SMEs to “think digital” by going online during winter, she also urged them to think about online shopping beyond the bounds of traditional e-commerce.
A recent report showed that WhatsApp is South Africa’s most active social media platform, with 90 percent of the country’s 31 million local internet users making daily use of the platform. Small businesses can develop communities on WhatsApp during winter – a season where less users are outdoors, and more users are using their mobile phones.
“Think like your customer – talk to them about where they are during the off-season, and leverage digital tools like WhatsApp to provide a level of personal customer service that will set you apart during this highly competitive period of the year,” Botha said.
BUSINESS REPORT