No quick fix for winter woes

NATIONAL: Experts have warned fashion retailers to be wary of using short-term crutches to help sustain them through an extended period of tough trading conditions.
The warning comes as increasing numbers of clothing and footwear retailers - staring down the barrel of another tough winter - turn to new initiatives to unbuckle consumer wallets and stimulate dwindling cashflow.
But while such schemes may prove beneficial in the short-term, industry experts have warned businesses relying on such practices they could be putting at risk the long-term stability of their enterprise.
Among the companies pushing for a drive in critical retail transactions is womenswear label Seduce, which has announced a new layby service to expand the brand's accessibility and "attract more customers".
Seduce marketing co-ordinator Shiralee Coleman said the new scheme, dubbed TakeHome Layby, helped boost the company's trading performance by allowing buyers to make a small deposit on their purchase, take it home and gradually pay for it over a 12-week period.
"The benefits that it will bring to our company are numerous. Finance can be a problem for customers at the start of a season, but now they can spread their costs over time. They can buy all the pieces that they want and budget their income to pay for it over the next two to three months."
Although Seduce is the first womenswear chain to adopt the system in New South Wales, small to medium enterprises (SME) in South Australia utilised it as a means to overcome the sluggish 2005/06 retail period.
The director behind designer boutiques Whistles and WO+MAN, Anne Marie Gaganis, said despite initial reservations, the program had helped to attract a greater client base.
"Once they pay off one TakeHome Layby they almost always start a new one up. We have a minimum spend of $400 on this service so it also increases your average sale. Where they come in for a pair of jeans, they will now buy a top and a belt to get to the $400 so they can use the service."
While business consultants have commended the novelty of the idea, Retail Doctor managing director Brian Walker said businesses shouldn't rely on such services through difficult trading periods. They should build on existing practices instead, he said.
Walker, who counts fashion brands Herringbone, Hallensteins and Glasson's among his clients, said he was concerned these businesses appeared to be focusing on driving transactions rather than the value of their offering.
"If they've done their sums and looked at the risk and debt exposure of the service, then I would commend them for taking a novel approach. Is it a good long-term strategy? I'm not so sure. Will it win more customers and spread out financial cash flow? Probably. But if that is your point of difference, then over time, it eventually becomes your norm.
"I'm weary when retailers focus on driving transactions rather than the value element. Are you trying to make shopping a transaction or an experience? Connect with the customer: capture their heart, not their head."
According to experts at the Australian Centre for Retail Studies (ACRS), major national retailers aren't the only businesses looking to push their performance through financially-driven services.
ACRS executive director Amanda Young said the steady growth of factoring - where invoices are discounted for immediate settlement - among smaller companies indicated that all retail sectors are looking to build on their cashflow throughout the season.
"Because retailing is so seasonal, a lot of stores have developed fall back systems as a way to increase cashflows. Factoring enables them to pay suppliers, keep their relationships healthy and still manage their businesses.
"But it's a short-term crutch because it can constantly erode the profit margins of the business."
Experiencing a 50 per cent growth in its client base since 2005, Australian factoring service Bibby has reaped the benefits of the trend with Sarom Fashion and Metropolitan Clothing among those sourcing it as a means for greater financial growth. Bibby managing director Greg Charlwood credited the boom to a desire for businesses to erect steady and consistent income.
"Businesses can wait up to 75 to 90 days for payment from their customers which means they're only turning over money five times a year. Businesses that factor can receive 80 per cent to 90 per cent of their invoice payment upfront which enables them to turn over 10 times rather than five and invest that money back into their business."