Smith urges small retailers onto discounts
By INDERIA SAUNDERS,Guardian Business Reporter,Inderia@nasguard.com
The former state minister for Finance is offering a survival guide for small businesses in a tough economy, driving them to whittle away at overhead expenses and do what many have so far resisted: Slashing prices.
According to James Smith, small businesses are more at risk during the economic downturn than their larger counterparts. He asserts they must now stretch further to ensure survival during the current slowdown.
“The recession reduces economic activity for virtually all sectors and in such an environment, those individuals and businesses that are mostly at risk are the recently employed and small business establishments,” Smith, a guest speaker at the Chamber of Commerce’s Business Development Seminar, said yesterday.
“The latter because of insufficiently deep pockets.”
Efforts should be made, said Smith, to collect all outstanding debts during this time, at the same time stressing the need to drive revenue growth not by price hikes but by volume sales. It’s an increase that won’t likely come without discounts being offered, said Smith, highlighting the likelihood of those price drops helping to retain consumer patronage.
“In order to generate more sales in the face of sluggish demand for goods and services, consideration should be given to offering discounts and other inducements that would allow you to maintain or enlarge your customer base,” he said. “Such discounts would have to take into account what the competition is doing more so than the impact on your bottom line.
“When the recession ends and business returns to normal, there may be opportunities to recover any losses by introducing an appropriate pricing regime.”
While he suggested small businesses look at cutting costs and reducing risks by doing everything from putting a freeze on hiring to laying off employees, he also pointed to the importance of reducing costs such as rent.
“Maybe instead of paying rent for an office, it may be better to [work] from home and save on rent,” Smith told young entrepreneurs yesterday. “You can just set up a little office at home.”
His comments come as the Central Bank projects the recovery of The Bahamas economy to occur as late as 2Q 2010. It’s a projection pinned entirely on how quickly the U.S. economy picks up and a similar lifting of this country’s present six percent slump in visitors compared to the previous year.
Smith, also a former governor of the Central Bank, is in agreement with others who predict recovery won’t in fact come until next year at the earliest.
“We are likely to be faced with a decrease in the number of tourist arrivals… fewer arrivals mean less expenditure in the economy [and] less need for hotel staff, less expenditure on goods and services,” he said. “Those individuals and businesses, particularly small businesses, which hope to survive the recession, ought to seriously consider making the short-term survival plans or adequate preparations to address the slowdown in the economy.”
