Managing retail challenges

By Lea Hart

While Amazon’s profits soar, many brick-and-mortar retailers are seeing sales decline. Retailers—and CPAs who advise them—may consider these strategies to persevere in challenging times.

Highlight what makes you special as a retailer. CPAs need to take a holistic look at the business, said Ryan McDevitt, assistant professor of economics at Duke University's Fuqua School of Business. Help clients analyze what makes their business special, and find things that aren't superficial and can't be chipped away by online retailers—such as a unique product line or brand, he said.

"Think about how the industry you're going to be serving is going to change in the next two, five, or 10 years," said Jim Carroll, a futurist and innovation and trends expert. "Your services will change—what do you need to change now about what you do and how you do it?"

Evaluate space and lease options.Ronald Friedman, CPA, partner at Marcum LLP, has helped his retail clients evaluate lease options, noting that it's important for a client to be able to get out of a bad location with minimal risk. For clients who have multiple store locations, Friedman said, a CPA can help with deferred rent calculations and tenant improvement allowances. A CPA also can assist clients considering building out a store with financial projections for their bankers.

Get creative with space. Today's consumers are looking for a reason to come into a retail store, Friedman said. They want to be entertained, perhaps with a café or coffee shop in the store, he said.

"My advice to accountants is to tell brick-and-mortar retailers to create an entertainment space," he said. "Keep inventory under control, keep expenses down, ride out the storm, but try to change with the times."

Consider a "test-drive" model. As fewer people shop in stores, retailers are starting to consider having smaller stores or showrooms, where consumers can try on a size or test-drive a product and then order from a tablet in the store to get the exact item they want delivered the next day from a warehouse to their home, Friedman said. A CPA can perform the financial analysis associated with inventory management, helping the client plan inventory levels, how much to buy, and what categories to buy in, he said.

Focus service on long-term value. CPAs can help their clients by developing ways to encourage practices that lead to the greatest long-term value, and do so in a way that's not susceptible to online retailers stealing the sale solely by offering a lower price, McDevitt said."

As an example, a pushy salesperson might succeed in getting a customer to make a small purchase today, but the negative encounter might mean the customer won't come back in the future," McDevitt said. "A more thoughtful salesperson, on the other hand, might provide impartial advice, like telling the customer to wait a month for the newest model to come out, that doesn't lead to a sale today but results in a loyal customer who will come back more often in the future."

Editor's note: This checklist is excerpted from "What the 'Retail Apocalypse' Means for CPAs and Their Clients," CPA Insider, Aug. 1, 2017.

—By Lea Hart, a freelance writer based in Durham, N.C. To comment on this article or to suggest an idea for another article, contact Chris Baysden, senior manager of newsletters at the AICPA, at Chris.Baysden@aicpa-cima.com or 919-402-4077.

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