By Betsy Markey, SBA’s Region VIII Administrator

Tis the season to be jolly, not broke.  Many small retailers earn 25 percent or more of total annual revenues during the Christmas shopping season.  Stagnant holiday sales can be the beginning of a slow death-spiral in the coming year.  Small locally-owned retailers don't typically have the sales volume and financial resources to compete with the huge discounts offered by big national chains. Small retailers' profit margins tend to be thinner than the big players, giving them less wiggle room on discounts.  The SBA compiled the following six hurdles small retailers face during the holiday shopping season, and ways to avoid them in the future.

Lack of inventory control. Inventory control is crucial for all small retailers, especially during the busy holiday selling months.  It is important to remember that inventory equals profits, and knowing how much product to order, when to order it, and what items to order can be the difference between having cash in the bank or aging inventory on the shelves.

Hiring the wrong employees for critical positions. There is a cost to hiring the wrong people for key positions. Small firms tend to have less layers of management between the owner and the employees, therefore new hires must be able to perform with less direct supervision and be motivated to get the job done right the first time.  Avoid this issue by writing a detailed job description, and immediately instilling a sense of extreme customer service in each and every new employee.

Undercapitalization will kill the holiday spirit.  Cash flow is the life blood of all small businesses.  Cash flow allows a business to make payroll, pay suppliers, and keep its doors open.  Business owners should immediately increase cash flow by collecting accounts receivables in a timely manner; don’t keep cash tied up in unnecessary inventory; and eliminate unprofitable account relationships.

Not embracing online sales and social media.  U.S. Census Bureau data shows that more than $1.2 billion in e-commerce sales were made during the first three quarters of 2016 – a 15.7 percent increase over the same period last year.  By the end of 2017 it is estimated that more than 60 percent of all U.S. retail sales will involve the web.  To stay competitive small retailer must develop a retail web presence.  Also, leverage Twitter and Facebook to promote one-day sales or plug special product lines and high inventoried merchandise. Use Facebook advertising to establish more of an emotional connection with shoppers.  

Not delaying the employee office party and social events.  It is sales crunch time from Black Friday until New Year’s Day.  Office parties can cause distractions at a time when a business needs to be especially productive.  Too much food and drink can not only cause a nasty hangover, but sidetrack employee and management’s focus.  Consider moving the company party until after New Year’s Day and call it the annual thank-you event. Tip: Involve the entire community in this thank you party.

Innovation and creativity lost.  Historically, locally-owned small retailers beat their big box and online competitors by providing outstanding individualized customer service.  Internet sales events have pushed large retailers into flooding the market with lost leader pricing on a wide array of holiday products.  Small retailers must take the offensive by selling creative and innovative products that cannot be found at the local mega mall or online.  Create a unique customer experience that will draw shoppers to travel outside of their comfort zone, and discover that out-of-the-ordinary shopping district with ten trendy stores, not 100 traditional chain stores. 

For more information on ways the SBA can assist your small business this holiday season, visit www.sba.gov.