Independent retailers are at the mercy of their banks, so building and maintaining a good relationship with them is vital
In these tough times, banks can lend a hand to their smaller customers.
At least, that’s what they say. These days, banks style themselves as more approachable, and the new touchy-feely bank manager specialises not just in finance but also management know-how, market analysis, marketing expertise and survival strategies designed to spot market opportunities and exploit them. An all-round business partnership.
Royal Bank of Scotland (RBS) managing director of business and commercial banking Ian Kay says: “The importance of regular dialogue with your bank is key. Continuous contact will allow the bank to really get under the skin of your business to provide the best possible advice and support for it to thrive.”
Barclays head of retail and wholesale Richard Lowe agrees. “The relationship between a bank and a small business depends on networking, keeping an ear to the ground and sharing knowledge,” he says.
Ask fashion independents whether they regard their bank as a partner and the answer is very different. “No, I don’t find it helpful,” says Michael Thomson, managing director of lingerie and swimwear retailer Pour Moi in Macclesfield, Cheshire, who talked to his bank recently about “a small loan” for which it insisted he use his flat as collateral. “They seem to want everything. To do business with the bank I have to fit with its ways of working.”
Thomson’s remarks are typical of the way many indies feel about their banks: big, slow, ultra-cautious and bound by rules and regulations.
Chris Geer of five-store Essex designer mini chain Zagger says his bank totally misunderstands what it is to be a small businessman. “If you’re prepared to take a chance and have a go, banks see that as a weakness,” he says.
William Mair, owner of Falkirk young fashion indie Quest, strikes a note of laissez-faire that seems to be the best that many indies can say of their relationship with their banks. “It’s fine, but that’s because I never have to talk to it,” he says. Mair owns three shops outright and does not have an overdraft, “so we’re quite immune to bank interference” .
Notwithstanding indies’ opinions, the banks say they are keen to offer help - and cash - to smaller customers. Barclays’ Lowe says fashion indies have some advantages and some disadvantages over their high street rivals during a recession. “They can innovate and react to spending movements faster,” he says. “On the other hand, they often don’t have the depth of management
Barclays has focused on UK retailers with its Turning the Corner scheme, a combination of practical guidance, workshops, industry discussions and networking for owners and managers.
RBS channels its support activities for smaller businesses through individual relationship managers based in a location close to them, “so that a close relationship can be easily fostered”, says Kay. It is also making an additional £3 billion of funding available, specifically to small and medium-sized businesses.
Ultimately, the yawning gap between the mindset of indies and the average high street bank manager is unlikely to converge at a time of economic stress. Nonetheless, banks are a resource for their customers, and during a recession, small businesses need all the help they can get.
Ten tips for fashion independents in the recession, supplied by RBS and Barclays:
1 Keep your supply chain supple This is not a time to be holding large amounts of stock. A loss of stock flexibility now could make the difference between success and failure.
2 Beat down the landlords Negotiate hard on rents for new and already occupied properties. The unthinkable terms of 18 months ago are now more than possible.
3 Bricks plus clicks equals minimum risk and maximum return There’s never been a better time to look at online trading. It brings in extra revenue for little outlay.
4 Maximise SKU certainty Analyse your SKUs for the fast movers and steady sellers and cut everything else back to a minimum.
5 Cost-engineer to maximise profit If you’re commissioning manufactured lines, ‘de-spec’ the designs as far as is practical to keep production costs low.
6 Customer service is king Indies excel at the personal touch - and in a recession it amounts almost to a secret weapon. Invest in your staff and train them to build relationships and provide a great customer experience.
7 Sell out Avoid discounting surplus stock by matching quantities to buying trends as far as you can predict them. Consumers have a greater tolerance for sold-out lines during a recession.
8 Use credit cards to maximise your credit loop If you pick the right point in the month, paying for goods or services by credit card means suppliers are kept sweet with instant payment but you get up to 40 days to settle up.
9 Look around for bargains Look at your cost base to see if anything can be renegotiated - a capital payment holiday, a ‘forgiveness arrangement’, slightly longer credit terms - many of your suppliers will now be amenable.
10 Cash in, cash out Cash is king. Consumers are increasingly paying for purchases with cash rather than plastic, and if you can, pay staff in cash too.