Will the Sears liquidation dampen your retail sales this holiday?

When Sears Canada announced this fall it would soon start liquidation sales, many consumers reacted to the news with anticipation of great bargains for the holiday season.

For other retailers, the announcement raised a few questions – and a number of concerns. How deeply will the bankrupt department store chain discount its prices? With the liquidation kicking off unexpectedly just before the biggest sales period for retailers, can small business owners adjust their inventory and pricing quickly enough to compete with Sears?

Sale may pull in more shoppers but they’ll want deals, deals, deals

Some of the media coverage of Sears’ liquidation have suggested that small businesses may actually stand to benefit, by taking advantage of the surge in consumer demand that typically happens when a big sale is advertised. The reality is, consumers lured to malls by liquidation ads expect to find bargain basement pricing and will push for similar, if not better, deals at other shops.

For retailers looking to significantly bump up business during the holidays – when they typically generate about 30 percent of annual sales, according to the market research firm Retail Economist, LLC – the countrywide clear out at Sears provides plenty of reasons to worry. That’s why it’s important for retailers to have a plan of action that can help them reduce and address the impact of Sears’ liquidation on their business:

Turn bad publicity into good sales

Some shoppers who visited Sears in October complained about marked-up pricing for the liquidation sale – claims that Sears has denied. Retailers can take advantage of this negative – albeit unproven – publicity by boosting marketing to shine a spotlight on their own holiday deals.

Be ready to drop and roll

There’s no question about it: liquidation sales drive consumers to look for the best deals, and they will comparison shop at the mall and online. While most retailers have already planned and set their pricing by now, the all-out clearance at Sears means they’ll need to rethink their numbers and be ready to price-match not only the deals at Sears but at other retailers as well.

Adjust store hours and staffing if needed

As more shoppers flock to Sears, some retailers may find their stores quieter than usual for this time of year. They should be prepared to respond quickly to unexpected downtimes, perhaps by trimming down staff and store hours as needed. Employees may have to be asked to work on a standby basis, and be ready to punch out early if required.

Sit down and crunch the numbers

Historically, most liquidation sales by large retailers have happened outside the holiday season. This makes it hard for retailers, consultants and industry analysts to gauge the true impact of the Sears liquidation. It’s imperative for small business retailers to sit down now to review their budgets, and see how anticipated revenue and profits are likely to compare to actual performance in light of what is happening at Sears. They need to ask the hard questions, such as whether or not they can really afford to spend more on marketing, or if slashing their prices again for short-term gain could damage the business in the long term.

Plan for the best but prepare for the worst outcome

Sometimes even the most valiant efforts will fail to bring in the sales. This holiday season, retailers should assess their sales performance early and frequently to see where they stand. If sales are so weak that the business is now at risk, then it’s time to seek advice on financing or debt management strategies. Depending on the extent of their losses, retailers may need to explore options such as refinancing, a proposal, or bankruptcy.

Don’t wait until it’s too late

While it’s hard to face bad news, it’s even harder to resolve a tough financial situation when it’s ignored for too long. Instead of just worrying about how the Sears liquidation might affect them, retailers should take steps now to stay competitive in a market where shoppers expect bankruptcy-sale pricing. At the same time, they need to educate themselves on their options should their best efforts fail to bring in the sales this holiday season.