Four Questions for Business Owners Before/After Market Volatility

2019 mid-year outlook from Chad Lyon, President of Electronics & Appliances Group, Wells Fargo CDF
Chad Lyon, President of Electronics & Appliances Group, Wells Fargo CDF

Chad Lyon, President of Electronics & Appliances Group, Wells Fargo CDF

Over the past year, electronics and appliances (E&A) retailers have faced a dynamic and volatile industry. There have been increases in product pricing, a slowing housing market, stock market volatility, and rough weather, to name a few factors. Even though the market has remained relatively healthy, every E&A retailer has seen customer impacts from these challenges. As we navigate through 2019’s second half, it is a great time to reflect on some of those effects and prepare your business for the rest of the year. To better prepare for future headwinds, business owners should ask themselves: 

What areas of your business felt the impacts first?

It is important to recognize leading indicators for volatility in your business. Were the impacted areas the ones you anticipated? If so, how does your business plan to track and respond in the future? Those should be your leading indicators for prolonged volatility and broader weakening moving forward. If there were unexpected impacts, go back and assess your business from the first and second quarters when many of those challenges arose. Was performance better or worse than you anticipated? It’s time to create an action plan for the rest of the year. 

What areas continued to perform well?

Determine where your strengths are. What are your strongest products, categories, or departments? If there were areas that had a strong performance in the face of industry headwinds, this could be an indication that you should be investing more into these areas. Assess why those products performed well, and what this means for the future of the industry. This can be a guiding principle for developing your upcoming business strategy.  

What areas underperformed? 

Assess where challenges arose and form a business plan to prepare for the future. If certain product lines or categories underperformed, think about whether they can improve or if you should reduce your dependence on them. Look at how that product category has performed this year, what the revenue has been like year over year, and the level of foot traffic in stores. From there, determine if it is a rough patch or time to reconsider those products.  

How did your team respond?

Your team’s reaction to unexpected volatility is critical. Did they use those challenges as an excuse to become negative, or did they continue to pursue opportunities and fight through it? No matter their response, spend some time coaching your employees and reinforcing how they need to respond in times of uncertainty. Midyear check-ins are the perfect opportunity to create a plan with your employees to prepare for future challenges, including reaction, performance, and managing expenses and liquidity. 

The rest of 2019

Overall, dealer inventory levels seem to be stable, and we are optimistic that the market will pull through this volatility. We have not seen any deterioration in our delinquency or other metrics because of these headwinds. And even though businesses have pulled through these challenges, it is always a good idea to assess how your business performed and create a plan to better prepare for expected or unexpected challenges. 

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The opinions expressed in this document are general in nature and not intended to provide specific advice or recommendations for any individual or association. Contact your banker, lawyer, accountant or tax advisor with regard to your individual situation. The opinions of the author do not necessarily reflect those of Wells Fargo Commercial Distribution Finance or any Wells Fargo entity. Wells Fargo Commercial Distribution Finance is the trade name for certain inventory financing (floor planning) services of Wells Fargo & Company and its subsidiaries.

See also: Indie Dealer Prep Help With Wells Fargo

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