How do we prepare for the asian economic recessions? what are the best financial strategies for business resilience in 2024?
THE QUESTION:
Mr. Khugan,
I have three retail clothing stores in central and south Phnom Penh. Business was fine last year. But in 2024 business is going down and in June it was really bad. My friends are saying it is because of ASIAN Recession. Can you please explain to me what that means and what can businessmen like me do?
Vibol.
THE ANSWER:
Hey Vibol! Your question is a very pertinent one. Although the explanation is extremely elaborate. However, let me scale it down for you the best that I can. First thing is, Asia is not in a full-blown recession yet, but there are significant economic challenges affecting the region currently.
Various factors are contributing to a slowdown in economic growth, which can impact businesses, particularly SMEs like your retail clothing stores in Phnom Penh. Let’s start with a simple explanation of what ASIAN Recession means to a business person:
1. REDUCED CONSUMER SPENDING – Economic downturns often lead to reduced consumer spending as individuals tighten their budgets. SMEs, especially those in retail, hospitality, and non-essential services, may see a significant decline in sales, like you have been witnessing lately.
2. SUPPLY CHAIN DISRUPTIONS – A lot of Asian economies are deeply integrated into global supply chains. During economic downturns, this usually cause disruptions, leading to delays and increased costs for SMEs reliant on imported goods or raw materials.
3. POLICY AND REGULATORY CHANGES – During economic downturns, most Governments may implement policy changes to stabilize the economy, such as tax hikes, higher interest rates or new regulations. This can impose additional burdens on SMEs that are already struggling to cope with the downturn.
4. STRICTER ACCESS TO FINANCE – During downturns, financial institutions will become more risk-averse, making it harder for SMEs to obtain loans or credit. This can exacerbate cash flow problems and hinder the growth of the companies.
5. INCREASED COMPETITION: This is a problem that I have noticed in the last year. As larger companies seek to survive, they may encroach on markets traditionally dominated by SMEs without realising it. This increases competition and pressurizes smaller businesses to innovate or cut prices or in some cases to shut down.
Now these are just some suggestions of what a business person like you in the retail industry can do:
1. MANAGE YOUR INVENTORY COST – Optimize your inventory to reduce holding costs. That would in turn minimize your unsold stock. Use your current data to forecast demand more accurately. Know your best sale periods and adjust your inventory levels accordingly to that time.
2. COST REGULATORY SYSTEMS – Identify and cut unnecessary expenses immediately! Negotiate better terms with suppliers. Remember, if you are having this problem, so are they. Try to reduce utility and other costs. When you streamline your operations, it actually improves profitability and financial stability for your business.
3. CREATE AN ON-LINE PRESENCE – This method worked for a lot of businesses during the Covid 19 pandemic; especially for the retail industry. Invest in a user-friendly website and activate your business with a high social media presence. Utilize platforms like Facebook, Instagram, and your local e-commerce sites to reach more customers. The key to Expanding online sales, is that it helps balance your sales when you have reduced in-store customer traffic.
Well Vibol! I hope I have managed to answer your question to some extent. While the economic landscape in Asia is currently challenging, we all need to create strategies that can help us weather the upcoming economic storm and mitigate our business risks the best that we can.
My advice is to position your business for resilience and potential growth as conditions will definitely improve. Keep a close watch on economic trends and remain adaptable to new developments in the market, especially in the field of retail.
If you have any further questions, please do not hesitate to email /WhatsApp me.
Best Regards Always,
S. Khugan