3 ways that layoffs can impact your distribution business

Today, I would like to share my reflections on 3 ways that layoffs can impact your distribution business. The article today will be an attempt to connect my macro ideas with a micro idea of working in a distribution business.?

I would like to examine the process on how layoffs could impact the economic climate and how such changes can influence your business. It would be quite useful to figure out whether the layoff trend would visit your company.

Without further ado, let's get started.?

1. Layoffs impact consumption?

Layoffs would create many people without means to generate wealth within a short period of time. That means that people would have to reduce their spending to keep their life afloat.

Every person has their obligation to pay for their expenses like energy bills, rents, and food bills to maintain their life. Without making payments for these things, their lives would be in serious trouble.

They may starve to death since they can't pay for their food or become homeless by losing their homes due to their rent payments. To prevent such a miserable situation, people would reduce their spending on non-essential goods.?

People may have differing definitions on non-essential goods, but it would refer to things that are not to our basic existence like food. Things like food or energy will become a part of essential expenses, but things like cosmetics won't.?

Your company's fortune would suffer if you distribute non-essential goods since people won't buy those goods. Since they feel threatened that they would lose their income, they would try to save money as much as possible by cutting those expenses.?

So, you would experience that retail sales would experience a sharp decrease since people won't open their wallets. If you are a distributor working with these channels, you would also suffer the negative impact of the layoff.

2. Customers won't order from you?

With the decreased retail sales, your retail customers won't buy your goods as often as before the layoff. Since people consume less in the retail stores, these outlets suffer from increased inventories.?

These inventories would increase the cost of operating retail stores since you need to pay extra for storage space for these goods. If these goods won't go out, the retail outlets won't have any need to order new products.

If you are a distributor supplying goods to these channels, you may experience a decrease in order amount and frequency. You might have received weekly orders from a retail outlet last year, but you now receive their orders once in two weeks or even a month.?

When more retail customers follow the suit, you would experience a cumulative effect of reduced sales. Your top line will suffer, while your operating expenses stay the same or increase due to inflation.?

So, your company will start to burn its cash reserves since your income will become smaller than your expenses. If you are lucky, you may stay afloat, but you won't have much net profit after you cover your expenses.?

Since the layoff decreases consumer spending, the retail outlets will also suffer. Since you work with these retail outlets, you would also suffer for reduced orders and hence your profitability.?

3. You may have to do your restructuring?

If your company's profitability goes down while its expenses increase, you need to make changes in your company to make it profitable. You may need to create a new business to generate a new flow of income, but if not, you need to cut down the expenses.?

If you cut down your expenses, you may start tackling reducing costs for office and stationery items such as papers. You may generate some savings, but it won't be enough to make a turn around.?

The biggest category of all will be personnel cost since these are big and regular expenses that you have to pay. If you cut down these costs, your cash flow situation would likely become better due to the size of these costs.?

Besides, some people don't contribute much to their organisation in comparison to their income. Laying off your staff may also improve the productivity of your business since people may start trying to work well to avoid layoffs.?

Considering the trend of 'quiet quitting', conducting layoffs might become attractive. Still, You should know that you also join the layoff trend that other big companies first started.?

By doing this layoff, you may reinforce the trend of increasing unemployed people in the society. It may create a vicious cycle of reduced consumption and retail sales that may further make your company's situation worse.?

So, if you have to engage in layoffs, you need to plan for where your company wants to go in the future. You need to know what you need to reach for your company's goal so that you would know who should stay in your company.?

4. Wrap-up?

I hope you would now make a connection between a macro-trend of layoffs and your company's future. Layoffs are not only for big corporations in the US, but also it can enter into any country to impact their businesses.?

I hope you would discern what the time is and make adequate preparation for the possibility that you would lose your job. I hope you would practise matching the macroeconomic trend with your personal wellbeing of you and your family.?

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