It may seem as though Christmas is a long way off for most of us, but retailers already have one eye on what could be a make-or-break festive period this year as they make their crucial decisions about how much stock to invest in.

The government’s furlough scheme is ending and redundancies increasing just as retailers require extra cash to stock up for the busiest period of the year. The next four weeks will be pivotal. Every retailer will be taking a closer look at their investment in product, range and buying quantities

Cashflow is going to be crucial for retailers in the run-up to Christmas. It could be the difference between a company surviving or closing for good if it manages its cashflow poorly.

Spending on stock is the focus now, meaning retailers need access to cash and it’s likely many will resort to additional loans. Unlike previous years, where seasonal demand follows a pattern and retailers gain insights on popular lines as well as staffing needs and stock levels, there are new unknowns this year because of the coronavirus lockdown. Retailers should plan now for a reduction in sales over the Christmas period as many people who have seen a reduction in their own income will look to cut luxuries that they cannot afford this year.

While retailers will have to base investment decisions on some key assumptions, if they don’t get these right it could lead to a serious liquidity crunch leaving them in danger of insolvency.

And having shed jobs during the year to August at the fastest rate since 2009, according to the CBI’s monthly distributive trades survey, with an even steeper decline anticipated for the figures to September, predicting staffing levels for the busiest period of the year is not going to be easy.

Some 74% of eligible retail businesses claimed financial support from the government’s job retention scheme, and as this comes to an end in October it is expected that many of the workers currently furloughed may be laid off as the scheme is wound down.

Spending habits have skewed dramatically towards online during the lockdown as consumers adjust to life away from the workplace. For businesses without significant internet exposure, now is the time to revisit that strategy given the continued uncertainty that there is likely to be subdued footfall in town centres and retail outlets in the Christmas run-up.

But devising an online strategy is about more that just setting up an e-commerce platform. The delivery of online orders needs to be slick, so larger items are delivered directly from the manufacturer/distributor to the customer, and back office systems need to be able to handle online payments and returns.

More than ever there will need to be a fine balancing act between holding stock and cash to survive, Retailers could stock less and order more often to increase liquidity and to keep their stores stocked, but to do so they will need to liaise closely with suppliers with whom they may need to enter agreements to support seasonal peaks through supplier finance, extended credit terms or display stock funding. They should also look carefully at their supply terms and think about possible sale or return strategies whilst being aware of supply chains which have already been affected by the pandemic.

Retailers that are imaginative and flexible in their approach will stand a chance of surviving what, for many, will be far from a happy Christmas.

Noel Guilford