A Frame of Reference for Managing Working Capital in Retailing

Abstract

Between 1970 and 1976 the competitive and economic environment in which retailers operated experienced a turbulence unprecedented in recent history. During this period the compression of institutional life cycles coupled with dramatic shifts in consumer life styles plagued many retailers. In addition, a web of other factors, such as steadily increasing interest rates and inflation, a heightening of inter‐type competition and the competitive entry pressure created by a large inventory of vacant retail space, made it increasingly difficult to both assess and predict the environment. These environmental conditions have intensified pressures on retailers to improve their profit performance, both to insure survival in an increasingly uncertain environment and to provide a basis for future growth. At the same time, these conditions have exacerbated the retailer's problems in trying to obtain new capital. Unable to generate sufficient capital internally to finance both market repositioning and new growth, retailers have found themselves in many instances unable to afford the costs of new debt (if indeed they had the capacity to support it). At the same time, investor uncertainty, regarding both the future and the ability of retailers to adapt to it, has reduced the flow of new equity capital into retailing to a bare trickle. In short, retailers during this period have recognised the critical need to manage capital more efficiently.

Citation

Lusch, R.F. and Kenderdine, J.M. (1978), "A Frame of Reference for Managing Working Capital in Retailing", International Journal of Physical Distribution & Materials Management, Vol. 8 No. 6, pp. 337-345. https://doi.org/10.1108/eb014429