Killer Inventory

According to the South China Morning Post, DSC has shut down its 14 shops across Hong Kong due to the financial matter.

Who is DSC? they are one of the major retailers in HK selling home appliances and furnitures, well known for the discounted pricing strategy. Rumour has it the DSC was planning to become listed couple years ago, so imagine our surprise !!!

High rental cost could be the cause for obvious reason ! However, it is unlikely rental is the fatal blow to this sudden meltdown. Both the rental and the unsettling local economy are gradual, and we (not referring to us of course !!) investors like things to be gradual because it gives time, time for certain contingencies to be made. i.e. shutting down 2 shops instead of all? laying off half the employees ??

We think the ground zero for this dominoes falling is the Inventory. Inventory is an asset and it is also a liability depending on how fare your financial status is. And inventory has an expiration date in which you would need to settle the payment (it’s called the Cost of Goods, we think?), and the inventory becomes your asset. This asset is meaningless if you cannot turn it into cash asap. We are assuming the landlord would not be too happy knowing your asset is worth over a billion dollars yet you have an outstanding rent for over 6 months.

We don’t like inventory !! It’s fair to assume all companies do not like inventory, and all SME retailers are horrid with inventory. Yet the lack of inventory would also result in a loss of sale ! Oh it’s wonderful to be a business operator, we get to play the balancing act everyday !! 🙂

The “Just in Time” approach may reduce the inventory risk, but would anyone willing to do the JIT with a small timer such as us? It is simply not feasible for a SME to operate the JIT method, unless DIY is also considered to be “Just in Time” !!

We are skeptical about the economy both globally and locally. Then again, there is nothing much we could do should the ceiling comes crashing on us. We can only worry about getting the Online shop up and running on time !! Even this, we are helpless !!

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