Today’s post is a summary of our latest Canadian Retail Solutions white paper “Why Retail Businesses Fail”. Download the full report.
Over our 25 years of experience in retail we’ve seen the same common mistakes derail countless businesses. As consultants, we want to give you the tools you need to make sure the amazing potential of your company doesn’t become just another statistic.
By avoiding these 5 common retailer mistakes you’ll minimize risk and give your business the best possible chance at success.
1. Starting Without the Right Business & Financial Savvy
According to the latest statistics, a lack of management and financial experience plays a significant role in over 70% of retail failures.
Successful entrepreneurs couple enthusiasm and passion for their products with a solid business plan and understanding of basic finances. In order to make sure a company is profitable, retailers should be comfortable with key concepts in retail math including inventory turnover, return on investment, and pricing.
Not so great at number-crunching? Partnering with an expert CRS retail coach could turn your business around. Get in touch today!
2. Choosing the Wrong Location
Retail experts agree: the right location can make or break a business.
Start by focusing on your ideal customers. Where do they spend the most time? Your perfect storefront will be strategically located near your target market.
Don’t underestimate the importance of footfall: a highly visible location may cost more in rent but a less expensive location will require a larger marketing spend to attract customers.
Other important factors to consider include proximity to public transport and accessibility for suppliers and staff.
3. Forgetting the Importance of Cash Flow
In the retail business, real profitability is measured by cash flow. If a business owner doesn’t have the cash to pay creditors a business can fail even if annual profit and loss statements are in the black.
One trap many new business owners fall into is underestimating the costs of overheads and running out of capital. Whatever you think your startup costs will be, prepare to spend up to five times that amount.
4. Not Making the Most of Inventory Management
An integrated inventory management system (IMS) can improve the efficiency of your company, decrease the amount of stock you need to hold, and increase revenue.
Modern systems seamlessly blend Point of Sale (POS) and IMS and provide detailed reports and analytics so business owners can understand cyclic and seasonal demand, track sales trends, and identify best and worst selling products.
On the other hand, mismanaged inventory can quickly lead to cash flow problems and decreased profitability.
5. Not Delivering on Customer Experience
In the age of Internet shopping and big box chains the customer experience has never been more important. For local, independent retailers, passionate, personalized and authentic customer service is a unique selling point and a huge asset.
Cultivate a deep understanding of your customers and take advantage of great new POS features like loyalty programs and preferred client discounts to offer a unique experience.
Finally, remember that 90% of shoppers will pre-shop online before they even set foot in a brick and mortar store, making a web presence essential.
Retail is a competitive space, but if you avoid these 5 common mistakes you’ll be well on your way to success in one of the most enjoyable and rewarding careers in the world.
Ready to take your retail business to the next level? Download the full report—packed with the latest research and over 25 years of retail consulting experience—or get in touch to speak with a retail consultant.