Hacusa Business Marketing

Retail businesses fail for a variety of reasons. Understanding why they fail can help existing or prospective retailers prevent the failure of their own business.

Here is a list of reasons for failure and some suggestions on how to avoid or address each.

Poor planning. This is the success or failure of a retail business is determined – in the planning phase. If this is not thorough and honest then the business is probably being opened without all issues thought through and all contingencies accounted for. Planning takes time and effort. It can also kill a business idea – this is why some people eschew the planning phase.

The keys to successful planning for a retail store are to: take your time, consult widely, check, check and check again, develop a strong plan B so that this competes with the main plan, get professional advice and to document the plan for others to review.

Poor location. If you are not able to find a location you and your financial backers are 100% happy with, then don’t settle for second best. The location of any retail store is essential where the business relies on passing traffic or convenient access. A poor location will starve the business of traffic and this will ensure that cash flow is challenged from early in the life of the business.

In choosing the location, research the traffic volume which passes by the front door, look at nearby businesses and their success, ensure that there are no planned impediments which could impact on the location, ensure that planning regulations allow you to run your type of retail business from this location and that there are not any local regulations which could make trading challenging.

In looking at nearby businesses, assess the traffic they generate. It is easier to leverage existing nearby traffic than to draw traffic in just for your business.

Poor range. A retail business must sell what customers want. The best way to assess the value of the product mix is the conversion rate. The number of customers who enter the store who actually purchase. Most retail channels have a benchmark against which you can compare. If your conversion rate benchmark is lower than the channel average then product mix is a cause worth further investigation.

Undercapitalized. Some retail businesses run out of cash. This happens where the panning has been inadequate. The only way to solve this is to have access to more cash to support the business. In most cases, this is not available – hence the closure.

Poor customer service. This can kill a business quickly unless it is noticed and addressed. Good customer service depends on the leadership provided within the business.

Tough competition. While this is a reason some retail businesses fail, it is not a common reason. It is more often an excuse to help others save face. Online Auto Insurance Quote