In part 1 of these two articles I gave you 3 of the 5 top reasons why retailers fail, namely:

# 5 – Ineffective Marketing Strategies

# 4 – Poor Tracking of Market Trends

# 3 – Inefficient Human Resources

Today I give you the remaining 2 top reasons. Plus I will tell you the one thing you can do, above all else, to prevent all 5 of these issues from happening to you.

If you don’t like reading that much, perhaps you would rather watch a video I just made, where I cover both parts of this article all together. If so, go here.

Otherwise let’s get straight into it; here are the top 2 reasons why Retail Businesses fail:

#2 – Cash-Flow!

Insufficient funds management. At the end of each financial year, your accountant gives you a copy of your profit and loss. Unfortunately many retailers are allowing themselves to be ‘too busy’ to actually do something with this, choosing to take a cursory look over it, perhaps shed a tear and then file it away. This profit and loss needs to not only become a part of your strategic business plan but also used for forecasted budgeting and as part of a Cash-flow plan.

For example, there are certain times of year when you need more funds than other months, to cover increases in variable expenses, such as marketing and wages, as well as stock/inventory levels. By looking back at previous years, you should be able to determine when your peaks and troughs are most likely going to occur again this year and thus predict when funds should be available to cover said needs. Rather than spend extra funds as they come in, on lower priority issues, bank them away instead, ready for when it will have a more useful impact.

Inability to interpret Data Analysis or failure to act on it. There are many types of data available to retailers but few seem to know how to analyse it, let alone what to do with the results. Whether it be benchmarking the industry to determine your own over/under spending and opportunities for growth, monitoring of marketing effectiveness, tracking of KPIs, (e.g. wages versus return), department performance… you name it; most retailers are too ‘old school’ to know what it all means. By relying on ‘gut feel’ and emotion to guide most of their decisions, they will only ever be able to maintain the same level of performance they have always achieved and will find it very difficult to grow the business. Everything they need to know is actually at their fingertips but accessing it requires the know-how.

Stock/Inventory Control missing the mark. Consumer trends change regularly, (just ask anyone in Fashion), and one example of poor use of data is not monitoring the performance of every department, including their ‘sweet spot’ price points; this is a great way to lose a great deal of money. Keep your fast moving lines stocked up and then, (if funds are available and budgeted for), look at what is currently trending before deciding on any new range items. Suppliers can easily tell you what their top selling products are but make sure you select from what falls in line with your best performing departments and sweet spot price points. Some demographic locations also do better than others in products that appeal to certain age groups and even race. So have your latest market research handy as well.

Another issue is the handling of old stock. Many don’t have an actual process in place to avoid items becoming stale in the first place, let alone ways to deal with it once it does. Proactive is better than reactive, so make sure you have steps in place to handle aging lines before the need for clearance. Also have a clearance process that is not only effective but of least detriment to your bottom line. I would love to take you through an effective process but there’s only so much one should cover in one article.

Experts are cheaper than ignorance. If the expertise to analyse data and/or to grow your business is simply not present in your business, or perhaps personal bias is getting in the way of needed changes, try getting an expert involved. An outsider will not have your bias and will be willing to point out issues that may otherwise go unnoticed or be avoided, such as changes in the industry making your current business model obsolete. As for cost, when you take on a mentor, for example, it will cost less than hiring just one extra casual staff member in your business, yet they will almost certainly increase your bottom line dramatically, probably even saving your business altogether; try asking a new casual staff member to do that. A good mentor/coach will ‘pay for themselves’ many, many times over.

So what is the number one reason for retail business failure?

# 1 – The Owners Themselves!

Poorly trained/qualified or not suited. Before commencing any business, owners need to be suited to what they are about to take on. If you don’t have the passion and the know-how, you will not enjoy what you do, or be good at it. For some reason, many who get into retail don’t recognize this and seem to think it’s just a matter of deciding on what to sell, where to sell and how to market it. The truth is; there is just as much expertise required in retail, as any other business.

I have lost count of the amount of owners I have met who are pretty much ‘winging it’. Many have completely different backgrounds, (e.g. I have a couple of ex-accountants as clients), but just want a sea change. Or perhaps they excel at making something and want to start selling their beautiful offerings. Being good at one element of running a retail business does not mean you will be good at all the rest.

We commonly accept we need a Degree to be in Marketing… a Degree to be in Human Resources and… you get the idea… yet many Retailers try to do ALL of these things, as well as Buying, Merchandising, Sales Training, Managing Cash Flow, you name it, and all without much, or even ANY form of training. As a result, they tend to rely on what they see others are doing in the same industry, or perhaps on what the last owner taught them. This wouldn’t be so bad if doing what others have always done wasn’t more of a guarantee of failure than success. Plus, constant changes in the industry, (don’t get me started on digital advances), mean that the tried and proven is only relevant to the era they were tried in.

Taking on too much. In an effort to ‘save money’, many owners don’t want to spend what it takes to get properly qualified staff and this results in their lack of confidence in delegating crucial aspects of their business to unqualified people. Thus they end up trying to do everything themselves, using what methods, policies and procedures they personally think are best, whilst often wondering whether there is a better way.

Business Structure. Structure your business so that everyone plays an active role and the right people are in those roles. If there’s something you currently control, but aren’t really good at, then give it to someone who is. Invest in some basic training for yourself and the people you need to do specific jobs. Identify everyone’s strengths and advance on those. You need to free up your time to do what you do best, not wondering where the day went and why nothing ever seems to get finished.

Outsource the too hard basket. Many smaller businesses can’t afford to hire degree qualified staff, or simply don’t have enough work available for certain roles e.g. human resources, marketing, (including social media), sales training, data analytics, store and staff assessments, loyalty harvesting and so on. If you are in this situation, try outsourcing instead. Rather than have an employee that has all sorts of entitlements, such as minimum hours, holiday pay, sick leave etc, an outside company, will simply invoice you only when you use them. Plus they will likely be more qualified and thus provide superior results than a part time employee or possibly even yourself.

And now for the number one best thing you can do to help prevent all issues in your retail business… drum roll please…


It sounds simple but lack of preparation is the biggest weakness in any business. President Lincoln once said “Give me six hours to chop down a tree and I will spend the first four sharpening the axe”, and he was right on the money.

You will have heard of the term “A.G.M.” which stands for annual general meeting; well this is something rarely practised correctly, if at all, in retail. In fact these meetings quite often lose focus. I was once invited to a massive AGM, where hundreds of Managers from all over the country attended, all expenses paid. They were treated to two days of being told how well the business traded the previous year and what was planned for the forthcoming year. There was entertainment included and even an element of training.

Afterwards, the owners, looking proud as peacocks, asked me what I thought about the event. I told them that apart from the morale boost and the training element, they had completely wasted their time and money… needless to say they were shocked.

You see an A.G.M. is meant to be when those who are good at having a positive impact on your business are called together to pour over the profit and loss, key performance indicators, sales reports, department reports, pricing sweet spots, marketing and merchandising effectiveness, supplier reports, channel distribution effectiveness, CRM and customer service experience, staff selection process,buying strategies, latest market trends, store setup/layout… and so on.

They then determine where improvements need to be made and set realistic budgets. Sure, you can add some fun element or even training, but always stay focused on the true purpose of this gathering; to prepare all business drivers for growth and update the business plan strategy. Once you have done so, remember to monitor throughout the year and fine tune where necessary.

Seeking help is strength, not weakness. If your plumbing springs a leak, you call a plumber, if your electricity goes haywire, you call an electrician, yet when the business that feeds your family is under duress what do you do? Unfortunately most would rather each for the ‘excuses and reasons why’ book, than call an expert. Don’t let pride get in the way of success, get help and get back on the track of growth. By calling on a retail expert you are simply making use of the resources available to you, not showing weakness.

I hope you found these articles helpful. Keep following me for future articles on retail, where I continue to supply Plain English answers to running a successful retail business. My next two part series will be on the top 3 traditional methods of running a retail business that no longer work, as well as what new ways ARE working instead.

In the meantime, feel free to contact me if you need a retail expert involved in your business. I’m cheaper than a casual…

NOTICE: Content in this article has been provided in a generalised format and is not recommended for every business model. Seek council from your financial advisor before implementing anything contained herein.
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