Key success factors in retail industry


This is the third in a four part series that looks at four of Australia’s core industries – Mining Services, Transport, Retail and Manufacturing.

Key success factors in retail industry

Retail is one of Australia’s more sensitive industry sectors, which is not surprising when you consider that sales are driven by consumer sentiment, interest rates, employment and disposable income.

As a result, retailers benefited from the highs of the economic boom during the early to mid 2000s, but they were also hit hard during the GFC with revenue contracting more than $1.3 billion (or 1%).

Post-GFC trading has been particularly volatile, with the government’s $10.4 billion stimulus package providing only short term benefits against continuing consumer uncertainty.

Anyone who regularly watches the news or reads the newspaper will be familiar with statistics such as CPI, employment, GDP, household expenditure, and the impact these have on our macro-economic environment.

But what about the micro-economy?

Although general economic conditions undoubtedly influence the overall success of the retail sector, what are the biggest risks at the micro level, and what can business owners and managers do to safeguard their businesses?

Competition remains the main threat to most retailers, as low barriers to entry and minimal regulations encourage new participants.

These new participants challenge existing businesses by introducing new products, improving marketing techniques and achieving better cost efficiency.

Established retailers (such as Wesfarmers, Harvey Norman, Myer and David Jones) also threaten smaller players as they leverage off buying power to maximise economies of scale.

So what are the key to success factors in retail?

Owners and managers of retail businesses need to increase their focus on key success factors such as:

  • A strong balance sheet – Careful management of working capital (particularly stock management and management of each customer’s monthly accounts) is directly related to a business’ ability to absorb operational shocks or interruptions.
  • Effective forecasting – A rolling 13-week cash flow forecast, focusing on daily sales volumes, will assist in assessing a business’ ability to generate cash to fund current working capital requirements.
  • Stock control – Adequate stock monitoring systems and processes will highlight changes in demand in a timely manner so that re-ordering can be increased/decreased as needed. Also, identifying high demand products can significantly increase profits as they can generally be sold at a higher price and therefore achieve greater profit margin.
  • Market position – Market positioning projects a clear and consistent image of the business and enables small and medium sized businesses to compete against larger players.  Retail business owners and managers should consider product branding as well as physical location.
  • Proximity to market – Understanding your target market demographic and ensuring your retail business can be easily accessed by that market will facilitate purchases (e.g. online store versus shopping strip, shopping centre, etc).  It’s worth noting the trend in online shopping and how prominent this has become in other parts of the world, particularly Europe. It’s only a matter of time before Australia follows suit.

For some more tips on how to get your retail business to stand out from the crowd, Have a read of our post, What Top Performing Retail Brands do differently.

Happy strategic planning. In my final blog post in this series, I’ll examine the manufacturing industry.

Elizabeth Mawby was a Client Director at Vantage Performance, one of Australia’s leading turnaround management and profit improvement firms – solving complex problems for businesses experiencing major change.

Despite the damage internet shopping has done to bricks-and-mortar retail, most sales transactions still take place offline. Customers like the convenience and ease of online shopping. But they also enjoy trying on or handling goods before they buy them, and the satisfaction of taking them home immediately. If you give them the right incentives to visit your store, you can win out over the internet.

Branding is Key

Whatever your line of goods – antiques, trendy boots, imported Thai candy – you have an advantage if customers associate your products with your store, rather than Amazon or WalMart. Sephora, the high-end makeup stores, thrive in part because of exclusivity. The expensive products women buy at Sephora aren't available on Amazon, which makes Sephora a destination worth driving to.

The Store Experience

For a lot of customers, the experience of shopping is part of the fun. Rather than sit on the couch, they go to your store, wander about with friends or family, then go somewhere nearby for dinner. It's vital to make their experience as enjoyable as possible. Part of the appeal for makeup-store customers is that they can snap and share selfies as they try on various looks. Brownie's Dog Boutique took its name from a real dog, so the store includes a mini-museum telling Brownie's story.

Solid Inventory Control

Inventory is a balancing act. You want enough stock on hand to satisfy customers, but items that sit on the shelf unsold don't help you bottom line. It's why big box stores such as Target and Nordstrom are launching significantly smaller stores, reducing the quantities needed to fill the shelves. It's not just the cost of buying, shipping and storing items but the time, effort and money required to maintain complex supply centers, distribution centers and deal with multiple suppliers.

Even if you're not slimming down from a big box, you may be able to improve your inventory management. Some retailers have been able to drop several thousand of their less popular offerings, concentrating on more successful products, without disappointing customers. It's also important to track and manage inventory so that you know when it's time to reorder popular products.

The Personal Touch

Building a personal connection with customers is another critical factor. If customers feel you and your staff are making a real effort to help them, they'll appreciate it. Having friendly, knowledgeable staff is part of that, but only part.

Use social media or a store blog to keep customers informed and encourage them to communicate with you. If you gather information on their purchases, for example, through a loyalty program, make use of it. So long as customers understand what you're doing, having a store that knows what they want in advance and provides it is a plus. Understand customers' needs and meet them. One Nike store, for instance, uses an interactive system so that customers can see how the shoes perform when they're actually participating in sports.

What are the 5 key success factors?

First, here are the 5 Key Success Factors:.
Strategic Focus (Leadership, Management, Planning).
People (Personnel, Staff, Learning, Development).
Operations (Processes, Work).
Marketing (Customer Relations, Sales, Responsiveness).
Finances (Assets, Facilities, Equipment).

What are the five 5 main important factors for a retail business?

There are five keys to success in retail: location; marketing; store layout and appearance; service and assortment, and bundle selling. Let's take a look at how each of these can help you establish a successful retail operation.

What are the 6 key success factors?

6 Critical Success Factors.
Shared Change Purpose. ... .
Effective Change Leadership. ... .
Powerful Engagement Processes. ... .
Committed Local Sponsors. ... .
Strong Personal Connection. ... .
Sustained Personal Performance..

What are the three keys to retail success?

But the basic fundamentals of retail success remain the same..
Product: Do you have the products they want?.
Price: Is it at the right price?.
Place (Distribution): Are you offering it in the channel and location they desire?.
Promotion: Are you getting their attention through effective promotion?.