Community Business Resouce Council

Reatail Industry

 
     
 
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Retail Industry

Retail Industry Critical Business Challenges

If you are experiencing any of these critical business challenges, then CBRC would like to help. Our Business Strategist has helped companies in the Retail Industry overcome their frustrations by conducting a strategic growth analysis - then involving them with designing a business solution to generate revenue and solve their critical business challenges.

 

Here are a few of those business challenges that we have solutions:

  • Retail Demand Depends on the Economy - Economic factors, including personal income, consumer confidence, job growth, and interest rates, can greatly affect consumer spending and the retail sector. During recessionary periods, retail sales growth can slow drastically and even decline. Retail spending grows rapidly during periods of strong economic growth, as consumers spend a greater share of income and increase their personal debt. Rising interest rates affect consumer credit and consumer ability to finance large retail purchases, such as cars.
  • Industry Concentration - In many retail segments, large companies dominate and hold the majority of the market. Even specialty retailers in fragmented markets must compete with mass merchandisers and warehouse clubs that offer a smaller selection of comparable merchandise at low prices. Suppliers favor large retailers by offering volume discounts. With limited marketing funds, small retailers struggle to compete with the large advertising budgets enjoyed by major retailers.
  • Seasonal Cash Flow - For many retailers, cash flow is uneven because of seasonal demand. Due to increased demand during the winter holidays, many retailers, including toy, jewelry, and consumer electronics stores, generate a disproportionate share of revenue during the fourth quarter. Back-to-school and spring and fall fashion introductions drive sales peaks for apparel retailers. Even general merchandise stores must build and finance inventory in seasonal merchandise categories to prepare for key selling periods.
  • Crime-Related Losses - Despite security measures, theft, shoplifting, and fraud are ongoing problems for retailers. Employee theft accounts for about 45 percent of losses, and shoplifting accounts for 30 percent, according to a recent National Retail Security Survey. Administrative error and vendor fraud make up about 13 percent and 5 percent of retail losses, respectively. An increasing number of retailers have become victims of organized crime, where crime rings illegally obtain merchandise and gift cards and either fence goods or sell them online. Categories with above average losses include cards, gifts, floral, novelty, books and magazines, accessories, and food items.
  • Protecting Customer Information - Growing concern over identity theft and credit card fraud has resulted in increased scrutiny over the security of customer data in the retail sector. Retailers access and often store confidential customer information through loyalty programs and credit card payment data. Security breaches have allowed hackers to steal credit card numbers and other sensitive information from large retailers. Adopting new security systems can be slow and costly, especially for retailers using older technology.
  • Trends Affect Demand - Consumer tastes and preferences can change rapidly and greatly affect demand for retail items. Fashion fads and product life cycles can be unpredictable and companies may struggle to make merchandising decisions based on future trends. Forecasting error can result in excess merchandise or out-of-stocks and missed opportunity. The fickle nature of certain demographics, such as children and young adults, has resulted in short product life cycles and high new product failure rates in some categories.
  • High Worker Turnover - Employee turnover in the retail industry is high, typically averaging 50 percent annually, due primarily to low pay and perceived low career growth potential at the entry level. In tough economic times, however, employees tend to stay in their jobs, which led to turnover rates of less than 50 percent during the late 2000’s recession. Recruiting and training new personnel is a constant activity for most retailers and can be costly and disruptive. Inadequate staffing can result in customer service problems.

 

 

 

 

 
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