The Future of a Retail Store: Boom or Bust?
As we wake up to another Fashion Brand going into administration, the question needs to be asked: What is the Future of the Retail store? Is it possible that a physical retail store will exist in 20 years time? Or is a profitable shop front a thing of the past?
Smart Company have just released today news of David Lawrence going into voluntary administration, and in the past twelve months it was Payless Shoes (footwear), Pumpkin Patch (children’s wear), Laura Ashley (homewares and clothing) and Dick Smith (electronics) – just to name a few.
“So what is the future of a retail store? Or should the question be – Is there a future for the retail store?”
Now I am not a retail expert, but I like to think I am a numbers expert and businesses go into administration for various reasons – most of them preventable if the business chooses to review their financial information carefully and regularly, and if they choose to take action to prevent the ship sinking.
According to Dunn and Bradstreet, the number of business failures rose 11 per cent in Quarter 3, 2016 compared to the same period last year, and was up 42 per cent on the previous quarter.
Here are some factors affecting the future of retail and what retail businesses can do to buck the trend for a (*hopefully) safe and profitable future:
- What is your risk level? Retail businesses tend to take on huge risk (especially in the startup phase). Stock has to be purchased, a shop front has to be built/refit and staff have to be hired – before you have even sold a single item. So money is flowing out the door quicker than the water at Niagara Falls. Whilst this risk is somewhat normal, you should never take on this risk without knowing what the next six months will bring. Budgeting and forecasting should be your best friend. And not the kind written on the back of a napkin at a bar when you dreamed up your business, I am talking detailed plans, analysis of income streams and assessing worst case scenario.
- Staff cost money. Yep – they totally do, and free labour for a retail store – well that just doesn’t exist (and doesn’t exist for anyone). What many people fail to budget for is the likes of overtime, weekend rates, public holiday rates – and everything that comes with having a store open 7 days a week (which let’s face it if you want prime shop front exposure in a shopping mall – then guess what – 7 days a week it is for you). If you can’t afford to pay your staff – plus the on costs – you should not go into business.
- Location, Location, Location. It is the age old saying isn’t it. So business owners are fighting to get the best shop in the best shopping location – Chadstone, Highpoint, Westfield locations – and wherever else the latest trendy spot is to shop. But that location costs money. And your lease….well have you factored into your budget things like on costs, rates, taxes, GST on commercial property, whether the landlord can increase the rent (at any freaking time they like), what term do you have to commit to and the sneaky fine print about what happens when you break a lease? As those hidden costs can add up to HUGE amounts. Experts like Amanda from The Tenant Company can save you time, stress and thousands of dollars in the long run in this detailed area.
- Seasonal stock is seasonal (funnily enough). So when retail stores order thousands of dollars of stock – they literally have less than 5 months to sell the lot before it becomes “out of date, out of trend or superseded by another model”. Most times, it should be sold before then. That is not a lot of time to convince people they “need” that outfit, that new gadget, that new style of “whatever”. Stores who don’t test the waters with new releases are bloody mad in my opinion. “Pre-sale” is a word retail stores need to embrace and social media is the perfect way to get clients excited about your stock – before it even hits the store. Loyalty is what gets your stock cleared within the relevant season, not luck.
- Cheap v Wow Factor. I can buy just about anything on eBay these days, not to mention from online at midnight in my pj’s. Physical stores will always be competing with this – it is not going to go away. So instead of bitching about cheap competition, embrace it, learn from it – and beat it. For me to go into a store, it is not just about the product, it is about the entire shopping experience. Are the staff knowledgable, are the products easy to find, is the store easy to navigate, is there an electronic look book to show me how to style the items, are their rewards for shopping, is there an after sales feel good factor – is the shopping experience unique and fun? Get someone to do a mystery shop in your store and you might just be surprised how little brand loyalty your customers have.
So is retail dead? Is the boom over? I don’t think it is over, but I do think that business owners with a physical shop presence need to up their game.
Statistics have proven over and over again that small business failure rates are crazy, with only 50% of business owners making it past the first 4 years in business and the two main factors are lack of cash flow and poor financial management.
“Both of these are preventable, manageable and beatable. But you need the mindset that you are not invincible. You need to be one step ahead and shop front business owners can learn a lot about being agile from online stores.”
Start thinking like your consumer, what do they want? The recipe for success will be a mixture of financial literacy, a dollop of customer satisfaction, a huge spoonful of mind blowing experience and a sprinkling of agility, as you continue to tweak the recipe for future success.