Any business owner’s main dream is to make a maximum profit while spending less. These days, more than 65% of entrepreneurs are engaged with the retail business, but what are some reasons that few of them are making a profit and the rest do not enjoy success. It is easy to open a retail business but do you know what it takes to run it well? What are the critical ingredients you need to mix for optimum results and outputs? Here we are going to discuss significant reasons why retail businesses do not make a profit and sink their existence before enjoying success.
Why does retail business fail? This is the million-dollar question. Commencing and running a business is not a cakewalk, and there are plenty of researches and statistics about the survival rate of retail companies. Especially today, customer’s preferences keep evolving, emerging technologies launch every day, market dynamics keep changing, and you might face major fluctuation in profit margin as well.
According to the report released by Statista in 2019, approx 20% of retailers fall in the first year. About one-third succumb to business failure within three years. One of the most unpleasant situations for any business owner is realizing that their business is not generating enough Profit. And it has become more difficult this year due to the pandemic. Before discussing the failure reasons, let’s dig in detail the future of retail and how the entire sector is going digital rapidly amid pandemic.
The Future of Retail Business
If you are running an old business, you must have observed that the future of shopping is online, and that is also from “smartphones.” Yes, the increasing penetration of smartphones has changed customer’s preferences, business owners are also making necessary changes to meet customers’ rising needs. More and more retail business owners are adopting an online business model where their customers order products online, make payments and get them delivered at their doorsteps in no time.
Popular eCommerce players such as Amazon, Flipkart, eBay, etc., have changed people’s perception towards consuming products and services. In short, a retail business must implement emerging technology tools that not only revamp their business model but also makes their customer’s lives easy.
In the year 2013, Amazon reported holiday season sales were all-time high as more than 3.6 million products were ordered globally, and half of those orders were placed via mobile phones. No, that does not mean that your physical store model is doomed soon, but you need to adopt an omnichannel marketing strategy to serve your customers.
You cannot deny that there is a constant increase in online purchases, but you also need to entertain customers offline for a meaningful and memorable experience.
Retail is Going Digital Amid Corona Pandemic
The corona pandemic has pushed entrepreneurs to move online. Moreover, customers are also shifting towards online platforms. Earlier, digitization was there in the retail sector, but you can say that the pandemic has added fuel and made this process speedy. Today, from groceries to food to medicines to cab, consumers accomplish their needs through the application.
Before the pandemic hits, in the first week of March in the USA, only 11% of consumers bought groceries online, but today, almost 37% of customers are ordering groceries online.
Not only the grocery retail sector experienced this level of hike, but the food is also another sector where technological tools have changed consumer’s preferences. Forbes stated that the online food ordering market would soon reach $200B; this is why more and more business owners opt for a white label mobile app platform for restaurant where diners can browse menus, place, and track orders in real-time.
GenZ and millennials quickly jump on this “online” bandwagon while GenX customers are still reticent to change their habits. These behavioral changes push entrepreneurs to transform their business models because customers are forming new habits, and this change will continue to grow even after the pandemic ends. So business owners are advised to seize the opportunity and reconsider the ways they run a retail business.
In short, the future of retail is digitized, personalized, connected, and automatic.
Now coming to the main question of why your retail business does not make a profit and what are the solutions that prevent your business from major losses.
5 Reasons Your Retail Business is Not Making Money
It’s all about the Profit, really.
No entrepreneur starts a business expecting to fail. Success requires a lot of dedication and planning. If you are a business owner and realized that you are not making enough money, or if you have been stuck in the middle of somewhere, there could be several reasons. Here we have discussed five reasons for failure with its solutions. So keep on reading and watch if you face any of them or not. Here we go.
Reason 1: Your Product is not Viable
If your product is not viable or does not match customer’s preferences, no one actually wants to buy it. If you are not making a profit, this could be the major reason. To fix this issue, you need to revise your pricing strategy; if your product is too expensive, then the majority of people would go for alternatives and won’t pay attention to your product.
Some of the famous companies today pivoted from their original business ideas. For instance, YouTube, Twitter, Instagram, etc. If you have a solid customer base for your product, but you are not making a profit because customers are not buying it, then make necessary changes in the product and create a product that your audience loves to access.
Solution: Pivot (if possible)
Reason 2: Lack of Modern Technology
We are heading towards digitization. Perhaps, technology has changed the way consumers deal with brands. Besides, bands are also leveraging modern technology tools to increase productivity and efficiency. If your retail business fails to embrace emerging technology tools, it might prevent you from making a profit.
It means you should have user-friendly websites and apps where consumers can access your products and services, know about your company, and can communicate with your brand without any barrier. Today’s consumer wants a pleasant and convenient shopping experience. It means your website should have amazing loading speed, an intuitive layout that attracts maximum eyeballs, and secure payment options that enable customers to pay without any hesitation.
Solution: Partnering with the right technology company
Reason 3: Poor Marketing Strategy
Digitization is no longer a buzzword in the marketing landscape. Earlier, businesses were using traditional marketing techniques to promote their business, but now you can see how it has changed. Digital marketing has become the mainstream because you have to be there where your customers are, and your customers are on social media websites, waiting for your personalized mail, and much more.
If you still stick to conventional marketing strategy, you won’t be able to make a profit. Because in the USA alone, there were 312 million internet users in 2019. It means you should have a strong digital presence. Moreover, digital marketing does not only include having a website or app; you need to adopt various marketing channels to get the word out about your retail business.
SEO, listing on local directories, social media marketing, email marketing, and paid advertisements are the several tactics that are used by popular brands to drive traffic.
Solution: Creating a well-crafted online marketing strategy
Reason 4: Going it Alone
In order to get success in the retail business, you should have multiple hands by your side. It is great to have a unique idea and vision but going alone is really tough. You should partner up with at least two or three people who can share their thoughts and workload to make a business better. It means you need someone who can help you finish daily chores, so you don’t burn out and focus on important business objectives.
Solution: Find the right and skilled partner
Reason 5: Lack of Determination
As a business owner, your mind should be firm and well-determined because this is the only way you can achieve success. If you are influenced by wrong examples and companies, it would hurt your business. No matter how many obstacles you face in the journey, you need to be well-determined to handle all the issues.
Solution: Opt for a perseverance approach.
Running a successful enterprise is not something you can leave up to luck. You should have a robust business plan, strategic approach, and sound cash flow to obtain favorable outputs. These five major reasons give you a glimpse of how to overcome issues so your business does not have to bear failure.
Brijesh Vadukiya is a tech activist and avid blogger. My major concern is to educate people who are interested in technology. I am passionate about helping people in all aspects of SaaS solutions, online delivery business, digital marketing and other related topics that make tomorrow’s world better. I am fond of writing useful and informative content that helps brands to grow business.