5 Fatal Mistakes for Small Retailing
In today's fast-moving and ever-changing business environment, mistakes can be fatal. Even at best, statistics show that about half of small businesses last less than two years. My 20-plus years of successfully operating several retail stores have made me a keen observer of the retail scene, and more important, the mistakes made by many retailers that have, in many cases, caused their demise. Even though the list of potential mistakes that retailers can make is long, I have found these five to be some of the most frequent and devastating.
- Failure to plan effectively and objectively: Many new retailers plunge into business with little more than a prayer and a lot of optimism. Take time to prepare a business plan and estimate your financial needs. Nothing kills a retail business quicker than underfunding. Planning should also include location, your market demographics and your product line. In Retail in Detail, I have included many worksheets and planning tools you can use to assess your prospects for success accurately.
- Focusing on products and not the market: I've seen stores slowly stagnate because the owner stubbornly hangs on to a product or product line, even though the market has passed them by. You're in business to make a profit, not to sell a particular widget. Don't become married to your products. A word of caution is appropriate here: You shouldn't arbitrarily dump a product line because of seasonal or occasional setbacks. There are ways to update your product lines without ditching them entirely. For example, if you run a gift shop that carries home decor products, you need to update your product offerings regularly to stay in step with changing decorating styles.
Small retailers cannot effectively compete with big-box retailers and the internet on many standard over-the-counter products like small appliances and electronics and should concentrate instead on more individualized products and services. You can offer more personal service and more choices on custom-made and one-of-a-kind products, such as lamps, rugs, furniture, and locally produced merchandise.
- Failure to change with the market environment: This is somewhat related to No. 2 above, but it's focused more on selling methods and media. Only a few years ago, movies were rented and returned at local video stores. Today, they're mostly rented online and/or by mail, or by downloading them directly to your computer. The latest trend is the $1 movie rental and return boxes at fast-food restaurants. The internet has dramatically changed many of our shopping practices, and customers are demanding more specialized and customized products and services, as well as comfortable venues in which to shop. Selling standard products off the rack from a plain-vanilla store environment rarely works anymore.
- Underestimating the demands of retailing: Retailing is not for sissies. The demands of operating a successful retail store are many, constant and, frankly, all-consuming at times. Some would-be retailers mistakenly assume they can open and operate a retail store in their spare time. Retailing involves an endless cycle of buy, market, display and sell that can be extremely tiresome and demanding, especially for some personality types. It also means lots of long days and/or nights in the store selling and in the office ordering and paying bills. Of course, with success comes an increasing quality of life if you hire more employees to provide relief, but this in itself carries its own set of problems and demands.
So if you're not prepared to commit a large portion of your life, at least in the beginning, perhaps you should consider working part time at Wal-Mart.
- Neglecting customer service: This may be the biggest cause of retail failure that I've observed. Some retailers think that customers are there for their convenience, not the other way around. I've seen retail businesses fail because they were located in inconvenient locations and because they didn't accommodate their business hours to customer needs. If you're targeting working people, for example, you probably won't succeed if you open at 10 and close at 3. One store I know of was often closed during published business hours, and the owner seemed unaware that such practices alienated customers. Another retailer located a store in a building that was convenient (and cheap) for them, assuming customers would seek them out. They didn't!
The other major sin in this category is failing to treat all customers with courtesy and respect. I'm constantly amazed at the treatment customers receive from retail employees. Things as basic as not greeting customers when they enter the store, offering help in merchandise selection, and ignorance about the store policies and stock are commonplace occurrences. This ain't rocket science! Train your employees--and yourself--on the basics of customer courtesy and service.
Although avoiding these five fatal mistakes won't ensure retailing success, committing them will surely bring you closer to the brink of failure. There are so many risks and pitfalls in today's rapidly changing marketplace, it makes sense to increase your odds of success by avoiding them.