The retail industry has always been competitive, but the last few years have been more challenging than ever.
People’s shopping habits have evolved dramatically and consumer expectations continue to increase. All the while, retail profit margins are shrinking. According to data from CSI Market, the specialty retail sector’s profit margins sat at 35.55% in the first quarter of 2021, down from 36.01% in the previous quarter.
To make matters worse, COVID-19 brought about a host of new challenges and disruptions — some of which the industry is still struggling to recover from.
As such, every retailer needs to be aware of the right strategies in order to be truly successful in the current landscape. To do that, you need to first make sure that you avoid some common pitfalls that many in the industry succumb to.
This article discusses some of the most common mistakes in retail you must avoid in order to promote longevity and profitability. Let’s take a look.
1. Doing everything manually
Managing a retail business isn’t a cakewalk — it has a number of moving parts and processes that operate simultaneously. Time management is, therefore, a crucial skill that every retailer needs to possess in order to succeed.
Unfortunately, many retailers resort to doing things manually — which is a surefire way to self-destruct. Here’s where automation can help.
As a retail store owner or manager, you need to adopt technology and systems that can help you streamline processes, increase efficiency, reduce errors, and make the best use of your available time.
By implementing the right solutions, you can streamline areas like:
Task management. Technology can help you send tasks to multiple employees instantly, set due dates and priorities for each task, and track their completion in real-time. This ensures that everyone is assigned their fair share of tasks and no one ends up being overworked or doing too many things at once. Good systems and tools can help you give clear directives to your teams by putting notes, photos, documents in one place for easier accessibility.
Inventory management. Effective inventory management ensures that you’re well equipped to meet customer demand and are in control of your finances. You need to make sure that your stock is always at an optimum level, neither excessive nor too scarce.
Managing your inventory manually is a recipe for disaster — any negligence or mistake can cost you. Modern stock control systems can make sure that your stock is properly tracked and you are notified when it runs low so that you can replenish it in good time.
Back-office systems. Automation can also help you streamline your back-office processes like managing purchase orders and record-keeping so that relevant documents are easily available to your stakeholders. Also, integrating your point-of-sale (POS) systems with your back-office allows your employees to have access to product and inventory information in real-time. This can make sure that your stock levels are optimized, leaving very little to chance.
2. Not auditing your retail stores
Audits are crucial in making sure that you stay on top of everything that’s going on at your store. However, many retailers make the mistake of either failing to do them consistently or not doing audits at all.
Regular audits can make sure that quality standards are being met, and operating procedures are being followed properly. Audit solutions allow you to track key performance indicators with features like customized checklists, signatures, photos, etc.
In addition, they can help you identify any issues and take corrective action swiftly and efficiently. You can also leverage audit software to impart training to your employees when required.
3. Not investing in your employees
Viewing workforce expenses as a mere cost rather than an investment is a major mistake in just about any business, but more so people-centric sectors like retail.
As Baron Christopher Hanson of RedBaronUSA points out, “retail is about people, personal relationships, and having a passion for your products or services that is contagious.”
He adds, “rock star employees know how to sell your product or service to anyone who walks through your door. Great employees also do not lie, cheat, or steal. They know how to spot shoplifters, and will raise their hand when they see signs of waste, lost revenues, and ways to save money.”
As such, hiring and investing in skilled and passionate employees — even if it costs more in the short-term — is a much more profitable strategy than cutting corners when it comes to staffing.
4. Failing to streamline communication and collaboration
Effective exchange of information between your internal and external stakeholders is essential to ensure that everyone is on the same page and can collaborate to achieve a common goal.
By communicating well, you can see to it that employees understand their tasks, your business partners understand their duties, and your suppliers know what’s expected of them.
If communication isn’t streamlined, chaos is likely to ensue. Many retailers make the rookie mistake of using multiple communication channels like email, phone, or text to communicate with various stakeholders.
This is ineffective and creates room for inconsistencies and discrepancies, thus ruining the chances of successful collaboration. In fact, 67% of employees believe that ineffective communication is the biggest obstacle to successful collaboration.
To solve this challenge, retailers need to adopt a common communication tool that facilitates instant connections between teams and makes it easy to share important information and files with everyone.
5. Focusing on vanity metrics
Vanity metrics are measures that make you look good, but don’t have any meaningful impact on the true health and success of your business. Things like social media followers, website traffic, or top-line revenue (in some cases) are examples of vanity metrics.
These numbers look attractive in isolation, but they’re essentially meaningless without context or when you don’t combine them with other measures.
For example, focusing on top-line revenue without paying attention to profit or business spending can give you a false sense of security. Your sales and revenues may be increasing, but if you’re actually losing money to generate those sales, then your business is in trouble.
The key to avoiding this mistake is to factor in a variety of metrics when determining the health of your business.
“Retailers should be looking at all kinds of measures, including conversion rates, gross margins, retention rates, and more,” says Marco Baatjes, founder at Caffeinated Face.
He adds that it’s important to “have a clear view of where you want your business to be in 2 years, then break out those goals into 1-, 3-, 6-month sub-goals. Track those quarterly and take corrective action when you see something happening in between quarterly or annually. Measure what really matters with high quality data which will give you more effective insight into how your store or operations are really performing.”
6. Not selling on multiple channels
Ecommerce and online shopping have been around for a while now. That said, if the pandemic has taught us anything, it’s that retailers must double down on multi-channel selling strategies instead of relying heavily on their brick-and-mortar stores alone.
In fact, even as total retail sales saw a 10.6% drop in 2020 (as compared to the previous year), total online sales went up 44%. This clearly demonstrates the importance of ecommerce and omnichannel selling in the current landscape.
Digital and social media have a huge influence on the way consumers shop today. Unfortunately, many retailers still aren’t utilizing multiple channels to engage with and sell to their customers.
If you want to stay relevant and competitive, you need a solid digital marketing strategy that goes way beyond just having an ecommerce website. You also need to leverage social media to engage and interact with customers and educate them about your offerings.
Product reviews, customer testimonials, blog posts, and social media posts can not only help you increase brand awareness among your target audience but also build credibility and reputation. As stores reopen and the world slowly starts to recover from the pandemic, use your online presence to further strengthen your customer relationships.
7. Dropping the ball when it comes to customer service
Poor customer service doesn’t just cost you customers in the short-term. It also ruins your reputation and hurts your chances of acquiring new ones.
“After a negative customer service experience, many people say they’ll never do business with a brand again,” explains Eric Rohrback, CMO at Hill & Ponton.
“That doesn’t even take into consideration the ‘word-of-mouth effect’ (making the clients twice as probable to discuss negative experiences with others). There is no replacement for excellent customer service. The reputation of your retail store is on the line in a huge manner.”
For this reason, it’s critical to make excellent customer service a priority. You need to educate and train your associates on how to manage questions and complaints from shoppers and how to enhance their customer experience by making personalized product recommendations and other useful suggestions.
Make sure that your customer service extends to digital channels. One great way to enhance the online customer experience (besides offering easy checkout, returns, refunds, free shipping, and multiple payment options) is to offer virtual shopping on your ecommerce website. This will allow you to offer the same personalized shopping experiences to your customers online that they would normally enjoy in-store.
Many retailers have introduced virtual consultations or assisted shopping on their websites. Using these features, customers can connect with store associates over text, email, or video to get their questions answered or get personalized product recommendations.
Every retailer wants to build a successful business that sees a steady stream of revenue flowing in at all times. However, doing all that requires a lot of hard work, innovation, and strategic thinking.
To put your retail business at the forefront, you must also get your basics right, and that means avoiding the common pitfalls that can pull you down. Make sure to avoid the mistakes mentioned above and follow the tips we’ve shared to take your business to newer heights.
About the author:
Francesca Nicasio is retail expert, B2B content strategist, and LinkedIn TopVoice. She writes about trends, tips, and best practices that enable retailers to increase sales and serve customers better. She’s also the author of Retail Survival of the Fittest, a free eBook to help retailers future-proof their stores.