To become successful in today's fast-moving and overachieving world, most people believe in studying the works of successful organizations and people. While there's nothing wrong with this, it is also equally important to gain insight into failures. This is especially true when it comes to retail management.
In order to achieve long-term success in retail management, it is crucial to understand why most retail management strategies fail.
To begin with, let us first understand what retail management is all about.
What Is Retail Management?
Retail management is a term used to refer to the process of running and managing all the day-to-day activities of retail outlets. These activities relate to the selling of goods and services to customers. The primary focus of retail management is to ensure that customers are happy with the goods and services they buy and to keep retail outlets running smoothly.
Retail management is vital to the success of any retail store. Therefore, an effective retail management strategy is valuable to ensuring the successful running of a retail store. The process of retail management has witnessed a significant evolution in recent years, with the process shifting from managing a physical store in just one location to handling outlets all over the world. At the same time, virtual retail outlets and online shopping have ensured that retail management undergoes a sea of change.
Many factors determine the success and failure of an effective retail management strategy. The fundamental essence of strategic planning in retail management is that the process should go from a generalized goal to shortlisting specific steps that will be taken to reach that goal. From taking into account the overall objectives of the retail organization to penning down the individual action plan, developing retail management strategies has to go through multiple stages.
This is why fashion brands must consider certain factors when designing their retail management strategy. Here are the top five reasons why most retail management strategies end up failing and what you can do to ensure you have a winning retail management strategy on hand.
1. Failing to factor in the need for cash
One of the biggest strategy fails in retail management happens when you forget to factor in the cash flow. Poor cash management is one of the biggest failures of even the most profitable retail businesses today.
Of course, producing profits indicates that your business is running well, but profits won't matter much if your retail business runs out of cash. So if your retail management strategy fails to factor in that fact, there's going to be a major issue. Money needs to keep coming in so that the business can continue making purchases and meeting its obligations.
Mismanagement of cash can quickly snowball into many other problems, including:
At the same time, bankers are hesitant to work with retailers who do not have at least some knowledge of their cash flow. Bankers understand that these business owners are unprepared and have not used a cash-flow budget.
A cash-flow budget is typically a plan that takes into account the future of cash balances, cash disbursements, and cash receipts.
In such cases, your strategy must incorporate sticking to a cash-flow budget and keeping a tight rein on store funds. Since many retailers do not prioritize cash budgeting, it eventually leads to the business failing.
2. Having an out-of-control inventory
One of the major issues faced by many retail businesses is the maintenance of proper product inventory. This is more common in retail houses that cannot afford the luxury of abundant storage space. Inventory is the basic engine of every retail business, and any company that carries inventory can easily run into problems if it is not managed correctly.
Inventory is responsible for customer satisfaction, generating the gross margin profit, and it keeps the business running. At the same time, it can also use up a lot of cash.
Another unique problem related to inventory is the pressure to keep buying more and more of it. The pressure to keep buying more or different stock stems from:
If your retail management strategy does not offset this constant inventory pressure, you may run your business straight into a loss. So how can you counteract this pressure to over-buy or buy the wrong things?
Of course, the biggest factor here is to always budget for your inventory buying. Setting up an Open-to-Buy system by department or a classification system by store can help. And remember, following the budget is a must for every store and department. Real professionals in the retail business strictly follow their Open-to-Buy plan and maintain the budget at all costs.
3. Out of Control Expenses
The most important thing that every retail management strategy needs to avoid is letting the retail business have out-of-control expenses. Actual productivity revolves around making every rupee count while getting the biggest return on every rupee spent. These are the fundamentals of expense management that many strategies tend to neglect.
Expense management may seem like an old-fashioned concept. But in today's competitive world, it is more important than ever before.
Every retail business owner needs to understand that, in the retail world, your major expenses may appear to be fixed. These costs include permanent staff salaries, premises, inventory, etc.
However, your margin profit must cover these expenses, regardless of whether your sales are good or bad. There will always be certain areas in your business with variable expenses, making it possible to cut costs. This is the area where you get to be creative. Ask your staff for help in coming up with some cost-cutting ideas.
Budgeting will always be your primary tool for keeping expenses under control. This is why it is essential to have a projected or pro forma income statement. You will get a lot of help if you forecast your expenses and follow the budget guidelines.
4. Unclear Communication
Retail companies rarely consider the massive problem of unclear communication when devising their strategies. Even if your business processes are straightforward, any form of miscommunication can lead to irreversible damage to the entire efficiency of your company. Imagine the far-reaching impact it would have on your inventory management – one of the most complex processes in retail!
Since there are many components in inventory management, clear communication is critical for a seamless operation flow. For example, the correct prices must be printed on the price labels for the products. If there is an update in the prices and it isn't communicated before the labels are printed, the products will go out with the wrongly labeled prices.
Revising such errors would not only take a lot of time, but it may also cost you many unhappy customers. And if the miscommunication is not detected in time, it may directly impact the sales and profitability of the company.
One of the easiest ways to streamline your communication process is to automate the flow across departments. Using retail inventory automation software can help provide real-time information about your inventory. Having access to correct and timely information will further reduce any miscommunication events.
5. Inefficient warehouse management
Many retail businesses tend to ignore the importance of proper warehouse management. Warehouse management is one of the most vital components of any brick-0 and-mortar retail inventory. If your retail management strategy fails to take into account effective warehouse management, it will impact the entire retail inventory chain. Having a decentralized inventory management system will help you manage your operations more accurately.
Remember that inept warehouse management can ultimately lead to delays in order fulfillment, lost orders, and even costly errors in shipment. Inaccurate barcodes and labels, incorrect stock counts, and misplaced products are some problems that will further plague your business if you fail to have an efficient warehouse management strategy in place.
An ideal solution to all these retail management fails is technology from Fashinza. The platform ensures that the entire retail management process is taken care of - from forecasting trends to managing vendors.
Fashinza’s know-how in the retail business can dramatically reduce your stress while boosting overall accuracy and business productivity. So sit back and relax as Fashinza assumes ownership of your retail tasks.