Anyone who has ever run a retail business knows that it can feel a little (or a lot) like a roller coaster. There are so many different factors that go into overall success of a retail business—and many of them aren’t directly under the business owner’s control.
Still knowing the cause of a disappointing (or exceptionally good) quarter can help you plan your strategy and stay in business even during the tough times. These 5 variables are factors every business owner should pay attention to, since they all affect how—and what—consumers buy.
1. Competition
Being the only vendor of a product is something every retailer wants—they want to be the place to buy, to offer unique value to customers. Consumers, on the other hand, want options—competition what keeps prices in check and allows consumers to have a say in what’s offered.
Healthy competition isn’t detrimental to a business, but many retailers are seeing changes in how competition affects their sales in the information age.
Now, consumers can easily price check and order online—which can drive down prices and make it more difficult for retailers to make a profit. About 8 in 10 shoppers make at least some of their purchases online, which is why retailers need to understand both the competition down the road—and the competition on the web.
2. Political Climate
You might be surprised to learn that the political climate and election results can have an impact on certain sectors of the retail market, but statistics show that they do. One example of this effect is in the firearms industry.
During the Clinton and Obama administration, more firearms were manufactured than during the two Bush presidencies. More than 10 million guns were manufactured during 2013—more than double the peak of any Bush presidency year. While politics may not have the biggest impact on retail sales, they do seem to play a role.
3. State of the Economy
When people are feeling confident about their job prospects and the economy, they buy more. That, in turn, drives even more economic growth, resulting in a healthy economy. In December of 2017, retail sales were up 5.5% from the previous year, totaling $5.7 trillion for 2017. Since retail sales up by 3% or more overall indicate robust economic growth, overall sales are a good indicator of how our economy is doing as a whole. During downturns, most retail businesses suffer—along with everyone else.
4. Trends
Consumer trends are important for businesses to pay attention to, because these shifts can have lasting impact on a business’s success. For example, many consumers are concerned about how retail products affect the environment, and are more interested in sustainable options when shopping.
Businesses that provide products which are harmful to the environment, or come in bulky, unnecessary packaging lose out on the business opportunity presented by this trend. The same is true for brick-and-mortar vs. online shopping.
Customers still shop in store—but they like to have the option of shopping online. Companies that adapt to consumers’ preferences can survive and thrive, however. The good news? These shifts tend to happen slowly, giving retailers time to react.
5. Technology
Technology affects every aspect of our lives, and the retail market is no exception. While the influx of data that is now available to retailers can be very valuable, there are downsides for businesses, especially small retailers. Consumers can now price-check on the fly and see what their other options are in real time.
Technology has completely changed the landscape of some industries, such as travel and health care, thanks to AI, big data, and the Internet of Things (IoT). Retail has also seen its fair share of changes, including mobile payments, targeted advertising, big data, and e-commerce. As time goes on, technology will play an even bigger role in how we shop—and retailers need to be prepared.
Adapting to Changes
Even though these 5 variables can make a difference in sales, they don’t mean that businesses are powerless in the face of market variables. Companies that can adapt to changes in the market, whether that means shifting more of their business online, changing their products to be healthier or more sustainable, or simply changing marketing approaches to appeal to a younger audience.
Knowing the economic, political, and social factors that play a role in strong retail sales—and being ready to pivot if necessary—can mean the difference between a flourishing business and a stagnant one.
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