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. Advertising
How you market and promote a business obviously influences how it does. You may be surprised to know that many retailers often don’t know how to market well and really connect with their customers. More research is showing that in order to be successful at advertising, businesses must understand psychology and how to create emotional responses within people. Emotional content performed better than rational content, and has greater influence on a consumer’s intent to buy a product than the ad’s content does.
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). It’s estimated that the U.S. needs $75.7 billion in investments to accommodate the passenger and cargo growth through 2019. No doubt, this will affect retail and other industries. 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 spend—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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