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SWOT Analysis of Retail Industry

The retail industry comes in various forms ranging from digital storefronts, tower squares, and coffee machines to departmental stores. It plays a significant role in the growth of a country’s economy. A healthy economy would suggest high production and consumption, and it happens due to the concentration of retailing.

Retailing comprises all the activities of the company dealing with the sale of products and services directly to the end consumer and they buy it for their personal and family use. The retailer could be institutional and retail and they both have to carry out a great number of small transactions.

According to a study in 2019, approximately 50 million Italian people have used the internet, and the figure is increasing to a great extent. Out of which 93% of the people have online e-commerce store once on their devices. 77% of the people bought something online in the last year by using a smartphone or computer.

Today, we’ll discuss the swot analysis of the retail industry. It’s going to focus on the internal strengths and weaknesses, and external opportunities and threats that the retail industry has to face. Here’s the swot analysis of the retail industry as follows;

Table of Contents

  • Strengths of Retail Industry
    • Location
    • Innovative Sales Techniques
    • Relationship Marketing
    • Supply Chain Agreement
  • Weaknesses of Retail Industry
    • Not Specific
    • Limited Industry Experience
    • Not Recognized Brand Name
    • Small Store Size
  • Opportunities of Retail Industry
    • Demographic Increment
    • E-commerce Trend
    • Geographic Expansion
    • Backward Integration
  • Threats To Retail Industry
    • Location
    • High Rental Cost
    • Exchange Rate
    • Changing Trends

Strengths of Retail Industry

Location

Prime location plays a significant role in the growth and productivity of any business. If the location of your retail store is at a crowded place where people come and go all the time. Naturally, the sale of such retail stores is much higher and it would amplify the income and revenue stream.

Along with the main location of your store, the display and well-lighted place would further attract the attention of customers. They would definitely visit your store even if they don’t have to buy anything. If they like it, then they would visit it again and again.

Innovative Sales Techniques

The foot traffic on your store is just one type of random people visiting your establishment, and some of them would buy anything there. Along with the traditional form of sale, the store is using its reputation and reviews/testimonies of customers as a marketing technique to convince them to buy your product or service. The big fonts, flash colors, and catchy slogans in the store increase the company’s sales.

Relationship Marketing

If the sales staff and the owner develop a positive and friendly professional relationship with customers, then they can make them do the repetitive purchasing. It means sending them a newsletter, informing them about the latest offer, and promotional deals. However, when you timely inform them about your offers, then it would amplify the sales.

Supply Chain Agreement

If the retail store has an effective relationship with its supply chain and they would make sure the timely availability of products and services at the store. It would be differentiating factors and offer the store a unique competitive edge. Customers would be confident that the product or service is available there at the store. 

Weaknesses of Retail Industry

Not Specific

Not specific means that retail store is not focused on one category of product or service. The store is offering a wide range of products and services to the end customers. However, we’re living in world of specialization and niche marketing, and the consumer market is leaving behind the general offers.

Limited Industry Experience

The well-experienced and knowledgeable workforce is a great asset to the company. They can increase the company’s sales, growth, and productivity. The employees working at the company’s retail store don’t have enough experience to properly deal with the customers and increase the sale. Resultantly, the conversion rate and overall sale of the company is down to great extent.

Not Recognized Brand Name

Brand name matters and speaks on your behalf, and it ensures customers that the store is trustworthy and offers quality products. If your retail store is new and doesn’t have a well-known brand name, then customers would be reluctant to trust your offers and try out anything. Therefore, it would take a lot of time and consistency for the customers to trust your products and services.

Small Store Size

Along with brand name and reputation, the size of the store also matters. If the storage size is small and could host only a few people and the other people would go to other shops and stores nearby. However, it’s something that you can’t tackle and deal with because the bigger store would cost more. It isn’t possible in some places.

Opportunities of Retail Industry

Demographic Increment

If your store is only targeting a young audience aged from 18 to 25, male, or female, then it’s a very limited market demographic. You should consider offering a variety of products and services to the customers. The variety and wide range would increase your market influence, and it would attract more people and bring them to the store.

E-commerce Trend

The pandemic has e-commerce business and online shopping trends. Businesses and companies that had their e-commerce store in place, sales increased to a great extent. If the retail store works on launching an e-commerce store and promoting it on social media, then it would amplify the sale to a great extent.

Geographic Expansion

Another benefit of an e-commerce store is that it would allow the retail store to expand geographically. The geographic expansion would be a huge plus point and you can sell your products/services anywhere from one place across the globe.

You should also consider launching the same types of retail stores in the other cities, where the market saturation rate is low. It’s a step-by-step process, and it would increase sales and profitability.

Backward Integration

Backward integration means acquiring the supply chain or the manufacturer in order to stabilize their market position. Many successful companies follow the backward integration strategy, it would allow them to gain control over the supply chain and make sure the availability of the product all the time in the store.

Threats To Retail Industry

Location

It’s no doubt prime location points offer advantages to any business, but the cost of the prime location is very high. Relocating your business to the new location would cost you a lot, and it doesn’t guarantee that your business would make the same profit whatever competitors are making it. All of your investment would go to dump if the store doesn’t make any profit.

High Rental Cost

The rental cost is increasing for the past few years, and it has decreased the profit margin of the store to a great extent. The store owner has got no other choice, but to pay it, because if it doesn’t, then the other businesses would be willing to pay for the same spot.

Exchange Rate

If your retail store has also got an online store and distributing its products/services in the other countries. It means that the store is dealing with various types of currencies, and that’s where the role of exchange rate comes into play. Different currency exchange rates on various days would impact your profitability greatly.

Changing Trends

The other uncontrollable factor is the changing market trends and customer preferences. For instance, you’ve made a huge investment and filled your store with a product that the customers either don’t want or it’s out of fashion. Your acquisition and investment in the store would be a great loss.

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Ahsan Ali Shaw

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