5 Reasons Why Retail Stores Fail

Running a successful retail store isn't always an easy task. According to StatisticsBrain.com, 47% of all retail businesses fail within four years of opening. This is staggering amount that should serve as a real eye opener to anyone who's thinking of launching a retail store or business. Of course, this statistic begs the question: why do so many retail businesses fail?

Reason #1) Inadequate Funding

To say that launching and running a retail store is expensive would be an understatement. In addition to the obvious costs of leasing a store and overhead, you'll also have to pay for employees, inventory, insurance, business license and more. If you aren't fully prepared for these costs, you could find yourself struggling to keep your doors open. The good news is that you don't need to front 100% of the costs, as banks and other financial institutions offer loans specifically for new businesses.

Reason #2) Poor Location

I've said it before and I'll say it again: location can either make or break a retail store. If your store is set up in a highly populated area that's visible from a major highway or street, you'll naturally have more customers coming through the doors. Stores set up in some obscure part of town that's difficult to find will only hurt your business in the long run. This is why you should spend the extra money to choose a premium location for your retail store.

Reason #3) Too Much Shrink

Shrink is defined as the loss of product between the manufacturer and point-of-sale (POS). Certain retail niches are more susceptible to shrink than others, but the fact remains that shrink plays a role in the success, or failure, of all retail stores. For instance, grocery store owners who constantly misplace or allow product to sit on the shelves past its expiration date tend to experience high shrink levels.

Reason #4) Lack of Leadership

You can't expect to run a successful retail store without a strong leadership presence at the helm, guiding and instruction employees on their professional responsibilities. Send a positive message to your employees by encouraging them to excel on the job.

Reason #5) Poor Inventory Management

A fifth reason why retail stores fail is because of poor inventory management. Without a system in place to track your current inventory, you could find yourself out of certain products. And when your'e forced to turn away customers for this reason, they'll likely end up at one of your competitors.