There can be both external and internal reasons for a decline in retail turnover. External factors are beyond retailers’ control, whilst internal factors always offer opportunities to further optimise operational management. Retailers generally notice a sudden drop in turnover very quickly. The reasons for this are usually clear as well. In the case of a gradual decline in turnover, however, analysing the causes is not so straightforward. Retailers should always bear in mind the following most common reasons for a decline in turnover when carrying out their analysis.
Reluctance to spend due to the economic situation
High inflation and the uncertain economic climate have led consumers to be cautious in their purchasing decisions. This is because they have suffered a decline in real incomes over recent months. In such a situation, consumers think very carefully about what they can afford and how much. Retailers with a large base of regular customers find it easier to weather such a difficult economic climate characterised by low consumer confidence.
Digitalisation
Digitalisation has, of course, been a reality for years. Growth in online retail turnover is contributing to a situation where turnover in high-street retail is stagnating or declining. Medium-sized and larger retailers should therefore adopt an omnichannel strategy to establish an online presence. For smaller retailers, there is also potential to benefit more from digitalisation by utilising social media channels and through social shopping.
Roadworks and accessibility
In some cases, there is a sharp drop in footfall – and consequently in turnover – because there is a major construction site near the shop. This makes it difficult to get to the shop and is stressful for customers, leading them to switch to other shops or shop online. In city centres in particular, retailers need to liaise with the authorities at an early stage to discuss how the negative effects of a major construction site on the retail sector can be mitigated.
More competition
The retail sector is constantly changing. Not only are retail businesses closing down, but new competitors are also emerging within the industry. This is particularly true of the fashion sector. The activities of competitors create competitive pressure and thus have an impact on a retailer’s sales performance. In particular, when comparable retail businesses set up shop in the immediate vicinity, this usually results in a decline in sales
Wrong product range
The customer base and customer needs change over time. As a result, people may visit the shop but be unable to find what they are looking for. They may then buy less, or perhaps nothing at all. Retailers must therefore regularly review how their customer base and customer needs have changed, and which trends need to be taken into account. The findings then determine the breadth and depth of the product range.
Low pedestrian traffic
In many places, footfall has often remained below expectations in the wake of the coronavirus pandemic. Particularly in shopping centres and town centres, those in charge have not yet done enough to revitalise these areas in the post-pandemic period. It is important for retailers to be in constant dialogue with those in charge regarding revitalisation strategies.
Inadequate service
The main advantage of high-street retail lies, above all, in the quality of the advice provided. However, if there are not enough properly trained staff available at the right time, this can lead to a negative shopping experience, resulting in a loss of sales. Furthermore, customers now have certain expectations regarding additional services. These include, for example, ‘Click & Collect’, ‘Reserve & Collect’ and modern payment methods. Special guarantees are now also part and parcel of the service.
Poor shop layout
Even the most beautiful shop will eventually start to show its age. Needs and trends change, so retailers must adapt their shop design accordingly. The design of the shop window and the outdoor area has a major impact on footfall. If the shop window is unattractive, fewer passers-by will be drawn to it. Fewer visitors mean fewer customers and lower turnover. The overall design of a shop’s entrance area must be designed to entice passers-by into the shop.
No targeted advertising
It is not only the retail sector that is changing rapidly, but also the world of media and advertising. Retail companies must therefore regularly review whether their current advertising campaigns are still reaching the desired target audience. This is because the effectiveness of advertising campaigns can steadily decline over the years. Advertising expenditure is then wasted and fails to generate any significant turnover.
Analysing the reasons and optimising the location
Retailers have no control over the economic climate, digitalisation, the arrival of new competitors or construction sites in the immediate vicinity of their own premises. However, to halt a steady decline in turnover, they can continue to optimise their premises. Optimising a location makes visitors feel more comfortable, encourages them to spend more money and ensures they are happy to return. The wide range of technical visitor analysis tools offered by Crosscan helps retailers analyse their own location and take the right steps to boost sales.
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