Evolution of a Broken Regional Order

Sample Essay on Factors Affecting the Retail Industry

Factors Affecting the Retail Industry

The retail industry has grown exponentially over the recent past. It is not monolith but different types of business that sell products and services directly to consumers. Some of the most popular retail businesses include pet stores, clothing and grocery stores. While retail industry as a whole may not be profitable as expected during favorable economic circumstances, there are those that perform exceptionally well.

Research shows that the choices that an individual retailer makes play a crucial role in determining whether a business will succeed or not. However, there are factors that affect almost all retail businesses including

The retail sector

The retail sector is quite big. Therefore, the sector in which a business ventures into determines its overall growth and profitability. For instance, when the economy is at its lowest, discount retail stores often do well. This is because they provide basic foods, inexpensive clothing and basic goods. Retail store will not see the luxury of providing its products and services when the economy struggles.

However, there are specific business niches that can suffer when the economy deteriorates. Businesses that deal with food and clothing can suffer a great loss when supplies are low. This is because they have to buy their supplies at a higher price thus, affecting the businesses profitability.

Consumer behavior and the economy

The behavior of consumers affects retailers. It has been proven that retail industry struggles a lot when the economy is poor. This is based on the fact that retailers target specific consumers for example, middle class consumers. When middle class consumers loss their jobs in a stable economy, chances are high that retailers will also lose their money. This will mean low profits for retail industry.

Inventory and costs

The costs involved in building and maintaining an inventory plays an important role in determining the growth and profitability of a retail business. An inventory needs to move very quickly for it to maximize its profits. Additionally, businesses with high costs are bound to enjoy huge profits if they have to grow.

Distribution and productivity

The productivity of a business has been proven to affect its overall ability to grow. If workers in a retail business are very sluggish in marketing a company’s products and services, the growth and profitability of such a business will be slow.  Similarly, the ability of a business to distribute its products and services is very essential in generating the desired revenue.

Therefore, when a retailer’s distribution is interrupted, for instance by a natural disaster it becomes a great problem affecting its profitability. Profits will additionally be driven down if rerouting of time shipments have to be carried out. This is also a costly affair and can affect the overall growth and profitability of a business.

Besides these factors, a retail business person has to make the right decisions in the type of business to settle for. You have to carry out thorough research of the market and define your target audience. This is important because it helps you to start a business that you can easily grow and make the most out of it.

Understanding your competitors is also very important.

 

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