Why Retail Startups Fail

According to Bloomberg, about eighty percent of startup businesses fail. It’s not exactly a comforting statistic when you’re looking to start your own business. But why is failure so common? 


Mostly it comes down to the same old problems. The first problem doesn’t actually have much to do with the retail environment itself, but with the person at the top. Entrepreneurs wanting to start a new business are often brilliant people. But at the same time, they can be dysfunctional, even self-sabotaging. In fact, it’s a trope of high-achievers in general. There are all sort of theories about why a person might undermine their own success, but they all come to one thing: fear of growth.

In everyday, normal life that’s a problem. In business, that’s an even bigger problem. The solution, therefore, is personal. Entrepreneurs need to work out what it is that is causing them to sabotage their own success. Is it their inability to deal with anger? Can they not work with their employees effectively? Are they afraid of responsibility?

Another common problem – this time for retailers in particular – is not differentiating the product. Retailers have a particularly tough time doing this. That might be why the subtle differences between supermarkets are such a talking point in the media. In retail, there are a thousand guys wanting to do exactly the same: pool a load of products and resell them at a profit.

The problem is, if you can’t carve a niche for yourself, you’ll end up competing with thousands of other people doing exactly the same thing. For most startup owners, going down this track just isn’t worth the effort. All you end up doing is fighting over the scraps, whilst the big players gobble up the lion’s share of profits.

Highly successful retailer habits include getting to know who your competition is inside out. Once you’ve got a clear idea of what your competition is doing, you can work on your own unique selling point. Perhaps you want to start selling unusual and unique gifts for birthdays. Well, there are already people out there targeting this market. So you might differentiate yourself by choosing to appeal to a particular market segment. Perhaps you could focus on gifts for the aspiring gentleman.

Often retailers do a good job of differentiating themselves but fail to communicate their value. Having a clear and concise value proposition is essential for letting people know why it is that they should shop with you.

Again, this comes back to the founder. It’s the founder’s responsibility to clearly articulate their value proposition. The best way to do this is for retailers to try to open a dialogue with their customers. Be clear about what who you are and what you value. Waitrose values customer service and high-quality food. Wilkos values price competitiveness and convenience. It’s all very simple.

Customers don’t have time to get to know you and work out exactly who you are. That’s why you need to be concise in communicating your corporate message. It should be clear within a few seconds who you are and what you’re trying to do.

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