WHY TRADITIONAL RETAILERS ARE IN CRISIS

Retail Discounters:

In the past 20 years, the growing influence of discount retailers has changed the complexion of the retail industry. Clothing companies that want to compete with discount retailers end up keeping costs down any way they can; from stocking inexpensive and inferior produced goods, made in developing countries like Bangladesh and Cambodia, to cutting labour costs on the sales floor.

Markdowns:

In the retail environment markdowns seriously harm the bottom line, with stores educating consumers to wait and buy products when they go on sale.  Retailers have spikes and dips in sales based on seasonal sales and inventory clearouts created by poorly planned budgets and forecasting.

Inventory Financing:

Inventory measured against projected sales is a huge risk to retailers.  Retail buyers have to commit to inventory well in advance of knowing which items will sell best; if at all.

High overhead costs:

Retailers must deal with fixed overhead costs such as rent.

"The store premises have a lease or purchase price long ago negotiated and agreed to," journalist Caitlin Kelly wrote in her 2011 book My Unintentional Career in Retail. "The merchandise was long ago chosen, ordered, shipped, distributed, marketed and advertised. Every possible cost has already been assumed. When retail companies look to cut costs, they often look to the payroll on the shop floor."

Marketing:

Ongoing outreach to your target audience via Traditional Advertising in Magazines, Newspapers, TV commercials and Radio are a very costly and outdated.

Traditional Retail vs. Online Retail :

Consumers' buying habits are changing and there is an increase in online sales vs. traditional retail sales.  Many retailers still only offer one distribution channel. 
According to a report from Industry Canada in 2010, online shopping increased by as much as 300 per cent per year. This growth in online sales reduces sales volumes and jobs in traditional bricks and mortar stores.

Manufacturing:

Canadian designers/clothing manufactures have limited domestic fabric resources, high production costs, and lengthy turnaround times to fill the sales pipeline.

Management and Staff.

Employment in the retail sector is now largely seen as a temporary job for low-skilled employees working for low pay, unpredictable hours and few benefits, but with nearly two million Canadians now working in retail sales, it now becomes the largest employment sector in Canada.

"We don't seem to perceive ourselves very much as a nation of retail workers," said Kendra Coulter, a labour studies professor at Brock University. "As the sector starts to play such an increasingly significant role in our economy, there is a real need for us to take it seriously," and if we don't, the consequences for the broader economy could be vast as low-paid workers with less purchasing power spend less in their communities.

Retail is becoming a growing sector for our labour market because of our aging population and shrinking economies.  However, Retail is one of the lowest paid industries and operates mostly on part-time labour.  Consequently, staff and management are either untrained or lack customer service skills which ultimately hurts customer service and retail sales.

Source: The Toronto Star, Saturday, October 26, 2013, Stephanie Maclellan
 

 

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