SWOT Analysis for Retail
Retail companies, like other businesses, often use a SWOT
(strengths, weaknesses, opportunities and threats) analysis to evaluate their
businesses. A SWOT analysis for retail is a detailed look at the retailer's
strengths, weaknesses, opportunities and threats versus key competitors in the
marketplace. Strengths and weaknesses are considered internal factors, over
which a retailer has more control. Opportunities and threats are external
factors, which are positive and negative situations that retailers continuously
face.
1. Identify and List
Strengths
The first step in doing a SWOT analysis for a retail
company entails identifying strengths. One possible strength may be the
retailer's financial backing if it has plenty of capital and access to bank
loans. Another strength may be the retailer's cheaper wholesale prices.
Additionally, the company may offer unique products compared to other
retailers.
For example, a clothing store may sell high-quality but
slightly defective clothing at a low price. Whatever the case, a retailer
should make a list of all its strengths versus key competitors.
2. Identify Palpable
(clear / straight forward) Weaknesses
A retail company should identify its most palpable
weaknesses in a SWOT analysis. Through market research, the retailer can check
if it has a weak brand image versus key competitors or lack of identity in the
marketplace. For instance, the store may sell both cheap and expensive brands,
so it lacks a defined place in the minds of consumers. Essentially, the store
selling to all market segments may mean it has no competitive advantage that
sets it apart from other retailers.
3. Look for
Opportunities
Another step in a retail SWOT analysis is identifying key
opportunities in the market, often through a review of a company’s sales force
and market research. Opportunities can include unfilled consumer needs. For
example, a small web design company may see an opportunity to add consulting
services, if it identifies customers who desire it when conducting marketing
research. Or a retail company may identify an opportunity to purchase a smaller
retailer to increase market share through a SWOT analysis.
4. Pinpoint
Potential Threats
A retailer can identify certain threats through a SWOT
analysis. Threats can include a decrease in consumer demand, a recession, price
wars among key competitors or even an increase in competition. Even a change in
shopping habits can be a major threat to a retailer.
For example, when people started migrating to the suburbs
in the 1950s and 1960s, downtown retailers, which represented the traditional
way of shopping, were affected. These days, the growing popularity of online
shopping represents an ongoing threat to bricks-and-mortar retailers.
Analyse SWOT for
Better Decision-making
Retailers should not just identify their strengths,
weakness, opportunities and threats; they must also use this analysis to
develop effective marketing strategies. This can be accomplished by matching an
internal variable, like strengths, to an external variable, like opportunities.
For example, the owner of a chain of gift shops may have a tech-savvy marketing
team – a strength – so she may see the opportunity to increase sales and
profits through social media campaigns over the Internet that the marketing
team can spearhead.
SWOT analyses can also be integrated into a retailer’s
hiring practices. Asking a potential manager prospect to complete a SWOT on the
business or a competitor as part of the vetting process can reveal helpful
information and identify candidates with the analytical skills to improve the
company’s bottom line.
Indian Retail:
Analysing the SWOT Matrix
The
Indian retail sector is growing rapidly. The relaxation in FDI norms is bound
to generate even more interest in the Indian retail market.
1.
Strength
The
inherent strength of the Indian economy provides a boost to retail. Following
are some of the factors that strengthen the economy:
Purchasing
Power
Population
Demographics
Low
Retail Penetration
Aspiring
Middle Class
2.
Weakness
Despite
the positives, there are certain facets of the sector that may dampen growth.
Following are the key areas to consider:
Political
Uncertainty and Regulatory Requirements
Poor
Infrastructure and Supply Chain Management
3.
Opportunity
Retailers
in India have been experimenting to arrive at a successful formula, but there
is no single strategy. The market is still undergoing a lot of changes, both
from the regulatory as well as demand side. Following are some of the winning
factors that players could focus on:
Innovation
Digital
Strategy
Customer-centric
Approach
Changing
the Regulatory Scenario
4.
Threat
The
two most important threats are as follows:
Availability
of land and real estate
Human
Capital
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