Reasons Why Retail Business May Fail

Retail business failures have increased by 30% in the last three years. This was primarily linked to the common issues often faced by retailers. They each can no longer find ways on how to resolve these issues before ending up in bankruptcy.

In this article, several reasons have been emphasized on why, both old and startup retail business, may fail.

retail business fail

1. The Lack of Good Location

Based from the retail experts, it is the lack of good location and capital that is the number one factor why retail businesses fail. But, still, some retailers choose for inexpensive locations. As per the locations, these are not even made visible to clients. With a perfect location, your business will be making a good impression among customers.

2. Insufficient Working Capital

Apart from the location, as mentioned, the lack of capital is another reason why a retail business may fail. A retail business does necessarily require a lot of money. If you have thought of starting a business and opening newer stores, you should have multiplied it by 5 and then you’ll be a lot closer. If you will simply do it, you must have an adequate capital prior to opening a business.

With an insufficient budget, it means to say that businesses will not be able to take opportunities presented to them. They may also tend to compromise for high-cost but short term solutions to the symptoms of problems. They no longer look for the best and most agreeable solutions in dealing real business issues.

Even the lack of technology is another significant area that must be paid attention to. As you can most observe among retailers, they have only the most out-dated processes and technologies.

3. Lack of the Understanding of Inventory Control and Numbers

In running a retail business, owners should have a good understanding of even the basic numbers including inventory control. There is also a need to have a good grasp of margins and costs, inventory turns, retail figures and more.  Especially in business planning, it must entirely cover certain aspects like promotional plans, sales, marketing, finance, profit predictions and cost breakdowns.

Similar with the lack of management, it is also the lack of discipline in money that makes it a big issue among retailers.

As per the inventory control, it should also be your area of passion and expertise. You have to understand that it is considered as the biggest asset in the retail field. If you will control the inventory, you should be ready to control the debt or the cash. Remember that in retail business, cash is still the king.

Many businesses have been struggling in an ineffective cash flow due to a lack of inventory control. Thus, there is a need to know that it is all about having a good product and a good idea. However, you must make an effort to meet your short-term cash outflow.

In the event that you have no basic OTB, you’ll surely run into some issues. With regard to highly reputed retailers, they usually rely on product hierarchies in tracking their purchases and sales properly. Range plans and assortment plans are even crucial among successful retailers.

The depth and the sophistication of inventory control still depend on the business and its size. It also relies on the retail sector that you are in. But, the basics still can break or make a retailer.

4. Lack of Effective Management

It is true that entrepreneurs are sometimes not good managers. They really are a picture of people having the passion, enthusiasm and great ideas. They are not capable of handling management issues and other complex elements of operating a successful business.

In this regard, a retail business may fail because an entrepreneur hires men who have no authority or experience in making significant decisions. Thus, inexperienced and weak management is still the major cause of all business failures.

Successful businesses and successful companies are usually backed by an excellent manager. The manager usually sits beside an entrepreneur. They both make decisions together and follow an even clearer direction.

5. Poor Promotional Activity

When you start a business it is very essential to have some promotional activity. Marketing your retail business depends on various factors but it is a vital part of your startup process. If it is neglected, then business can fail to sustain.

6. Lack of Determination

As a business owner you should be well determined to make it a success, otherwise it is more likely to fail. No matter how you are prepared, the issues are bound to come on your ways, so you need to be well determined to take your retail store to the next level. Perseverance will matter a lot.

With the several reasons why retail business may fail, it is thereby necessary to keep all these in mind. Remember that retail is a simple process. When you have kept all things simple and you just stick to the very basics, you can surely expect more from your retail business.


  • Marina Shah said on July 15, 2016
    Thank you for the tips.
  • Maria said on August 9, 2016
    These tips are really valuable for me. Everybody keeps saying what we need to do but no one ever said what can break the business. Thanks again.
  • Moiz A Tankiwala said on July 19, 2017
    We are on "Start up" for retail business in Hardware and paints at Indore. Our well wishers and business personnel are divided on opinion. Some say it should be 1)It should be mix, retail as well as wholesale 2) It should be in key market 3) It should be in upcoming areas.4) Buy locally 5) Bring from Gujarat and Punjab 6) Start the shop automatically different agents will come and deliver. Kindly advise. Thanks
  • Sumaiya Ramalan said on December 27, 2022
    Thanks for the vital information🤝


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