Lessons learned from 1,000 retail site closures: 6 leading causes

The six leading causes behind 1,000 retail site closures, and how scaling and struggling brands can avoid them.

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Retail: Easy to understand but hard to execute!

I greatly respect anyone attempting to make something happen in retail; it’s a brutal sector. I’m left feeling gutted every time I see a brand fail.

The aim of this piece is to help:

  • Scaling businesses avoid mistakes as they expand their estate.
  • Struggling brands to correct their course.
  • Operators understand when to close sites or fire quickly.

Against a backdrop where 95% of our churn at Shopwave is due to business failure, we have identified six leading indicators. The top three will kill your business every time.

1. Location

Nothing is worse than a great deal on a bad to average site.

Low footfall? In the city, but your business model only works when trading seven days a week? Have all past brands on your site died before their lease expired? In an area where you struggle to recruit? Too many direct competitors? The wrong customer base for your brand, vision or product?

Don’t let sunk cost drown your entire business, close the site. Nothing is going to fix this. Working harder, perfecting ops, and cutting costs, will only extend stress and pain. A 6/10 product can be successful at a great location. A bad site will sink a 9/10 product outside of extreme edge cases.

Real-world tips

  • 10 metres or a 20 second walk can be the difference between success or failure. Don’t ever let a broker tell you any different.
  • Free rent & rates? However good the deal, don’t ever be persuaded to take on a poor site. At best, it will become a distraction.
  • If you don’t have a seasoned CFO or legal team, take financial advice around protecting your business as you scale up. Sometimes even good sites can go wrong. Many brands set up each location as an independent business entity to avoid taking out their entire estate if things don’t go to plan during early scale.
  • Invest in your brand and product to secure great deals on great sites. Prestigious new developments always want to add new, on-trend brands alongside mainstream offerings.

2. Menu, product mix, promotions and recipe engineering

Myopic founder vision and passion with an unwillingness to compromise to market desires kills way more brands than ‘average product’.

Outdated products? Too expensive? Too cheap? Are portion sizes too large or too small? Tastes bad (market rather than stakeholder view)? Not aesthetically pleasing? No product market fit? On trend but too early to market? Plates left half eaten? High return rate? No local area customisation? Are customers conditioned only to spend with deep discounts or coupons?

Act fast. A strong capital position will only lengthen your pain.

Real-world tips

  • Target NPS (Net Promotor Score). Actively track how many customers recommend your product to their friends via a referral mechanism or social channels.
  • If you have a strong location and capital position, but the product and brand don’t pop, consider going all in on change. Many operators successfully switch out entire brands or menus at prime locations.
  • Leverage AI and BI tools to improve your menu or product mix.

3. Team

Bad teams kill strong brands.

Everyone has an off day, but a bad GM is poisonous for your team and brand at the site level. This extends to the whole estate at VP level. Talent will walk, leaving behind the B players. A bad GM/VP always hires B players to mask their failings. They will attempt to blame and disrupt everything they can if you don’t act decisively.

Drug and other addiction issues are often not supported or dealt with effectively. Thousands struggle for every industry outlier that has battled through these in public. This can often lead to threats, abuse or violence that can spill beyond the direct team to customers and vendors. Things quickly compound if the business struggles due to points one and two.

Real-world tips:

  • Fire fast. Training and nurturing upcoming talent is essential, but a poor GM/VP will always damage and distract. We can tell within minutes of entering a venue, predicting outcomes from a mile off.
  • Ex-banker or PE? have access to funds but lack experience? Want to start in F&B but haven’t worked in F&B prior? Save the pain; earn your experience undercover and make mistakes on someone else’s dime before blowing your fund. Take this with a pinch of salt if you have had exposure to the industry and can hire a world-beating team. Provide funds and support within your core competency areas and avoid the temptation to pull your team in the wrong direction. Our experience shows that not even world-leading PE funds are immune here.

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The above are non-negotiable for survival. The below can still kill your brand but are much easier to fix:

4. Brand & Marketing

If you don’t have the competence in-house, own the failing and outsource. There are many great consultants and influencers that can help. Don’t have the budget? Take one week to focus deeply and at bare minimum make sure you are active over all search and social profiles. Tools like Localistico can help if you lack time.

5. Operations

Avoidable operational mistakes impact experience, profit and land you in regulatory trouble quickly. The right consultant or experienced hire can make a massive impact very quickly. Don’t hesitate to invest here if your team, infrastructure and sites are not running effectively. Lacking time and budget? Try a tool like Jolt or Monday.

6. Margin

If the business has an audience and revenue is good, there are many levers to pull here. Leverage your CFO or PE friends here; they can likely negotiate with landlords or suppliers much better than you! Just ignore them when they tell you to stop salting food during cooking to increase profit. Don’t hesitate to negotiate every expense you incur.

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What about technology?

Once you have the above points dialled, technology will become a significant lever in your global growth story. At that point, you can go all out on product requests and bespoke integrations to differentiate your experience and help you scale. At Shopwave, we will help you scale faster than anyone else in the industry. Deep tech conversation re data stack and integrations but can’t afford or don’t want to use the usual big four management consultancies? You’re in the right place.

Earlier on in your journey? You can join our scale-up academy. If you have points 1–3 in place, we will take a bet on you and help you dial in points 4–6 while offering our service at a deep discount.

Need help with any of the above points or want to plan your journey without being sold to?

Come and chew the fat with our CEO and CTO. Your choice of Zoom call or in person at our London office. Are you fed up with meeting rooms? Select your preferred F&B venue for tea, coffee or a stiff drink on us. Use medium@getshopwave.com to book now.