Have you ever heard about the parable of the boiling frog?

According to the tale, “if a frog is put suddenly into boiling water, it will jump out. But if the frog is put in tepid water which is then brought to a boil slowly, it will not perceive the danger and will be cooked to death.” While we don’t know if this is scientifically correct, the “boiling frog story” does teach retailers a valuable lesson about the importance of being vigilant and proactive.

See, problems within a business rarely show up of nowhere. Signs of trouble often come up months, even years in advance, but they don’t always manifest in big, obvious ways. That’s why it’s critical that you stay on top of every component of your business, from sales and inventory to staffing and customer service. You should be aware of possible warning signs, so you can catch them early and take action before issues escalate.

Read on to learn about the subtle warning signs of a retail store in trouble. If you spot any of these happening in your business, take action ASAP.

1. Your daily foot traffic declines by more than 5%

“First sign of retail store trouble is when you notice a drop off in daily foot traffic of more than 5%,” says Jim Angleton President at AEGIS FinServ Corp™.

While the occasional or seasonal drop in foot traffic is normal, a consistent decline in store visits could spell disaster. 

What to do about it. Listen to your customers.

Customer feedback is incredibly valuable. Make sure you and your team are always listening to what they’re saying both in-store and online.

“Pay attention to customer discussions while in your store,” says Angleton “Are they saying ‘Wow, this is expensive?’ or ‘I saw this at XYZ for less?’ And don’t be afraid to ask questions: ‘is this your first time in our store?’ ‘How do you like our store and products?’ Just ask.”

And pay attention to what consumers are saying on social media and review websites. Angleton continues, “Do you look at your profile in consumer rating magazines and online comments? If not, we urge you to do this.”

Ensure that your store looks attractive from the outside

As much as we love the adage “It’s what on the inside that counts,” this doesn’t apply to retail. The outside appearance of your store counts a whole lot if you want to entice people to walk inside. Do this by:

Keeping your window displays updated – Always give people something new to look at. Shoppers won’t walk into your store if they keep seeing that same old tired displays. Switch your displays at least once a month, and do it more often during busy seasons such as the holidays.

Instructing employees to look busy inside the shop – Bored-looking employees are a turn-off. See to it that your staff are mindful of how they look and behave even when there aren’t any customers around. Make sure they look busy and cordial, as this will help entice more people to come inside.

Keeping your curbside well-maintained – Never underestimate the value of curb appeal. In addition to your window displays, little things such as the cleanliness of your storefront and the paint job you have outside can make or break people’s decision to walk into your store. Trust us, it pays to stay on top of maintenance.

Go online

Whether the internet drives traffic away or towards your brick-and-mortar store is up to you. While some people are complaining about how ecommerce is grabbing market share from brick-and-mortar, smart retailers are busy leveraging the web to increase their foot traffic.

You can, too. Here’s how:

Offer in-store pickup – Got an online shop? Give people the option to pick up their purchases in-store. Doing so not only saves them money (who wants to pay for shipping these days?), but it brings people to your location. This, in turn, opens up sales and engagement opportunities.

Improve your Google presence – Can people find you on Google? If not, you’re missing out on search and physical traffic. With more than two trillion searches happening on Google every year, you can bet your customers are using the site.

So, how can you beef up your search engine presence? Start by maintaining updated listings on Google and across the web. In doing so, you’re enabling your business to show up when people conduct local searches.

Use social media – Maintain an active social media presence. Do a bit of research on the social media habits of your customers. What networks or apps are they using? How are they engaging with brands on those networks? Find the answer to these questions and use the insights you gather to craft a retail social media strategy.

Touch base with shoppers via email – Email has been here for a while, and it will continue to be a major communication channel for years to come. If you don’t have one yet, set up an email list so you can keep in touch with your customers.

Use email to give people a heads up whenever you’re having an event or a sale, so they know when to stop by. Want to boost your campaign performance? Tailor your emails based on people’s demographic info and purchase histories.

2. You’re unable to stay on top of stock control

“In stock inventory on the shelf for immediate purchase is still the lifeblood of retail stores,” says Chris H. Petersen, CEO at IMS Results Count. According to him, when popular items are out of stock or when vendors start curtailing shipments and evaluating a retailer’s credit, there’s a good chance that business is in trouble.

It’s not just about out of stocks, though. Poor handling of inventory, in general, is a sign of trouble brewing at the retail store.

According to Lloyd Vliet, the Marketing Manager at Datacolor, a clear sign of retail store in trouble is when it “begins making noticeable, negative shifts of inventory levels. You will begin to see fewer SKUs and best sellers not replenished. Slow moving merchandise becomes abundant and the center of attention (dumping). Clearance sections grow bigger and bigger.”

Poor stock control also manifests in failure to keep up with a category’s life cycle. As Shannon Bedore Managing Director at Sightline Retail notes, “some of the early signs that a buyer or category are in trouble, is when buyers push out meetings and don’t bring in new products according to the category life cycle.”

“So think of tank tops and when these should set on the retail floor — usually March — so the retailer begins to capture the early summer selling first, and the customer stocks up there. However, if the retailer is in trouble they may push out the set until May or June to stretch out their cash requirements necessary to pay for the inventory.”

What to do about it. Keep your metrics in check

Optimizing your stock starts with knowing your numbers. Questions like what to stock up on or what to put on sale can only be answered if you’re monitoring the right inventory metrics. Not sure what to track? Start with the following:

  • Lost sales
  • Shrinkage
  • Sell-through
  • Stock turn

Improve cash flow

Is tight cash flow preventing you from stocking up on the right merchandise? Get more funds flowing by:

Liquidating excess inventory – If having too much stock is tying up your capital, find ways to move that inventory.

For starters, you could refresh your merchandising and displays to make products look more attractive. You could also bundle slow-movers with top sellers. Want to entice people to buy? Offer slow movers as freebies. And if those tactics don’t work, see if you can return or exchange those items. Another option is to sell them to liquidation companies.

Collecting unpaid invoices – Not collecting what’s due can keep much needed (and well-deserved) cash tied up, so if you have customers paying in installments, make it a priority to top of their accounts. Keep shopper records up to date, monitor outstanding invoices and send reminders when necessary.

Maximize revenue – Another way to improve cash flow? Sell more. Brainstorm ways to increase sales and revenue in your business. Is it a matter of improving your product offerings? Do you need to make your promotions more enticing? What can you do to get your existing customers to buy more?

Answering these questions can give you new ideas or shed light on opportunities you haven’t taken advantage of.

3. Decline in basket size or average order value

“Too many businesses (both online and brick-and-mortar) are tempted to focus on bounce rate and conversion rate; i.e., they focus on people who didn’t buy. These metrics are important, but they may be keeping your focus from customers who bought but didn’t buy enough,” says Steve Merrill, CEO at Bella Ella Boutique.

According to him, “Low AOV may indicate that your brand is failing to resonate with customers. Rather than being motivated to purchase by affinity for your brand, they’re motivated only by certain products or prices. They’re consumer mercenaries, ready to bolt to a competitor the second they don’t see a product or price that they like, only willing to buy one or two items at a time.”

“There may also exist unnecessary obstacles for high order value purchases, e.g., not offering a volume discount (ex. “buy 3 get the 4th free”), not showing customers related or synergistic products, or not selling high-margin, inexpensive add-on items like accessories, jewelry, stickers, or prints.”

What to do about it. Learn the art of suggestive selling

A good way to add value to each customer interaction is through suggestive selling. By recommending related products or upgrades, you could increase basket size while helping customers discover products they want and need.

Just be sure to practice ethical tactics. Don’t be the sleazy salesperson who’s only after the sale. Aim to genuinely help customers and add value to their lives.

Optimize your prices and offerings

You could be leaving a lot of money on the table by failing to price your products correctly. So, revisit your pricing strategy. Do the math, factor in shopper psychology, and explore tactics such as dynamic pricing or bundling to see what works for you.

If you’re running promotions, optimize them for different customer segments. For example, is a BOGO promo really the best way to go, or should you try a discount instead? Speaking of which, are you offering too big of a discount to shoppers who would convert at a lower threshold?

Ask yourself these questions then optimize your prices and offers accordingly. If everything goes well, you’ll start seeing an increase in your AOV.

Improve your branding and loyalty efforts

As Merrill puts it, low order values could be a sign of low brand affinity. Address this by forging stronger customer relationships and by making sure that they can relate and connect with your brand.

Be human. Tell stories. Have some personality and interact with your customers in genuine ways. Do these things consistently, and you’ll start attracting the right people into your store. The ones who will buy from you not because you have the lowest prices, but because they truly love your brand.

4. You see a breakdown of the culture that makes your company great

Angela Smith, the general manager at Lush Cosmetics, says that “a breakdown of the culture that started the brand will surely be the downfall in the end.”

The culture in your company — i.e., your way of life and shared beliefs — can influence every aspect of your business. When the culture deteriorates, the business itself suffers. Employees become less engaged, and in turn, the customer experience takes a hit.

It’s easy to let culture fall to the wayside when you’re busy growing and increasing profits. But letting that happen is a huge mistake. As Derek Sivers, Founder of CD Baby said on the Buffer blog, you should “Protect your internal culture, no matter what. Once it turns nasty, it never goes back. Fire a rotten apple immediately.”

What to do about it. Hire the right people

We’ve said it before, and we’ll say it again: when bringing in new people, hire for attitude and train for skill. If you’re given a choice between aptitude and attitude, go with the latter every time. Remember, skills can be taught, and qualifications can be earned. But someone’s natural disposition and attitude cannot be changed so easily.

You want to hire individuals who are a natural fit with your company culture and who effectively embody your brand.

Live and breathe your values

A while back, we interviewed Retail Culture Consultant Beth Boyd and asked her to share her thoughts on how retailers can create a strong company culture. One of her key pieces of advice? Solidify your mission, vision, and values, and see to it that your team is living up to those standards.

“Mission statements and values need to be real things that organizations speak to and hire to. They are not — nor will they ever be — lived or ever even referenced to if they are simply a poster on the wall or a page in a manual/handbook,” she said.

“People who share a passion for the vision and values of the organization and who are compelled by its purpose… will make a tremendous difference,” she adds. 

This is especially true when it comes to leadership positions.

“Executives who live and work with the organization’s vision & values and who make decisions are aligned with those things are easy and inspiring to follow,” shares Beth. “When there is a disconnect between the actions and words of a retail organization, that’s when things start to crumble.”

5. Employee morale is suffering

“Employee morale says it all,” says Meredith Lawler, Campus Visit Program Coordinator at the University of Denver.  “If your people are not happy it is a very clear indication that things behind the scenes are not running smoothly.”

Jon Winsell, Senior Director of Customer Experience Strategy at XperienceLab echoes this. When asked about the subtle signs of a retail business in trouble, he said, “Critical mass: employees don’t care. Not about customers or the retail environment. They are not engaged with customers. Customers are an interruption. Leaders either know morale is down and choose not to fix it or don’t know it’s down at all. Either way, there’s a going out of business sale on the horizon.”

What to do about it. Treat and pay employees fairly

This may sound like a no-brainer (and it should be) but plenty of companies still try to stiff their employees. Don’t be one of them.

Employees who are treated and compensated well perform better and are much more loyal. Ultimately, these things will lead to happier customers and a healthier bottom line.

Recognize great work

Never underestimate the power of staff recognition. If your employees are doing great, see to it that they know just how much you value them.

It also helps to encourage peer-to-peer recognition. As Rachel Cooper, a marketing specialist at Perks.com puts it, “Not only is it important that managers recognize employees for a job well done, it is equally important that there is some sort of peer-to-peer recognition going on at work.”

“Think about it. People you work with have a large impact on your self-esteem and ability to succeed. These are people you see on a day-to-day basis. Even if you don’t want to admit it, their opinions matter.”

Your turn

Did we miss anything? What are the other signs of a retail business in trouble? Share your thoughts in the comments.