The retail brick-and-mortar business is undergoing disruptive challenges of seismic proportions. With a sea change of disruptive, constant, and never-ending technology as the driver of innovation, coupled with the volatility in the macroeconomic business environment faced by most businesses today, it is the retail brick-and-mortar stores that continue to bear the brunt of these volatilities. E-commerce, a purveyor of disruption, lacking the legacy fix assets of traditional

brick-and-mortar stores, continues to make major incursions into the tuff that was previously an exclusive preserve of physical stores. Customers now have much shopping and buying options and formats at their fingertips. Thanks to the Internet-enabled browsing and shopping which desktops, laptops, tablets, and smartphones have enabled the consumer. If you are in the retail business, and you want to remain relevant, to thrive, and to grow your retail business, like all businesses you must constantly evaluate and update your business and marketing plans. Like a health check, this where an objective situation analysis of your business should begin. Situation analysis is a health check, and like all health checks, you must conduct it periodically, at least quarterly. In a retail business with physical stores, without periodic and ever-ending situation analysis (business health check), you wouldn’t know what perils may possibly be stalking your business just around the corner.

But What is a Situation Analysis?

According to professors Barry Berman and Joel R. Evans, situation analysis (a business health check)is an honest analysis of the challenges or threats facing your business, the opportunities you can exploit, the internal weaknesses of your business model, and the strengths your business possesses. This business health check is one of the first issues you must address when crafting or reviewing your business and marketing plan.

Situation Analysis: The Main Components You're Business Health Check

1. Business-Factor Environment

These are both the internal (micro) and external (macro) economic factors that can affect your business, for better or for worse. The business-factor environmental elements are what you must pay close attention. They consist of two elements; namely, microeconomic (internal checks)and macroeconomic (external checks).

• Microeconomic factors are internal to your retail business. To a large extent, you can manipulate these factors to your benefit. They include the revenue you earn or can earn within a defined period, your profit margin, the inventory levels you maintain or wish to carry, the products in your inventory (category management), your advertising budget and your staff strength. They are micro in the sense that they are internal to your business, and you can tweak and fine-tune them internally.
• On the other hand, macroeconomic factors are external and mostly beyond your personal control. They include national and global events, like the possibility of a recession, inflation, consumer price index, inflation, tariffs, and taxation. These are not factor-specific events that you can predict with reasonable accuracy much less control. That these macroeconomic factors are outside your control does not mean you should throw up your hands in the air and resign yourself to fate. There are a couple of proactive steps you can take to ameliorate and manage their effects on your retail business.

Take rising unemployment for instance. This has the effect of lowering consumer spending. This, in turn, means you must lower the inventory of goods you hold in your warehouse, and perhaps consider a halt on staff recruitment. To drive sales at your retail store, you may consider to counterintuitively spend more on advertising and sales promotion to drive traffic to your stores.

On the positive side, a rise in employment means more disposable consumer income. This, in turn, can translate to more retail patronage, increased revenue for your retail store, increase spend on inventories, and more staff hire. The same is true when the exchange rate is favorable. The favorable exchange rate means you can buy more for less or you can lower the selling prices of your merchandise.

Macroeconomic events uniformly affect most businesses, either nationally or globally. This is why it is recommended that you pay close attention to economic events outside your retail business. This will allow you to quickly and proactively update your situation analysis, and by implication, your business and marketing plan in sufficient time to either take advantage of favorable circumstances or hedge your retail business against negative macroeconomic factors before serious damage is done to your plans and projections.

2. Analyze Your Products Category as Part of Your Situation Analysis

Retail is detail. As a retail brick-and-mortar business, day-after-day, you generate lots of transaction data from the merchandising activities in your stores. Organize your product assortments into major categories, and treat each category as a strategic business unit (for instance, your skincare category may include: body creams, body lotions, body wash, wipes, lip care, foot care, and hair-removing products assortment). Then use transaction data from each category (in this case skincare category)to analyze the efficiency of each product assortments category, the effectiveness of your advertising campaigns, your pricing strategy, your inventory turnover, and other metrics you consider important. You should periodically review these data-driven transactions to gain valuable market insights. The market insight you gain will be valuable in helping you stay up-to-date in understanding market trends, category patronage, and the behavioral patterns of your customers in relation to each category assortments. Deep insights about your customers, a greater understanding of your market environment, and competitor analysis are the tools you will need to craft and tweak each product assortment category. You will know which product categories are being sold more, for instance, a particular brand of toothpaste, so stock more of that brand of toothpaste, and which products are not being sold in sufficient volume, for instance, a particular brand of body lotion, and so spend less in stocking that brand of mouth wash. This is one vital information you will need in making or reviewing your business and marketing plans by setting your business goals to sync with your customer buying preferences.

As a retail business, to thrive, you must be customer-centric in the decisions you make. Your business goals must be tailored to meet the needs of the customer segment(s) you serve. These goals will determine your product assortments and categories. You must aim to differentiate your business and what you offer from what your competitors offer.  You must decide whether to compete on the basis of price or quality or service (customer total experience). You may decide on a broad product assortment or a much narrower product range. These are issues that data-driven category management strategy will help you address.

3. SWOT Analysis

To a reasonable extent, SWOT analysis (strength, weaknesses, opportunities, and threats) and situation analysis overlap. In your retail business and market planning document, you may incorporate your SWOT analysis as an integral part of your situation analysis or conduct a separate SWOT analysis.

Basically, the SWOT analysis consists of two components. The internal components are the strengths and weaknesses inherent in your business model or operations. The external components are the opportunities you can exploit and the threats your business faces.

Your Business Strengths: Your business true strengths may consist of your store atmospherics, your unique visual merchandising display, the core competencies of your organization, your locational advantages, the technology you employ, your unique organizational structure and culture, your market share, retail brand image, financial resources. The point is to be as objective as possible in conducting your SWOT analysis.

Your Business Weaknesses: In auditing the weaknesses inherent in your retail business, it is important that you be as objective as possible. Drill down on available data to help you locate where your weaknesses lay. Is your category assortment and brand right for your customer segment? What about your pricing? Store location?

External Threats: External threats your retail business in particular faces and that faced by the whole retail industry, in general, is another issue you must address in your situation analysis. Technology and e-commerce perhaps may pose the greatest threats to brick-and-mortar industries as a whole. Year-on-year, e-commerce sales have continued to grow at the expense of brick-and-mortar stores. Online stores have become the unstoppable disruptor of brick-and-mortar business format. To combat this threat, you must seriously enlarge your online retail footprint. Some threats are internal, like overstocking on fads. This is particularly of great importance to the retail fashion industry.

Regulatory issues place limits on what you and your retail business can or cannot do and when. They include environmental regulation laws, especially in such areas as cleaning chemicals, food and safety, and ecological matters. You must equally take into consideration government regulations about licensing and permits, privacy laws, state and federal permits, and healthcare laws. Also to be considered are Federal and State company taxes, income taxes, and deductions.

4. Competitive Analysis

As part of your situation analysis, you must analyze your competition. Competition in the retail industry has assumed a cut-throat dimension. You must know your competitors, where they are, what they are doing, how they do what they do, what their strengths and weaknesses are compared that that of your retail store(s). You must analyze them, classify them into different groups, and monitor each group and their members. The insight you gain is invaluable as an aid in positioning your retail store(s), in better targeting your customers, and in taking the offensive or defensive competitive posture. You must give shoppers a reason to choose you over the competition.

Competitor analysis will help you know what the industry trend is in your sector of the retail brick-and-mortar industry. It will help you out-think and out-maneuver the competition. It will help you know what inventories to carry, what advertising campaigns will be appropriate, and how best to design your sales promotion for maximum effect. There is no one-size-fits-all for carrying out an insightful competitive analysis. However, you must pay attention to the following:

• Segment your competitors into meaning groups.
• Know who are your direct competitors and separate them from your indirect competitors.
• Study their websites for the product assortments in each of the categories they carry, the easy of their website navigation, their website load speed, the quality of images they use. The quality of blogs they post. Customer comments and followership. Experiment by place an online order to compare their speed of delivery and how their product packaging compares with yours.
• What is their unique selling proposition (USP)? How do they compare with yours? Do they live up to their USP?
• How are their products priced compared to yours? Is price a key competitive tool in their selling strategy?

 5. Technology

As a retail brick-and-mortar retailer, you must be agile, flexible, and nimble. You must employ retail technology to be omnipresent so that your customers can reach you from anywhere and at any time. Your customers' experience must be consistent and seamless across all channels. You must employ technology to know their needs, to engage them and be relevant when they desire information and or to make purchase intentions. Know that each customer is unique with peculiar expectations that change at a whim. You must be able to connect with them where ever they are through the use of customer relationship software, you must create a trusting, engaging, and delightful relationship experience with your customers. You must do all this while at the same time respecting their need for privacy.

In the final analysis, when all is said and done, the usefulness of your business situation analysis, like a comprehensive health check is as useful as the rigor with which it is performed. Understand that you are not alone in the retail world. Be mindful that your competitors are also studying you and other industry players. Understand that the business environment is volatile, uncertain, complex and ambiguous. Understand that the giant retail chains, with their almost unlimited resource-war chest, are there in your retail industry. So be practical. Be objective. Have clear goals. Articulate how you will attain your business goals from the prescription you derive from your business situation analysis.