Decline in sales: causes and strategies for their elimination

The effectiveness of both a small store and a retail chain can be determined by various indicators. One of them is the volume and quality of sales.

Sales volumes are a quantitative indicator that depends on the demand for products in the market, the assortment in the store, the service policy, the work of the staff and, in fact, marketing efforts that would maintain a constant interest in the target audience in the goods. 

Sales quality is a measure of trade efficiency that indicates the extent to which a product is able to increase a company's profits. It depends on the product's capabilities and on marketing activities aimed at increasing the value proposition of the product and the average purchase check.

Many entrepreneurs are interested in why store sales are falling and what measures should be taken to achieve a stable and desirable financial result in trade.

Factors that affect the quantity and quality of sales

If the sales volume is low or does not show the desired profit result, this may indicate either external factors, such as changes in the market, or internal factors, such as shortcomings in the company's work. Let's take a closer look at the internal causes of low sales.

1. Ineffective marketing strategy

Sales decline is often caused by shortcomings in marketing planning:

• Lack of a marketing strategy.

• Lack of marketing activities, in particular those that would work to increase the company's market awareness, inform potential customers about the store or products.

• Little or no investment in advertising and product strategy.

• Illiterate pricing.

• Unattractive loyalty program.

• Gaps in customer service.

No matter how great your product is, if you don't market it, no one will know about it. Start with small actions: outline your business goals and the marketing tools you intend to use to achieve them.

2. Uncompetitive prices

Reducing the price will not always increase sales. And vice versa, a price increase may be negatively perceived by consumers.

It is important to take into account the specifics of the product, its seasonality and changes in demand, which will determine the final pricing policy.

Read more about customer price perception in this article: Factors of price perception: how do customers evaluate the product?

3. Poor quality of goods or lack of value for the customer

If your product doesn't cover 100% of the consumer's needs, for example, you resell the same e-cigarettes as your competitors across the street and don't provide any bonuses, you should consider creating a USP. This is the value proposition of a product that distinguishes your product from the rest.

To develop it, research your target audience and add convincing evidence or facts to your offer that show why the customer should buy from you. If you don't have anything unique to offer, promise them a discount on their next purchase, set up special conditions for regular customers, etc.

4. Assortment

An insufficient selection of goods that does not meet the needs of different customer segments, a lack of new products and current trends, and a complete size range of clothing or footwear can negatively affect sales.

However, if you have a really small selection of products of the main group, dilute it with related items: for example, in a clothing store — accessories, cosmetics — perfumes, and vice versa. 

By selling a complementary product alongside the main locomotive product, you will not only increase the average check, but also customer loyalty to your store. Don't make them search for what they need, offer ready-made sets or show combinations of products.

Upselling is often used by large retail chains and online stores:

5. Poor customer service

If your staff doesn't know the basic rules of communication with customers, doesn't understand the product and terms of trade, your physical store has long lines at the checkout, and there are not enough consultants in the sales area, the question of why your store's revenue is falling will be rhetorical.

A similar anti-effect is created by slow processing of customer requests in an online store, lack of responses to user messages, etc.

6. Inconvenient location

Difficult accessibility of the store or its remoteness from target customers, lack of parking or public transportation near the store, for online sales — lack of geotagging of the store on Google maps — all this will irritate customers, especially those unfamiliar with your company. They may already be unsure about choosing your product, and you make them make an effort.

7. Lack of online presence

If you don't have an online store, it shows that you are not adapted to e-commerce in the era of increasing online shopping. More and more customers are choosing to buy online, even for complex and expensive products. 

If your offline sales are sagging, it's time to think about an additional sales channel. A website is guaranteed to improve your business, provided that you have a successful marketing promotion.

By the way, Torgsoft has its own digital platform that allows you to create an online store in just 1 day. TOM — Torgsoft Online Market is a turnkey solution for launching your own website from scratch, which, together with the accounting program, is a powerful tool for conducting full-fledged e-commerce.

8. Haphazard management accounting

The absence of a clear strategy for managing and accounting for goods in the store is another wake-up call that your sales may not be reaching the desired numbers. Sporadic or outdated accounting methods eventually lead to chronic gaps in sales:

• debts, and shortages of goods,

• errors in calculations: revenue and profit,

• staff theft and fraud,

• disorder in reporting to the tax authorities,

• chaos in warehouses and retail outlets, etc.

Only systematic and correct accounting can fix existing problems and launch stable business processes on autopilot. In general, automation in trade helps to increase business productivity, reduce routine work, increase the accuracy and efficiency of processes, and provide a better customer experience.

9. Insufficient attention to data analysis

Lack of analysis of customer behavior and preferences, ignoring data to optimize assortment and marketing campaigns also negatively affects business profitability.

10. Economic factors

Economic and political turmoil, inflation, war, recession — all these external factors lead to a decrease in the purchasing power of the population and, as a result, a drop in sales. In addition, consumer preferences may change, and your product will simply lose relevance in the market.

You should regularly update your product range, follow trends, and work proactively, incorporating possible risks into your planning strategy. 

How to identify the causes of a sales decline and what measures to take?

Timely and regular monitoring of sales allows you to identify the types of products that lead to profit or loss. This will help to remove unprofitable products from the assortment in time and actively promote the profitable segment.

In the Torgsoft program, the "Sales Analysis by Product Type" mode is designed to compare sales results by category and shows what actions need to be taken to increase sales and reduce costs: evaluate and optimize the assortment, adjust purchase volumes, and form a marketing policy for identified unprofitable and profitable positions.

Analysis of sales by product type. It provides information for each type of product for the selected period:

✓ the number and amount of receipts,

✓ quantity, amount of sales, amount of cost of sales,

✓ quantity, amount of return, cost of the returned goods,

✓ the number and amount of inventory balances at the end of the selected period, the average cost of inventory balances in the selected analysis period,

✓ final indicators:

❖ revenue — amount of sales — amount of returns — actually shows the share of the type of product in the store's turnover, 

❖ Revenue — cost of sales + cost of returns — commodity profit by type of product;

❖ profitability — revenue by type of product per month / average cost of product balances for the period of analysis.

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Solving the problem of a sales decline requires a comprehensive approach, which may include changing the marketing strategy, reviewing the product range, training staff, improving the quality of service, investing in an online presence, etc. Understanding the target audience and the ability to adapt to changing market conditions also play an important role in increasing sales.