SWOT Analysis for Retail

by Rick Suttle; Reviewed by Michelle Seidel, B.Sc., LL.B., MBA; Updated February 12, 2019

Retail companies, like other businesses, often use a SWOT (strengths, weaknesses, opportunities and threats) analysis to evaluate their businesses. A SWOT analysis for retail is a detailed look at the retailer's strengths, weaknesses, opportunities and threats versus key competitors in the marketplace. Strengths and weaknesses are considered internal factors, over which a retailer has more control. Opportunities and threats are external factors, which are positive and negative situations that retailers continuously face.

Identify and List Strengths

The first step in doing a SWOT analysis for a retail company entails identifying strengths. One possible strength may be the retailer's financial backing if it has plenty of capital and access to bank loans. Another strength may be the retailer's cheaper wholesale prices. Additionally, the company may offer unique products compared to other retailers.

For example, a clothing store may sell high-quality but slightly defective clothing at a low price. Whatever the case, a retailer should make a list of all its strengths versus key competitors.

Identify Palpable Weaknesses

A retail company should identify its most palpable weaknesses in a SWOT analysis. Through market research, the retailer can check if it has a weak brand image versus key competitors or lack of identity in the marketplace. For instance, the store may sell both cheap and expensive brands, so it lacks a defined place in the minds of consumers. Essentially, the store selling to all market segments may mean it has no competitive advantage that sets it apart from other retailers.

Look for Opportunities

Another step in a retail SWOT analysis is identifying key opportunities in the market, often through a review of a company’s sales force and market research. Opportunities can include unfilled consumer needs. For example, a small web design company may see an opportunity to add consulting services, if it identifies customers who desire it when conducting marketing research. Or a retail company may identify an opportunity to purchase a smaller retailer to increase market share through a SWOT analysis.

Pinpoint Potential Threats

A retailer can identify certain threats through a SWOT analysis. Threats can include a decrease in consumer demand, a recession, price wars among key competitors or even an increase in competition. Even a change in shopping habits can be a major threat to a retailer.

For example, when people started migrating to the suburbs in the 1950s and 1960s, downtown retailers, which represented the traditional way of shopping, were affected. These days, the growing popularity of online shopping represents an ongoing threat to bricks-and-mortar retailers.

Analyze SWOT for Better Decision-making

Retailers should not just identify their strengths, weakness, opportunities and threats; they must also use this analysis to develop effective marketing strategies. This can be accomplished by matching an internal variable, like strengths, to an external variable, like opportunities. For example, the owner of a chain of gift shops may have a tech-savvy marketing team – a strength – so she may see the opportunity to increase sales and profits through social media campaigns over the Internet that the marketing team can spearhead.

SWOT analyses can also be integrated into a retailer’s hiring practices. Asking a potential manager prospect to complete a SWOT on the business or a competitor as part of the vetting process can reveal helpful information and identify candidates with the analytical skills to improve the company’s bottom line.

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