PESTEL Analysis for Retail Sector
The PESTEL Analysis is an analysis of six key macro level elements which impact business and the decisions that they make. The retail sector on the other hand entails the sale of goods and services from a fixed location like a departmental store, kiosk or boutique, or through mail in small quantities that are directly consumed by the buyers. Besides, it should be noted that retailing can also include subordinated services like delivery. The buyers can be individuals or businesses based on the product. The PESTEL Analysis looks into factors like political, economic, social, technological, environmental and legal.
There are various kinds of political factors for the retail industry. Such factors can be impacting the sector currently and also have an impact in the future. Some of those macro level elements that players in the retail industry need to look into include rate of tax levied by the government, interest rates, political stability, consumer protection and foreign exchange rates for retail businesses that are operating on an international platform.
The economic environment is yet another aspect of PESTEL analysis that is very crucial for the retail sector. All those businesses that fall under the retail sector have to be up to date with the economic situation of the country in order to survive and make profits since when the economy is doing badly, spending habits shift. This in-turn impacts demand and supply.
Social and cultural changes that take place in a country are also of great importance to players in the retail industry. Such changes may have significant impacts on the performance of the sector. For instance, in a country whereby the population is culturally diverse like the UK, retailers have to be on the look out to supply products and services that can suit the various needs of buyers in order to perform well. The retail industry has to know how to manage diversity in order to benefit from the market.
In almost every sector today, technology is taking center stage. For instance, many consumers are today opting to shop online. Thus, it is very important that players in the retail industry are very keen to adapt to the technological changes in order to meet the various needs of buyers. Through technology, retail businesses can develop better relationships with the customers.
Since retailers operate on fixed locations, it is also important to consider the physical environment. Retailers have to be keen on selecting environment that is conducive for their target customers, the location is ideal in determining the number of customers that a business can attract. Besides, retailers should also be keen on the impact that their businesses have on the environment since that too can impact their performance.
For any business, there are always certain legal minimum standards that have to be met. Besides, there are also various pieces of legislations that are made from time to time in order to control the way in which retailers operate. These are important to look into so as to avoid getting on the wrong side of the law.
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