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The Biggest Hidden Costs to Retail Businesses – HindSight

The Biggest Hidden Costs to Retail Businesses

When you’re planning out a business, often you consider the location, merchandise, employees, and loan payments as the big expenses to watch out for. And while these play a large part in the running of a retail location or online service, they can be perfectly factored in only for you to find at the end of the month that your input is greater than your output. Hidden costs can mean the difference between profit and loss, so here are three big ones that might stop you from succeeding in the retail industry.


Unfortunately, employees in retail tend to have high turnover—above 60%, in fact. And high employee turnover rate means costly rounds of hiring, recruiting, and training that takes time out of managers’ other responsibilities, while other employees struggle to pick up the slack. Exit costs of employees leaving and costs for new hires are easy to see, but then there’s also the decrease in your company’s productivity, knowledge, and morale, which can incur costs that are harder to measure. While being in retail means you probably won’t avoid having a higher average than the national average, 19%, you can still take action to decrease employee turnover rate at your business and lower such costs.


Another huge expense to retail businesses is theft—whether by employees or shoplifting. Commonly referred to as retail shrinkage, the loss of inventory is ultimately the loss of profit, and so should be handled seriously and proactively. Minor expenses now can save you a lot later; security cameras reduce the costs of theft to your business. Intentionally laying out your store makes it harder for shoplifting by customers to occur. Considering theft is the cause of 36.5% of a retail’s annual losses, it’s definitely one you should take steps against when your profits don’t look the way they should.


Especially when first planning a business, people often forget about the costs of licenses and other permits. Almost every state requires you to purchase a local business license, and there are many counties and municipalities that require their own as well. Most states also dictate that you need a resale license to buy goods tax-exempt from a manufacturer, an essential part of retail. Even more, there’s your business name registration, permits to sell certain things like alcohol, and fines if you don’t renew them on time!

There’s a lot of things to think about when getting your retail business off the ground. Preparing for hidden costs like these will make a big difference. With that in mind, plan very carefully to avoid losing out on the profit awaiting you!

Read this next: How to Navigate Legal Difficulties in Business

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