The Complete Guide to Market Research for Your Retail Business (2024)

Long gone are the days when price was a leading factor in consumers’ purchase decisions. While price still plays a role, today multiple factors are at play such as brand differentiation, reputation, and customer-centric return policies.

But how do those considerations drive the purchase decision? It’s hard to read a customer’s mind, and it’s challenging for retailers to figure out where they fit when compared with their competition. Especially for retailers just starting out, it may feel like a lot of decisions are made on guesswork or instinct.

Market research can remove much of this uncertainty by helping you understand your industry, your target customer, your competition, and your product. When you understand all that, your chances of success are a lot greater.

There are many agencies that perform market research, and you can always get help from them. If you’re on a budget, however, you can do the research yourself. In this guide, we’ll show you how.

What is market research?

Market research is the study of a target market, including companies and people involved, to understand its needs and preferences.

Essentially, it gives you an understanding of the cultural, societal, socioeconomic, geographic, and personal makeup of your target customers. It will help you understand whether there’s a demand for your product, how big that demand is, and who is generating the demand. It’ll also help you understand the competitive landscape.

Market research, in other words, is research about the world of your retail business. Among other essential details, it will provide you with data on your target shopper’s buying power, shopping preferences, and relationship with competitors.

With this information, you’ll be able to create products that provide solutions, market to consumers effectively, and increase your chances for success.

Put simply, retail market research tells you who your target consumers are and why they’d want to buy from you.

Why is market research important?

The 2022 Shopify Future of Commerce report reveals that availability of marketplaces and advancements in technology have lowered the barrier to entry. As more retailers enter the market, competition is only going to grow.

Fortunately, market research can help you not just effectively growbrand awareness but also stand out andmake loyal customers.

Here are some things it can help you do:

Better understand your target market

Market research gives you insights on the size of the market you’re targeting, how competitive it is, and where there’s room for improvement. This information can help you create aSWOT analysis, which in turn helps you devise strategies to penetrate the market effectively.

Get a strong grip on your target buyer

With market research, learn where and how to find your customers and how to present your product to them. With the insights that you gather, you can work out audience-resonating marketing strategies,smart product pricing, and effective brand positioning.

Validate product idea(s)

By digging into consumer shopping preferences and interests, you can validate and refine your ideas. Consumer feedback on sample products and new concepts can help you launch products already proven to succeed.

Stand out from competitors

Competitor analysis as part of retail market research tells you how fierce the competition is and what others are doing to market and retain their buyers.

It also reveals your competitors’ product quality and shortcomings, helping you design better product and customer experiences.

Understanding the competition, then, helps you figure out how todifferentiate your brand and develop a unique selling proposition to stand out from the crowd and attract customers.

How to do market research for your retail business (+ tools)

While some business owners opt to hire a market research firm or consultant, it’s entirely possible to conduct this research yourself. In fact, many retailers prefer to own the market research process as they enjoy spending time with customers and learning more about how consumers view their businesses.

If you’re wearing the researcher’s hat yourself, know that there are two elements of market research: primary and secondary research. We encourage you to begin your research by reviewing secondary research materials: industry reports, trends, and case studies. By starting with this established data that someone else has collected, you’ll learn more about how you’d like to conduct your lengthier, more expensive primary research.

Secondary market research methods

Here are some tools and sources for secondary market research:

Nielsen: Nielsen has research reports and studies on consumer behavior across more than 100 countries.

Pew Research Center: Pew also conducts scientific studies, many of which provide insight into consumer behavior and trends.

D&B Hoovers: You can purchase reports from D&B, a company which has researched over 85 million corporations, 100 million people, and 1,000 industries. Expect to find insights ranging from consumer behavior to competitive analysis and industry trends.

MarketResearch.com: Much like D&B, MarketResearch.com has tons of independently conducted research and analysis reports you can purchase. Retailers can start by checking out their list of consumer goods reports.

U.S. Census Bureau: The U.S. Census Bureau provides a holistic look at the American economy. Use it in your market research to understand the state of your industry both in the United States and internationally (they have a whole section on retail trade).

U.S. Small Business Administration: The SBA offers resources to help American-based retailers understand their target market and current economic conditions. The SBA’s free SizeUp tool is a great way to see how you stack up against your competition.

Bureau of Labor: The Bureau of Labor has an abundance of resources to help you learn about employment in the U.S. They provide employment rates and statistics on topics like occupational employment and wages, labor demand and turnover, and the dynamic state of the labor market.

Office for National Statistics: U.K.-based retailers can use the numerous resources here to learn about their industry, the economy, employment information, and consumer demographics.

FedStats: This is another great U.S.-based resource for statistics and trends that cover a variety of topics and findings from trusted sources.

Consumer Price Index: The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. This is a great way to learn how to set prices for your products.

Consumer Spending: The U.S. Bureau of Economic Analysis has personal consumption expenditures (PCE) resources that you can use to learn about how to price your products, similar to the CPI.

American FactFinder: The U.S. Census Bureau has a whole library of facts that can be especially helpful in researching the demographics of your target customers.

Consumer Product Safety Commission: This U.S. agency reports injury statistics based on product category and by hazard category. It helps estimate how many injuries caused by products will be treated in the emergency room each year. You can use this information in a variety of ways, from determining your selling proposition as a safe product provider to understanding how to communicate the safety of your product to customers.

Primary market research methods

Next, go down into the trenches and study the market directly. Use the following methods for primary research:

1. Customer surveys

Customer surveys are a way to gather data on your target market. Depending on the questions you ask in your survey, you can not only understand your target market and its competitiveness but also get feedback on your product.

Several free tools such as Google Forms and SurveyMonkey are available to help you conduct customer surveys. Use them if you already have an engaged audience, such as an active email list or social following.

Don’t have an audience yet? Share the survey in relevant Facebook Groups, online forums, and Slack channels.

If you need to get the survey out to more people, pay for a service like Google Surveys, which also allows you to add targeting parameters to get more specific and relevant insights.

2. In-depth customer interviews

Customer interviews are one-on-one interviews with customers. You can conduct video chats or meet customers in person or over the telephone.

Since customer interviews are direct conversations, they provide unparalleled insights about your consumers, their shopping motivations, and feedback on your brand and product(s).

Customer interviews can help you make smarter business decisions. For example, paying attention to the language your target shoppers use during the interview can help you create audience-resonating marketing copy and store layouts.

The key is to ask open-ended questions that encourage interviewees to give longer responses instead of plain “yes” and “no” answers. For example, instead of asking whether they prefer to tap or insert their card when paying, ask them what they think about contactless payments.

Making this kind of subtle change in the way you frame your interview questions will get the interviewee thinking, getting you excellent insights.

Keep in mind that customer interviews don’t have to be long. Also, you can incentivize consumers with something valuable for taking the time to talk to you. This could be anything from a gift card to a free product or lifetime membership.

3. Customer reviews

Customer reviews can offer a treasure trove of actionable consumer insights.

You don’t have to stop at studying your own business: analyzing competitor reviews can tell you what customers like and dislike the most about them, what they commonly complain about, and how those retailers handle negative reviews.

What’s more, the insights you uncover here can guide your product creation and give you ideas for improving the customer experience.

Make sure you gather reviews from various channels such as social media and review sites (think: Yelp, Amazon, and Google).

Having a large and diverse pool of customer reviews coming from people who represent your customer base helps reduce the odds of bias in review analysis.

It’s also helpful to study reviewer profiles. Record reviewers’ age, location, gender, items purchased, and date of purchase. This extra layer of data will help you identify trends based on customer profiles.

4. Contextual inquiry

Contextual inquiry is a user research technique that involves observing and interviewing people while they perform tasks in context. It helps validate product ideas and improve prevailing user journeys such as how customers navigate your store layout.

By observing how participants complete a task—ask them, for example, to describe how they navigate your point-of-sale (POS) system—you can easily learn how consumers use and feel about your store, products, and purchase processes.

Don’t forget to carefully observe participants’ non-verbal cues such as their body language. This helps you track and understand their habits and how their mood changes as they interact with a product display or in-store event.

The best part? Contextual inquiries aren’t very formal, which helps you get your hands on more realistic data.

5. Mystery shopping

Another useful market research method is to send undercover researchers as customers to stores—yours or your competitors’—to evaluate store operations and customer experience.

Secret shopping gives you the benefit of learning from interacting with store employees in real time. It also helps you study your competition and access information only available to their customers.

Most important of all, mystery shoppers can study any and every aspect of the customer experience, including:

• Greeting and wait times
• Staff knowledge and helpfulness
• Product variety and availability
• Store design including cleanliness, product display, andwindow display

You can always pre-script the visit (ask researchers to evaluate specific details) or keep it open, encouraging researchers to share whatever they experienced.

Secret shopping isn’t limited to store visits. Mystery shoppers can buy and return merchandise to understand how a store handlesreturn exchanges. They can also make phone calls or contact specific departments via website forms or emails to evaluate performance.

6. Focus groups

Focus groups bring together a group of 6-10 people to gather feedback on a product, service, idea, or marketing campaign from them.

People interviewed in focus groups are systematically selected based on their demographic traits. The questions are scripted beforehand, and the interviewer’s role is to elicit responses from all participants.

Focus group sessions are a low-cost, high-accuracy market research method, delivering insights in the respondents’ own words.

You can hire an agency to conduct in-depth research via focus groups. Or create an online focus group for learning consumers’ thoughts on whatever you want.

Hair care brandCeremonia'sfounder, Babba Riversa,created an online community of influencers for planning her brand launch. Initially, the group met in person to give Riversa feedback on products. Later, when the pandemic hit, the group went virtual, meeting weekly on Geneva.

7. Sales records

This involves studying customer and sales information already available, and works best for established retail stores.

These sales records, covering customer purchase dates, amount, payment method, returns, and other information, provide a goldmine of data. The data is also proprietary and unique to your business—no one else has that information.

Analyze it to identify your loyal customers and customer-favorite products, and use the insights you gain to plan marketing approaches that will most likely resonate with these customers.

8. Employees

Finally, ask sales associates for their findings on the floor, whether it’s commonly asked questions from customers or observations in customer behavior.

Staff research can uncover insights that not only help you better understand your customers but also learn how effective yourvisual merchandising, store layout, and sales promotions are.

By asking staff to observe customer motivations and what products they frequently buy together, you can train them to upsell and create hot-selling product bundles.

Improve your retail business with market research

In a nutshell, market research is essential. It can show you how to create customer-favorite products, beat your competitors, and provide an exceptional customer experience.

Market research also never ends. You should conduct market research on an ongoing basis: the market changes frequently, and you need to be on top of those changes to stay ahead of the curve.