Five Below (FIVE) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Department & Discount)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Five Below (United States)
Based on various researches at Oak Spring University , Five Below is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings,
geopolitical disruptions, challanges to central banks by blockchain based private currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Five Below can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Five Below, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Five Below operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Five Below can be done for the following purposes –
1. Strategic planning of Five Below
2. Improving business portfolio management of Five Below
3. Assessing feasibility of the new initiative in United States
4. Making a Retail (Department & Discount) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Five Below
Strengths of Five Below | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Five Below are -
Effective Research and Development (R&D)
– Five Below has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Five Below staying ahead in the Retail (Department & Discount) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy of Five Below comprises – understanding the underlying the factors in the Retail (Department & Discount) industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
High brand equity
– Five Below has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Five Below to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Retail (Department & Discount) industry
- digital transformation varies from industry to industry. For Five Below digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Five Below has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Training and development
– Five Below has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Ability to recruit top talent
– Five Below is one of the leading players in the Retail (Department & Discount) industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Strong track record of project management in the Retail (Department & Discount) industry
– Five Below is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Five Below is present in almost all the verticals within the Retail (Department & Discount) industry. This has provided Five Below a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Superior customer experience
– The customer experience strategy of Five Below in Retail (Department & Discount) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Five Below is one of the most innovative firm in Retail (Department & Discount) sector.
Successful track record of launching new products
– Five Below has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Five Below has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Analytics focus
– Five Below is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Retail (Department & Discount) industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses of Five Below | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Five Below are -
Slow decision making process
– As mentioned earlier in the report, Five Below has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Retail (Department & Discount) industry over the last five years. Five Below even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Low market penetration in new markets
– Outside its home market of United States, Five Below needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on Five Below ‘s star products
– The top 2 products and services of Five Below still accounts for major business revenue. This dependence on star products in Retail (Department & Discount) industry has resulted into insufficient focus on developing new products, even though Five Below has relatively successful track record of launching new products.
Employees’ less understanding of Five Below strategy
– From the outside it seems that the employees of Five Below don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Products dominated business model
– Even though Five Below has some of the most successful models in the Retail (Department & Discount) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Five Below should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the Retail (Department & Discount) industry, Five Below needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow to strategic competitive environment developments
– As Five Below is one of the leading players in the Retail (Department & Discount) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Department & Discount) industry in last five years.
Lack of clear differentiation of Five Below products
– To increase the profitability and margins on the products, Five Below needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Five Below has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Skills based hiring in Retail (Department & Discount) industry
– The stress on hiring functional specialists at Five Below has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Aligning sales with marketing
– From the outside it seems that Five Below needs to have more collaboration between its sales team and marketing team. Sales professionals in the Retail (Department & Discount) industry have deep experience in developing customer relationships. Marketing department at Five Below can leverage the sales team experience to cultivate customer relationships as Five Below is planning to shift buying processes online.
Five Below Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Five Below are -
Manufacturing automation
– Five Below can use the latest technology developments to improve its manufacturing and designing process in Retail (Department & Discount) sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Use of Bitcoin and other crypto currencies for transactions in Retail (Department & Discount) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Five Below in the Retail (Department & Discount) industry. Now Five Below can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Five Below to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Five Below to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Five Below has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Department & Discount) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Five Below can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Five Below can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Five Below can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Better consumer reach
– The expansion of the 5G network will help Five Below to increase its market reach. Five Below will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Retail (Department & Discount) industry, but it has also influenced the consumer preferences. Five Below can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Five Below can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Retail (Department & Discount) industry.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Five Below can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Buying journey improvements
– Five Below can improve the customer journey of consumers in the Retail (Department & Discount) industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Five Below can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Five Below to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Five Below can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Threats Five Below External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Five Below are -
Consumer confidence and its impact on Five Below demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Retail (Department & Discount) industry and other sectors.
Technology acceleration in Forth Industrial Revolution
– Five Below has witnessed rapid integration of technology during Covid-19 in the Retail (Department & Discount) industry. As one of the leading players in the industry, Five Below needs to keep up with the evolution of technology in the Retail (Department & Discount) sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Five Below needs to understand the core reasons impacting the Retail (Department & Discount) industry. This will help it in building a better workplace.
Regulatory challenges
– Five Below needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Retail (Department & Discount) industry regulations.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Department & Discount) industry are lowering. It can presents Five Below with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Department & Discount) sector.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Five Below in the Retail (Department & Discount) sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Five Below can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Five Below prominent markets.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Five Below may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Department & Discount) sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Five Below in Retail (Department & Discount) industry. The Retail (Department & Discount) industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Shortening product life cycle
– it is one of the major threat that Five Below is facing in Retail (Department & Discount) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Five Below needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Five Below can take advantage of this fund but it will also bring new competitors in the Retail (Department & Discount) industry.
Weighted SWOT Analysis of Five Below Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Five Below needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Five Below is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Five Below is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Five Below to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Five Below needs to make to build a sustainable competitive advantage.