How to start a retail business

Starting up in business can be both demanding and rewarding, and for those looking to establish themselves in the world of retail the choice can present unique challenges. There is the initial decision over whether to establish the business as either a bricks-and-mortar operation, or whether to go completely online.

Then there is the competition - the retail sector is tough and it is worth bearing in mind that any business no matter how unique is going to have to compete, not just with similar retailers but with a wide variety of different shops for the consumer spend.

Is the retail sector right for you?

Sit yourself down and consider if retail is really the type of business for you, because it is important to be committed. As many of the larger high street chains are proving at the moment, business is tough and with consumers tightening their belts there is less spending money to go around.

Owning a shop is also hard work. If you decide to run a high street outlet you must ideally work in the shop yourself to get to know the business from the bottom up. This leaves less time for other important tasks like managing the finances and marketing the business. Even if your business is online you will have to manage stock and the mailing of purchases to customers as well as promoting the website online.

Many retail start-ups now establish a customer base for their products online before venturing into the world of the high street. This is a less risky way to get started because it requires less start-up capital.

What will you sell?

Many people want to own a shop because they have a special interest in something, for example fashion or crafts. The decision as to what type of retailer you want to be and what type of products you will sell will form the foundation for your business and it’s very difficult to change once you are up and running.

Doing some research into what customers are buying and into your competitors is an important step. It will help you to clarify who your customers will be and what they will buy. For example you may want to open a shoe shop. So you would find out: which other shoe shops will be in competition with me, what type of shoes do they sell, who is their target customer, what is the quality and price of their shoes? Is is also useful to find out what the demographic is in the local area, for example what is the average age of residents, where do they usually shop, what employment opportunities are in the area?

Doing this research will show you who your potential customers are and how much money they have to spend. It would be pointless opening a designer shoe shop in a town where most of the locals are over 50 and most people work in a factory!

Objectivity is the name of the game here. If a particular hobby or product is close to your heart you may not be able (or want) to see that selling it it wouldn’t make a profitable business.

Hitting the high street

If you have the funding and the right type of products, you may decide that the bricks-and-mortar shop is for you.

If this is the case you need to think about finding a premises in the right location first and foremost. Shops rely on what is called footfall, or the number of people walking through the doors, and this won’t happen if nobody knows your shop is there. The only shops people tend to set out with a mind to visit are grocers or supermarkets in order to buy
necessities. Even if they are doing some personal shopping or gift shopping it is most likely they will visit the shopping centre with a view to browsing rather than with a specific shop in mind.

What this means for you is that you need your premises to be in close proximity to other shops – either those that sell the necessities or those that offer the opportunity to browse.

Financially, a bricks-and-mortar shop also carries a burden. You’ll need to be able to cover rent, business rates, energy bills, the cost of re-fitting the inside and fitting a new fascia on the outside, plus many other costs. As it is unlikely you’ll generate enough revenue to begin with to cover all these costs it is important to ensure your start-up capital will cover you for at least a few months.

Selling online

You may decide that your type of shop is best suited to the internet, in which case you will need to consider a different set of factors.

Setting up your website is your first priority and if you are serious about your business it is best to get it professionally designed and developed. This is especially true when you need a shop-front function as this needs to work smoothly and give customers confidence in you when they are handing over their credit card details.

Many people think that just creating a website is enough and that the customers will start flocking to it in their droves. Of course when you consider just how many websites and more importantly, online retailers, there are on the internet you’ll know that this is far from the case.

Invest time in learning how to optimise your site to rank near the top for the search engine terms that fit your business. Key things to work on are creating intelligent, relevant content and getting other relevant websites to link to your site.

Other things to consider when running an online shop are: the amount of stock to buy and where you will store it; how you will deliver goods to customers and what your terms will be; how you will take payment and what payment options you’ll be able to offer to customers; how you will keep your website up-to-date with new products and new content; where you can advertise and how you will differentiate your business from its competitors.

Get professional advice

When starting a new venture, it is a good idea to get as much advice as possible from the broadest range of sources, particularly on legal or financial issues, or for help creating a business plan. Retail is not an industry to be entered into lightly, especially in the current economic climate, so doing as much preparation and research as possible beforehand is doubly important.

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