How to start a retail business
Retail Business is one of the fastest growing business in the economy.
In all the countries around the world, retail business plays vital roles in making products available to the consumers. Economists affirmed that the production is not complete until the goods get to the final consumers.
In most cases, there are intermediaries between the manufacturers and the consumers. The intermediaries can be a combination of wholesalers and retailers. At times, it can be that the retailers buy directly from the manufacturers to sell to the consumers. It is not a surprise if a manufacturer serves more than fifty retailers. This is why the number of retail businesses are always on the increase. Whether on the high street, market places or in the neighbourhood, you will see retail businesses around you. Retail business is a good alternative to 9 – 5pm pay check jobs.
Actually, retailing is one of the largest employers of labour in any country around the world. Retail business is a unique small business idea for men and women. It does not only provide job opportunity for the owners. Retailing provides job opportunities for employees of all levels depending on the size of the retail business. As a retailer, you can either buy goods and services from the manufacturers, wholesalers, importers having capacity to buy in large quantities, or other retailers who buy in bulk from wholesalers. You can start retail business either by buying a franchise, or buying over an existing retail business or start your own retail shop from the scratch. If you like to buy a franchise, this will give you access to the use of already established trademark. And you will gain supports from the franchisors. But this can be expensive for someone who wants to start a retail business with no money or low investment capital. As a franchisee, you need to pay initial fee and annual royalties to the franchisor. If you like to start you own shop from the scratch, you have the privilege to develop and grow your own brand. This method can be slow. It requires a lot of patience. In general, iIf you are considering starting a retail business, you need to take the following steps:
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Decide on products to sell
Retail business is a business with varieties of products to sell. The first thing you need to do if you want to start a retail business is to decide on the products to sell. Before you choose products to start a retail business, a lot of factors come into play.
- If you want to start a retail business, you need to be passionate about the business and the products you sell. Considerable part of your days will be spent running the retail business. Therefore, it will grow to become a part of you. You cannot afford to live with what you don’t have passion for. If you have passion for the products, you can stay the whole day at the business without feeling bored. Your hobbies can be a pointer to the type of products you can sell effectively.
- Products Knowledge. If you start a retail business without adequate knowledge of the products, you will find it difficult to even convince the customers to buy the products. If you have been working as an employee, you can leverage on the knowledge of products your company manufactures or sells to start your own retail business.
- Inter-personal skill. Before you start a retail business, you should understand that the business requires ability to relate with others very well. Some products demand that you should be able to advice customers about the uses of the products. Therefore, you should be able to communicate well and should be tolerant as you will have different types of customers coming to chat or seek advice on the product you sell.
- Marketplace Desires. Before you start a retail business at all, it is important I advise you that you should not be carried away with any favourite product. Passion is not enough. If a product is not selling, you don’t need to get too attached to such product to the point that you cannot do away with it. You need to separate your personal favourites from what customers actually desire. You have to validate that your target customers will be willing to buy the products.
- Consider the profitability of the products. Sales is not equal to profits. It is one thing to sell, it is another thing to record profits on the sales. You need to consider all the cost elements of the products. You then compare the cost to what the customers are willing to pay. If there is enough margin on the product, then such product can be a good one to sell. Margin is the difference between your sales price and the cost price. Your sales price should be higher than the cost price.
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Study the market
After you have located good products to sell, you need to conduct a market research. Your research should uncover the size of the market and your competition. In retailing, it is not uncommon to see many retailers selling almost the same things on the same street. Visit the shops of your competitors and conduct your own SWOT analysis. SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. The fact that there are many competitors does not mean that you cannot start your own retail shop. You only need to learn how to differentiate yourself. You can differentiate yourself through good customer service or by offering products that are not available at your competitors’ shops in conjunction with what they sell. This will help draft more traffic into your shops, Some customers like doing all their shopping in one place. Also, you can decide to extend your closing hour to allow shopping for customers coming late from work.
Choose a perfect location
When it comes to retailing, location is very important except you want to start a retail business online. Why is location important when starting a retail business? Whether you want to start a small retail shop or a mega supermarket, the location determines your sales volume. In retailing, if your margin is low but you are able to sell in high volume, this will translate to high profits at the end of the day. When you want to choose a location for your retail shop, you need to consider the following:
- The customers. Who are your customers? Where do they work or live? Where and when do they do their shopping? I believe the reason you want to open a retail shop is to sell to your customers. You should open your retail store in a place that is easily accessible to your customers.
- The security of your merchandise, yourself, your staff and your customers is very important. Theft can erode all the profits you have ever made in one day. Also, customers may not be willing to do their shopping where their security is being threatened. Your background checks will reveal whether a particular location is safe or not.
- When you want to start a retail business, you must find out if the zoning of the territory allows that you open a retail shop there.
- Traffic flow. A location with heavy traffic will be good to run a retail business. You will enjoy much patronage.
- Parking space. There should be adequate parking lots for customers in a place where you want to open your retail shop.
- The presence of competitors may indicate that there are customers in that particular location. Before you open your retail shop, you need to consider the number, size, quality and the aggressiveness of the competitors.
- Similar products. If you want to start a retail business, emphasis should not be on your products alone. You need to locate your retail shop in a place where customers can easily buy complementary products.
- Cost is a very important to consider especially if you want to start a small retail shop. If you are opening a small retail store, it won’t be wise to spend the money you would have used to buy your initial inventories on rent.
Source for funds
Your funding requirements depend on how you want to start your retails business. As mentioned above, buying an existing retail business or a franchise can be more expensive than starting a small retail store from the scratch. Essentially, you should not under-estimate your funding requirements. You will not only need funds for the initial inventories, you need funds for other things such as:
- Registration of the retail business
- Licenses and permits
- Rent
- Utilities
- Construction of furniture and other fixtures
- Staff costs
- Printing and stationery
- Computerization
- Marketing etc.
If you are finding it difficult sourcing for funds, you can read our article on funding options for small businesses.
Source and stock inventories
One secret of running a profitable retail business is for you to buy at good price as you may not have much influence on fixing your selling price. Establish a relationship with your suppliers so that they can offer you good prices. Your store arrangements should allow free movement. Also, you should ensure that light products which can be easily picked are kept in a safe place preferably in locked displaying boxes.
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Market your products
Light marketing efforts might make a huge difference especially when you first open your retail shop.