Retail businesses sell practical quantities of various products directly to the final consumer. Becoming a retailer requires considerable planning and risk, but it can be a rewarding career if you succeed with the endeavour.
1. Figure out if retail is right for you.
Operating a retail business is difficult, and you need to carefully consider the challenge before embarking on it.
- Ask yourself why you want to become a retailer and how committed you are toward your goal. You may end up working 12-hour days, including most weekends and holidays, and your standard of living may drop while you establish your business.
- Assess your personality, as well. To succeed as a retailer, you’ll need to be good at multitasking and comfortable with taking risks. Moreover, you’ll also need to bee a self-starter who can work without supervision or steady support.
2. Choose a retail business model.
Store retailing is the most traditional type, but online and other non-store forms of retailing have grown in popularity, too.
- Store retailing covers any type of retail shop with a physical storefront. You might sell a variety of products, or you could specialize in something less general.
- Non-store retailing technically covers any type of retail shop that does not operate from an actual storefront. This can include electronic shopping, door-to-door sales, catalog sales, vending machines, kiosks, and mail orders, among other mediums.
- While online retailing is technically a form of non-store retailing, it’s such a largely used medium that it warrants its own category. Most online retailers have a digital storefront but do not have a physical one.
3. Consider forming a partnership.
You can become a retailer as a sole proprietor, but if you know someone who can help with the costs and operation of your business, it might benefit you to form a partnership.
- In addition to these two types of business structures, there are also corporations and limited liability companies.
- Research the pros and cons of each option thoroughly before settling on the right one for your retail business.
- Also note that each structure has its own set of tax laws and other regulations, so you’ll need to know what structure you plan to use before building the rest of your business.
4. Pick your products.
Good products are an essential element of retail success, so you’ll need to choose your products carefully.
- Choose a product that you’re knowledgeable about. Look at your hobbies or your present line of work for ideas. You can also visit marketplaces and trade shows for ideas that interest you enough to learn about.
- There also needs to be a reasonable amount of demand for your product. Check around local businesses and online marketplaces (Amazon, eBay, etc.) to see if people are already buying your product. You can also look up official statistics.
5. Determine how to obtain your business.
You can start your own business from scratch if you have a solid business plan, but you can also buy into an existing opportunity if you don’t have any new ideas of your own.
- If you choose to buy an existing business, look into franchises, business opportunities, network marketing systems, and existing independent businesses.
- Franchises are brand name companies that allow you to use their trademark to sell their own established product.
- Business opportunities are similar to franchises since you’ll use the established name of a parent company, but your business will not be a legal extension of that parent company.
- Network marketing systems are direct-selling companies, so you’ll sell specific products to personal contacts you establish on your own.
- An existing independent business is, essentially, an independent store that has already been established. Buying it means that you’ll take over its operations and costs.
6. Find the best location.
When choosing a physical location, make sure that the storefront you choose will be visible and accessible to a demographic interested in your product.
- If you have a non-store retail business, you may end up being a home-based retailer who works directly out of your own home.
- To be a store retailer, though, you’ll need to investigate various commercial locations. Make a list of options, taking into account interested demographics, the location and aggressiveness of your competition, and zoning regulations. Once you’ve narrowed down a few options, look for sites up for lease and compare the cost with the site’s overall accessibility and desirability.
7. Take care of any legal matters.
You’ll need to abide by strict laws and regulations at the federal, state, and city levels. These laws can vary by location and business type, so research any that apply to your retail store and comply accordingly.
- At the city level, pay attention to the municipality’s zoning laws. Zoning laws regulate the operations of both store and non-store retailers, and you’ll need to verify that you are legally allowed to sell the product you plan to sell at the location where you plan to sell it.
- When establishing your retail business, you’ll need to get a Federal Tax ID (also called an “Employer Identification Number”). For store retailers, you’ll also need a nine-digit D-U-N-S number. Make sure that you apply for any necessary licenses, permits, and certificates before opening your doors, too.
8. Estimate your start-up costs.
You’ll need to spend a considerable amount of money before you can earn any, but the exact amount will vary from retailer to retailer. Take time to calculate how much you’ll need.
- Common start-up costs include those related to rent, operations (staffing, utilities, etc.), property improvements, store supplies, technology (computers, phones, card readers, cash registers, etc.), inventory, marketing, and official fees (licenses, accounting fees, etc.).
- Get quotes from service providers as needed, and estimate your costs higher than necessary instead of guessing low. It’s better to have excess funding than not enough.
9. Obtain funding.
Once you know how much money you’ll need to start your business, you’ll need to find ways of getting that money legally.
- Use your personal funds and assets as much as possible to avoid going into too much debt.
- Personal investors, including loved ones and “angel investors,” can be another worthwhile business. Some will extend a loan to you while others may wish to become an investor in return for some type of stake in your company.
- Bank loans and credit union loans are other common forms of funding, but you’ll need to pass a rigorous set of requirements before these institutions will give you the loan. Credit cards are less strict, but you need to keep up on the monthly bill if you don’t want your credit to suffer.
- The Small Business Administration also provides financial assistance to certain small businesses. Other government institutions and private organizations may offer similar help, too.
10. Set prices.
There are numerous factors involved in setting your prices, but you’ll need to begin by determining the minimum price you can afford to sell it for.
- Contact potential suppliers to find out how much it will cost to make or purchase the product. Ask around for multiple quotes.
- Find out the current retail price by researching how much other retailers sell the same product for. This will tell you how much customers are willing to pay for certain products and give you an idea of how high you can comfortably set your own prices.
- When setting your prices, find a good balance between the maximum price consumers will pay and the minimum price you can afford to sell for. Keeping your prices within this range instead of drifting toward either extreme should help you remain competitive while maximizing your profit.
11. Establish your inventory.
Before you can open your doors, you’ll need to make sure that you have the necessary inventory you’ll need to survive the first day, if not longer.
- Determine everything you’ll need for your inventory, dividing it into classes and sub-classes as needed. Allocate a percentage of your funds to each sub-class within your overall inventory based on necessity and quotes cost.
- Once you know how much to spend on each portion of your inventory, search out suppliers that will provide you with the products you need at a cost you can afford.
12. Arrange the products wisely.
If you have a physical storefront, you’ll need to arrange your products in a manner capable of attracting customers.
- Make it easy for your customers to find all the products you sell. If you are unable to view nearly all products from the centre of the store, you may need to place signs throughout the store to direct customers to various product areas.
- Keep related products and product types near each other, and position the most profitable products in the area that receives the most foot traffic.
- Discourage shoplifting by keeping an open floor plan. Place mirrors in blind spots, and protect expensive items by keeping them in locked display cases.
13. Experiment with different inventory options.
Your retail business needs to remain flexible if you want to meet customer demands effectively, which means that you may need to experiment with different ideas with regards to your inventory.
- Sometimes, this may mean altering your inventory itself. If a certain product line or product category doesn’t sell, you need to be prepared to switch it out for something that will.
- You can also experiment with the layout of your inventory. Install lighting and display furnishings that can be adjusted as needed.
14. Hire and train employees.
Regardless of whether you operate a store or non-store retail business, you’ll probably need to hire employees. This may include salespeople, inventory staff, and managers.
- The number of employees will vary depending on several factors. Large stores, stores with long work hours, and stores selling complex products will need more staff.
- When hiring employees, pay close attention to zoning laws and employment regulations.
- Thoroughly train every employee you hire, too. This is especially important when you hire salespeople since these employees will interact with your customers directly and, as such, will need to know how to provide adequate help.
15. Know your competition.
You need to persuade customers to buy from your retail business instead of the competition, and to do that effectively, you need to know your competition well.
- Identify your competition, then take the time to actually research them. Read about the competing business. Look at official statistics and read reviews from popular review websites.
- If they have a storefront, visit the store and analyse the in-store experience they offer. Look at the merchandise they offer, the cost of that merchandise, the number and quality of staff, and the overall layout of the store. Pay attention to the places they advertise and the apparent success of their overall marketing plan.
16. Market effectively.
Once you set up everything else, you need to attract potential customers to your store with good advertising and other marketing strategies. There are numerous ways to advertise your retail business, so you’ll need to do some research before determining the right marketing strategy based on effectiveness and affordability.
- Common forms of advertisement include print ads (newspapers, magazines, etc.), commercials (television and radio), Internet ads, direct mail brochures, and signs.
- Nowadays, most good marketing strategies also involve the effective use of social media and other Internet-based sources of information (websites and blogs). This is true regardless of whether you own an Internet retail business or a store-based retail business.
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