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More and more people are looking for a way to start a retail business, which allows them to exercise the professional career they studied, or to be within the sector they like most within retail sales. The retail sector offers many investment opportunities as one of the fastest growing economic segments around the world, which is currently dominated by giants like Amazon, who in 2018 achieved 258.22 billion dollars in sales from retail e-commerce.
Competing against big brands and earning a place in the retail market can be complex but not impossible. Therefore, today we will tell you how to start a retail business in a practical, comprehensive guide that will help you know the best practices to implement.
Before entering the market, you must know the product you are going to market and have defined the customer you are going to target. In general, two retail formats will help you to have a better definition:
Many seemingly bright and successful business models have failed due to the lack of market studies that determine the feasibility of opening a point of sale in a particular location or area, set prices based on the average consumer’s budget and the competition, in addition to not knowing or understanding the brand’s potential customers.
Before you get excited and rent a place or invest to fill it with a lot of merchandise, we recommend you analyze the market and your competition to answer the following questions:
Now, you probably think that your business idea and products to sell are unique and original, but the reality is that you will probably find other entrepreneurs thinking about selling similar products or compete with the same products after learning about your idea. Therefore, knowing the competition will help you identify their weaknesses and strengthen your own business so that it is not easy for other competitors to go over your business.
Probably, many entrepreneurs would like to have a business near our home, or in a comfortable location, with a cheap rent and many customers who come to buy.
The truth about the points of sale regarding the location is that a “great” location is no guarantee of success, but a bad location can lead to failure. One of the most important points at the time of start a retail business is that they are in a place where customers have easy access, good visibility, enough space for sales and that is a safe zone, both for your customers and employees (in case you have them) as for your merchandise.
To make sure your location is the right one, we recommend asking the following questions:
Finally, when analyzing the location, you should think about the cost-benefit of the area; that is, if the cost of rent equals the volume of sales, or if you want to pay less and not have such high traffic of customers. What we recommend is to avoid the premises with a very cheap rent but with dubious locations, with little influx of customers and in unsafe areas.
Now, let us get into one of the most complex tasks of how to start a retail business, which is inventory. The first point is to locate the places where the goods will be put up for sale and those that will go in the warehouse, if you have backup inventory.
To have an inventory system, name each area and keep records of all the goods purchased, the cost of acquisition, the cost of sale, the expiration dates (if applicable), and keep a daily record of what you sell so you can check from your computer when it’s time to buy back merchandise and what products you’re selling the most.
If you sell products such as clothing, accessories, or electronics, you can place your orders in advance and have a wider range of sales than if you sell food, where you need to register the raw materials for making food, as well as a daily supply of those who need to be fresh to have them as short as possible on the shelves and to avoid a costly loss.
However, if you buy a large volume of wholesale products, you should label them with their characteristics with a product code and, preferably, the place where they will be stored. In this way, you can easily locate them if they are missing on the shelves, if a customer requests them by bulk or several pieces, or, for example, if a customer asks you for a larger size or another color different from the one displayed.
Another essential point is to consider the time between the orders of the goods and their arrival at the retail store, so that you can reduce the lack of products on the counters. Preferably, you should anticipate shortages so that there is constant availability of products since one of the things that most annoys customers is that they visit a retail store that does not have a good inventory, or where they do not find the products they need.
Remember that some customers have to make a considerable trip to your retail store, and the lack of products (especially from the best sellers) can make them leave with the competition.
If all goes well with your business, you will soon have to hire staff. Before you start doing it at arm’s length, or fall into the temptation to hire your relatives or friends, you should determine the needs of the business and the skills that employees should have.
The following questions will guide you in determining the employee(s) profile you need:
However, hiring personnel involves legal procedures and procedures such as the payment of taxes, benefits, social security, holidays, among others that you should know very well and provide to your employees, which will help you stay up to date with legal issues, but also to make your business attractive to the talents you seek to attract.
At this point it may be convenient to request the support of a specialist to detail all aspects of the company: how will be its structure, products to sell, potential customers, financial information, number of employees, among other data that will help you to have a comprehensive vision to determine the strategy to follow.
Your business plan should be informative, detailed, and concise, and it should be flexible to integrate changes, add products, or services as the business progresses.
Your brand name is as important as anything else, especially in the retail sector where competition is tough. We recommend that you look for a name that is easy to remember and repeat, that is unique, and has meaning for the audience, as this will help them remember you easily.
Search if other companies, especially in the same category to avoid legal problems with trademark registration, have not used your name. Preferably, do all this legally to make sure your name is registered and no one else can use it.
When choosing your name, ask yourself:
We have already analyzed the location factor, now consider whether you want to rent or buy. This is very important because, depending on the turn of your business, it is likely that you will have to invest in adaptations, furniture, extensions, amenities, among other considerable investments.
An alternative that you may have already considered is not to start your retail business from scratch, but to open a trade in the format of franchises, with a proven business model, in which you will have the backing of the brand name, market research, marketing, and customer communication, among other benefits. Nevertheless, before you rush to sign the contract with that franchise that catches your eye, make sure you know:
While your business may be food or products made by you, you will need a supplier of inputs and raw materials; in fact, you can have multiple suppliers and choose them based on the quality of the products, the deadlines or credits to pay, availability and timeliness of delivery, among other factors.
In case your business is reselling products, you can look for suppliers that give you special prices so you can make enough profits to invest, pay the rent, services, salaries and recover your investment. At this point, in addition to considering the factors mentioned above, you have the option of looking for wholesale suppliers to sell at a lower price than the competition, or suppliers that are manufacturers to sell unique, original and different products.
To make your business attractive you must think about colors, light, the arrangement of furniture, accommodate merchandise based on merchandising techniques, in addition to giving the professional, clean and aesthetic image so that your customers feel comfortable when entering, like to stay, purchase products and return later to buy again.
How to start a retail business should include policies that include internal rules for employees (uniform wear, check-in and checkout times, security equipment, to name a few) as well as customer service (exchanges and returns, restrictions on clothing, refunds) and cohabitation. The more specific these policies are, and cover more issues, the more effective they will be in responding to a crisis
In addition, we recommend printing the retail store’s policies and pasting them in large in strategic locations, and instructing staff to remind customers of the policies, for example, if there are no changes or returns in case of goods on offer.
The customer is the most important thing in retail as we depend on him for sales. The customer service plan will give employees the cue to resolve questions, provide services and address customer complaints so that they leave your business satisfied.
There are so many points to consider to start a retail business, which you will need all the help available, and what better than being an expert on the most important points to start and succeed with your business model.
In FriedmanU you will find the course you need to start your retail business, which is based on the best practices that thousands of successful retailers have applied. We invite you to download the syllabus and enroll in our course, certify yourself as a retail entrepreneur and bring your business to success.
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