Today’s article on What To Prepare When Starting A Retail Business is brought to you by Hann P., a copywriter at ConnectPOS, a cloud-based POS software for omnichannel retail stores.
Let’s welcome Hann P. to our blog, and learn from her invaluable experience!
As we’re reaching the end of 2020, it’s high time businessmen and businesswomen considered a strategy for starting a retail business. They are the ones who wanted to step into the retail space but couldn’t due to the heavily negative impacts of the COVID-19 pandemic. And we’re here to help. This article will act as your starter pack to start a retail business for a hopefully more fruitful and successful 2021.
Ask yourself if a retail business is right for you
Making a good career decision involves both self-assessment and market research. While market research takes time and seems to be quite tricky, you can start with the self-assessment process first. That can be done by evaluating your skills, identifying what types of retail business model you can operate and what kinds of products you can offer. Based on that, you can determine if a retail business is the right opportunity for you or not. Furthermore, matching your skills to your market’s needs and demands significantly increases the success chance when starting a retail business.
You can begin by asking yourself the following questions:
- Are you good at multitasking?
- What is your risk tolerance?
- Are you a team player, or even a team leader?
- Are you a self-starter and comfortable being alone?
- How is your stress tolerance?
- Do you value predictability or prize diversity?
Choose your type of retail business
As discussed above, deciding on what type of retail business is vital when considering starting one. As each type has its own distinct traits that require different ways of operation, as a businessman or businesswoman, you need to be aware of various business models and types of your retail stores.
Some common types of retailers are:
- Department store: a retail establishment offering a wide range of consumer goods in different areas of the store, each area specializing in a product category. Example: Dillard’s, Kohl’s, Belk, Macy’s.
- Mom-and-Pop store: a small, family-owned, or independent business.
- Discount store: a retail store that sells products at prices lower than those asked by traditional retail outlets. Example: IKEA, Walmart.
- Warehouse store: a no-frills warehouse requiring membership to access their low prices. Example: BJs, Costco.
- E-tailers: online retailers that sell on the internet and have products shipped to customers’ front door. They typically do not have brick-and-mortar stores. Example: Amazon, eBay, Etsy, Dell.
- Big box store: major retailers that specialize in one type of product, usually part of a chain of stores. Example: Walmart, Home Depot, BJs, Costco.
Find a suitable location
Even though having a great location doesn’t guarantee you a successful retail business, a bad location, on the other hand, pretty much guarantees failure. Due to its distinct commercial traits, a retail business needs to be where plenty of customers are. Furthermore, a great location is where the security is at a reasonable degree, public transportation is easy to access, and there are sufficient areas for parking as well as retail space. It’s a fact that where you set up shop will impact how long it will take you to grow, and, more importantly, how long you can last.
There are 2 kinds of locations you should know when considering starting a retail business.
The home-based retailer
The benefits of running a business from home are undeniable. For example, low overhead, no daily commute, etc. However, a retail business is one of the few businesses that are tricky and difficult to run at home. The major obstacle is the heavy penalties of having a stream of clients visiting your home every day, or, more exactly, every minute. In many areas, your neighbours can report you to city or county officials if your business creates noticeable traffic, noise, or parking problems. So, do consider carefully when starting a retail business at home.
The best retail location combines visibility, affordability, and lease terms that you can accept and grow your retail business with. Take time to analyze to find the best location when considering starting a retail business.
When choosing a commercial location for your retail business, bear in mind these elements:
- Customer attractiveness
- Degree of accessibility
- The nature of competition
- Regulations of zoning
- Sales and traffic growth prospects
- The geographic direction of the city’s expansion
- The general appearance
- Neighbourhoods’ demographics
Have comprehensive plans
Inventory management is always complicated even for long-standing retail businesses. Particularly, when you are a newcomer, things become even trickier. Don’t worry, you can take 5 tips below as your starter pack when starting a retail business:
- Use the FIFO approach (first in, first out). Products should be sold in the same chronological order as they were purchased or moved into inventory. With that, you can avoid your stock becoming dead stock.
- Adopt a POS system. Nowadays, a POS is so powerful and technologically advanced that it can be an extremely supportive side-kick in managing inventory. With such a system, retailers like you can monitor your stock level, keep track of the stock-flow, be alarmed when you’re low in stock, get comprehensive inventory reports and insights, etc.
- Audit your stock. Even if you have the best inventory management software, it’s still necessary to count your inventory. It’s to make sure what you actually have in stock matches what the inventory reports show.
- Don’t forget quality control. It’s important to ensure that all your products are in good condition. During the stock audit, you should have a checklist to notice any sign of damage. Moreover, you also need to correct product labeling to properly examine the quality of the products.
- Identify dead stock and slow-moving stock. If an item hasn’t sold at all in the last 6 to 12 months, you probably should stop stocking it and figure out a way to get rid of it as soon as possible. For example, you can consider a special coupon and discount, or negotiate with your suppliers to see if they’re willing to take those stock back, or even consider donating to charity.
In making your pricing decisions, you need to ask yourself these questions:
- What prices are buyers willing to pay?
- Where on the positioning map do you want to be in comparison with your competitors’ pricing: equal, above, or below?
- What is the suggested price proposed by the supplier?
- What are the qualities or characteristics of your products in terms of the perception of quality and value-style, perishability, scarcity, richness, commodity, or other?
The most concerning issue might be “How much staff do I need when starting a retail business?”. Well, the answer to that question depends heavily on the following factors:
- Size of your firm: The bigger your retail store is, the more staff members you need.
- Product type: The higher the price and complexity of the product, the more personal selling is required. As a result, more employees are needed.
- Opening hours: Changes in the holiday business will also affect staff management.
- Trade patterns: You should have more staff members during the peak period of the day or the busiest days in the week.
- Sales density: The higher the sales per square foot, the more sales assistants should be there.
- Business location: If you’re running a home-based retail business, you want to keep the number of staff members at a minimum to avoid creating a fuss out of your neighbourhood.
So, we’re reaching the end of this article as well as the end of not-so-favorable 2020. We hope that this article can help new players like you with starting a retail business. To sum up, there are 4 key things to bear in mind when considering your retail business, including:
- Ask yourself if a retail business is right for you
- Choose your type of business
- Find a suitable location
- Have comprehensive plans in terms of inventory management, product pricing, and staff management
If you’re interested in such meaningful content, follow us closely, and visit our blog page every day for more articles like this. We, ConnectPOS, will always be by your side on the way to your business success!
We feel honored to have Shane Barker’s insights featured in our blog, and we are incredibly thankful for the knowledge he has shared with us.
Hann P. is a copywriter at ConnectPOS. Being fascinated with Fintech and E-commerce, she has been keeping an eye on particularly how technology has been changing the game in the fields.