You’ve decided to start a retail business and you have a broad idea of what you would like to sell. The question now is the ‘how’. How to run the business day-to-day, how to consolidate sales and revenue, how to keep customers happy- these are just some of the many questions you’ll now be looking for answers for.
In this guide, we list out things to keep in mind, from the right product assortment to understanding demand, stocking and sales before you can start a retail business.
Aspects Common To Offline And Online Retail Businesses:
- The Right Products
- Margins & Logistics
- The Legal Framework
- Choosing your Sales Channels
- Employees and Policies
- Viral Marketing
Start a retail business by choosing the right products- a decision you must base on your own interests as well as market demand. Then, work out the logistics of supply by choosing vendors. Follow up with the right shipping partner. When calculating your profits, don’t forget to account for all of these expenses that eat into margins. Choose a legal name for your business and start officially by registering it. You can then choose your channels of sale for a soft launch, followed by viral campaigns to help with the actual launch.
What You Know And What You Like
Choosing the right product assortment is the first step to selling more. You should ideally match your interests and market demand, so that you have a product that people want, and that you like selling. When choosing products to sell, keep these things in mind:
- Products you know and understand will be easier to stock and sell. You understand their demand and supply patterns, as well as the average turnaround time for that business vertical. For example, a furniture retailer knows that they would need 15-day lead time to procure products and ship them in order to save on warehouse space.
- Products that are already trending in the market, or are evergreen, are a good bet to get started with. For example, children’s classics, daily household goods are always in demand, while school supplies do well after a summer break. When you choose products with perpetual demand, you don’t have to worry too much about calculating the right stock levels each season.
- Choose a product in domains that you like to some extent. If you hate sports and try to sell sports apparel, you may not be able to answer questions that consumers have.
- If possible, choose to start out in a domain that you have closely observed other people make sales in. This way, you know that the niche you have chosen does indeed sell.
You can read more about choosing the right product assortment here. The next thing to consider is Demand Analysis.
In the earlier section, we dealt solely with what you want to sell. Now, we must take into consideration what consumers want to buy.
- Consumer trends can, thankfully, be predicted using a few tools and a bit of market research. While viral products like fidget spinners take off and plummet very quickly in terms of sales, some products show sustained sales over time.
- To observe the patterns of consumer interest, you can use Google Trends and Google Insights. Both these tools can show you the relative interest (in terms of web searches) for any search query you post. In this case, it will be the product you want to sell. Simply go to one of these sites and type in the product name. We’ve done one for you as a sample. We typed in ‘woolen scarf’ on Google trends and as you would expect, these are the results that showed up. You can do this with all the products that you have in mind.
- When it comes to understanding demand, never underestimate traditional market research. Make and post surveys that target your specific audience. You can use sponsored social media ads to do this. You can also get in touch with buyers groups or purchase sales trends reports for more insight into how your future consumers usually buy.
Now that you have a shortlist of products on hand, you need to calculate which of them can give you the best margins. When calculating margins you also need to keep in mind the turnover time of your inventory, the amount you expect to spend on shipping and after-sales service and even whether the profits make the sale worth it or not.
Traditionally, gross margin is the number that most retailers fall back on. It is defined simply as the selling price minus the cost price. However, as an online retailer soon discovers, it is the net profit that matters, which includes all of the aspects mentioned above and more.
The Cost Of Selling Goods
For example, you sell a certain product for $10, and you acquire it for $2, apiece. This is great for business! However, the product needs warehouse space. In the most simplified example, you stock 3000 such products and their collective warehousing expense is $800 a month, meaning each of the unsold products is raking up a cost of $0.67 each month that it sits there. Moreover, every time you ship out an order for this product, you pay your shipping partner $1.50.
So if you sell and ship this product within a month of stocking it, you still make a profit of only about $6, which is lesser than the $8 you thought you would make. As months go by, inventory costs add up and the situation gets worse.
However, there are aspects of this equation you can control- inventory being one of them. Products like Primaseller can help you decide how much inventory you need and stock only as much so that you don’t have too much dead stock on hand.
When calculating the margin for each product, take into consideration the cost of storing it, packing and shipping it, the cost of processing a return or replacement and the cost of its advertising.
Any business needs to have clearly established policies before it begins operations. This is truer even for retail businesses which depend so much on mutual trust, and where the money is changing hands every day.
First, you need to think about whether your business will be helmed by you alone, or whether it will be registered as a partnership. Both approaches have merits and demerits- as a sole proprietorship, you will be responsible for all of the business’ risings and fallings. In a partnership, the responsibility is diffused slightly. However, a sole proprietorship is faster to get set up and easier to audit for tax compliance.
Then, you must pick out a business name. Ideally, pick a name that resonates closely with the products you sell. This helps in the quick recall. Also, websites with URLs relevant to their on-page content do better in search engine rankings. Remember, be sure to have a choice of names on hand if your first pick isn’t available.
Finally, you register your business under the chosen name. In the case of a retail business that runs across state borders, you can register your business in one state and apply for foreign qualification. Businesses registered this way often file tax applications in both their registered state and the ‘foreign’ state where they are doing business. Each local government and city council can have different rules about how to run a retail business, so you need to ensure you comply with all norms. Read more about registering your business here.
Multichannel retail is the buzzword of the decade for retail. With good reason, we would say. Consumers these days aren’t waiting to buy from a store the next time they visit- they want things instantly. At the same time, consumers prefer to get a feel of the new product before actually buying it online.
Retailers who understand this dichotomy can flourish. It comes down to understanding the mindset of your consumers, assessing which channels they are most likely to shop from and giving them what they need. If your consumers buy largely from a marketplace like Amazon, being present there helps. Likewise, as a growing brand, you may find that consumers want to experience your products before they buy. In this case, a retail store or pop up shops are your best bet.
In the world of multichannel retail- two things work. One is ensuring that you have enough inventory to actually make a sale and the other is targeted marketing. Primaseller takes care of aspect one. For two, you just need to stop and consider if every marketing activity, every promotion and every giveaway you do is targeting your custom audience or not. A pop-up, indeed, may be the most trending event on Instagram. However, if your consumer base doesn’t usually visit them, what purpose does that serve?
If you own and operate a retail store, your employees make up the front face of your business. Hiring and retaining store staff can be tricky, but always hire someone with a proven track record in customer service.
- Run background checks before hiring to identify which of your potential hires has a bad apple in their professional past.
- Training programs that help your staff to build their skills are a value add not just to them, but to the customers they will eventually serve. The staff that believes you have their best interests at heart is likely to last longer.
- If you use automation tools in the store for various processes, ensure that every staff member is aware of how to use the tools.
- In the online context, you need a team of people available across all social media and on phones to answer queries and sort out issues. Good oral and written communication is an absolute necessity here.
- Store staff is just one component of your employee pool. You will also be interacting with warehouse staff, accounts staff and administrators as your business grows. Build your knowledge in all of these areas so you can have relevant, productive conversations with each of them.
- The returns and replacements policy is customized to each business and must be written down with extreme caution. It outlines under what circumstances, and for what products, you will accept returns. It also specifies the time limit for the receipt of these products by you. In other words, it evens the playing field and ensures that consumers cannot return products after months of use.
- The shipping and delivery policy specifies your shipping partner’s terms of carriage. What is the expected delivery speed? What happens when a product is damaged in transit? How do these things impact the consumer? These are some questions this policy answers.
- Retail stores also have policies of their own, such as the returns and refund policy for in-store purchases.
Viral marketing essentially means building visibility across as much of your audience population as possible. This is done in order to truly put the message out there that you have arrived! Making yourself visible to a larger audience population increases your chances of making the first sale, getting your first review and building your business with that boost. Here are a few campaigns you can run:
- Begin with the problem that your products solve. Highlight them. You can build a video around the problem and solution, but you have to make it engaging and convincing.
- Videos that demonstrate how your products work are usually a big hit, especially if your product is a new entrant to the market.
- Contests and giveaways always appeal to people, as do sales and promotions. However, don’t overdo them- if you have a sale running all the time, it takes away from the whole idea behind buying at a sale.
- As far as possible, let your campaigns and products help consumers discover your products themselves, as opposed to you telling them about it.
- Always collect feedback from consumers, both about your products and your service and use the good reviews to your advantage!
Start A Retail Business- Offline
Despite what people say, offline retail is alive and well. It has simply transformed to become part of a larger narrative- omnichannel retail. If you want to start a retail business offline, here are some things to consider:
Choose The Type Of Retail Outlet
Today, retail outlets come in many shapes and sizes. You can choose to open an entire store by yourself, collaborate with someone else to share costs or host a temporary pop-up. Each method has its advantages and pitfalls. If you open your own store, the entire onus of payments and inventory management falls on you.
If you collaborate with a bigger store, you gamble with visibility for a better price.
A pop-up’s success is solely determined by how many people you manage to attract.
Make the choice based on your personal constraints, market forces and what your competitors are doing. Of the three, give priority to market forces since consumer demand is what drives supply.
Pick The Right Location
The Soft Launch
A soft launch has many benefits:
- It is relatively easier to start off with and gives you the chance to make some mistakes away from the public gaze.
- A soft launch lets you control the number of customers you serve to begin with. You can test out all your systems and processes with a smaller population.
- It also allows you to test your staff-readiness before you begin selling on an exponential level.
Leave the fanfare for a later date and time. Just open your shutters, put out a ‘we are now open’ standee and begin to sell. It also helps to train your store staff to be present, but not hover around, new customers. In this phase, it is likely that you have very few people walking in. They may not appreciate being ‘served’ by three salespeople at a time.
The Main Event
- Several days before the launch event, start creating a buzz on social media. Put out sneak peeks of your products, customer reviews from the soft launch phase and even early bird offers.
- Start a countdown engagement, where each day before launch you ask a question and whoever answers correctly gets a great offer on the launch day.
- Close to the launch day, deck up the place and hint at what is coming up. You can even have a lucky draw leading up to the big launch.
- Make the prizes and coupons worthwhile. It is an expense initially, but it will pay off.
- Intimate the press and media about your launch activity and what they can expect from it.
- On the day of the big launch, change your banners across channels, announce the winners of any contests you have run, and promote those coupons that expire the very same day.
Start A Retail Business- Online
As an online retailer, you have far more aspects to deal with- order fulfillment is one of them. However, selling online cen help you reach a wider audience base than you ever could from a physical outlet. If you want to start a retail business online, keep these aspects in mind:
Choose How You Will Sell Online
You have the option of selling through a marketplace or starting your own web store. In a marketplace, you already have several customers shopping. All you need to do is use the right keywords to show up in search results and keep up good delivery standards. In your own store, you have better control over operations and your own brand. However, it may take some time to truly take off.
Build Your Website
If you choose to open your own web store, you are going to need a website. We strongly recommend using WordPress or Magento over site builders because they help you control your user’s experience better. You will initially need some coding support.
Do A Beta Launch
For a web store, a soft launch can mean getting the store ready, running a search ad campaign and putting out banners on social media. You can use one campaign at a time to see which performs better for your business. You can offer your first few customers an incentive for providing feedback- such as a discount coupon for leaving a review. This way, you get valuable information about their buying experience, as well as a repeat customer.
The Main Event
Launch of a physical outlet and a website are almost similar in the steps you need to take. When in doubt, consider this- will this action gain enough positive attention?
Over time, you will find that sustained marketing efforts get you good results. You may not always have to run large scale campaigns each time. Account for seasonal sales variations for your products and promote them extensively when they are in demand already.
And keep going! Retail business does see its share of ups and downs based on market trends, recession, and even the average household earnings over time. So account for as many variables as possible.
Looking for even more information? Read The Complete Guide To Opening And Operating retail Stores