STARTUPBIZHUB

10 Questions to Ask Before Starting a Retail Business

Online products and services have become the trend for quite some time now. Since the advent of smart devices, people are all into shopping using their mobiles, tablets, and laptops as they don't have to go to the store to buy what they need. However, it does not mean that investing in a retail store is a bad idea to make money.

Like a retail business,

Traditional stores still have an undeniable advantage over online shops - the ability to touch and feel the products. At the same time, traditional stores provide a more engaging shopping experience than online.

questions to ask before starting a retail business

As such, you can see that more people still consider shopping personally. But before you ever start a retail business, make sure that you do your research. If you are seriously considering this to be an ideal business for you, go through our guide and bookmark this page to review whenever you are stocked.

1. What is a Retail Business?

When starting a new business, the first question is always the kind of business you want to start. In this case, you want to try starting a retail business, and with that, you need to understand what kind of business retail is before everything else. So, what are retail businesses?

Retail Business Explained

Retail businesses are those that sell finished goods directly to consumers for money. Retail goods can be sold in varying ways, including in stores, by mail, or through the Internet. The seller of the retail goods is called a retailer or merchant, the entity that sells the commodities in small quantities to the consumer using different distribution channels.

Similar Articles

Different types of businesses can be considered retail. They can be grocery, garment, convenience, department, or drug stores. Even service-related businesses, such as beauty salons, can be considered retail businesses. Rental places may also be considered retail businesses. In large retailers, the items sold are generally purchased from a wholesaler or a manufacturer. The items are then sold to end users – consumers – at marked-up prices.

It is from the markup price that retailers get their profit. Large stores are not the only retailer businesses. Even a small, family-operated business is already considered a retail business. Typically, retailers do not manufacture the goods they sell. Some exceptions exist, but retail businesses are usually the final link to the supply chain that gets the product to the consumer.

You might be confused sometimes about retail business and wholesale business. Their difference stems from retail businesses selling their goods directly to consumers. On the other hand, the wholesale business sells theirs to other businesses, such as retail. With that distinction, you can recognize a retail or a wholesale store. You can learn more about the retail business and its different types here.

2. How Do Retail Businesses Work?

The retail business can be defined as selling commodities in small quantities to consumers for their end use. The products can be sold in single units or in small quantities depending on the shop’s capability and the needs of the consumers. How does retail business work, and how do consumers buy the products from the retailers? Here are the different ways to do that:

  • Counter Service
    The most common practice of doing retail business is counter service. This way, the merchandise is procured from the counter. Unlike that in a grocery store, the buyer cannot easily access the product and cannot pick them up on his own. Often, he has to walk up to the counter and ask for what he needs.
  • Delivery Service
    If not counter service, the other option is through delivery service. It is the shopping mechanism of shipping the goods and bringing them directly to the customer's doorstep. In this kind of retail service, the customer does not have to walk to the store to procure the necessary merchandise. Instead, it is delivered to them thru different means of transportation.

Apart from counter service, delivery service, and simply picking up the goods from the store shelf, the buyers can order them by phone or online. The products can now be displayed on websites, and the buyer can purchase them through credit cards. A similar method is often also applied when ordering by phone.

3. How to Do Retail Business Plan?

For a small retail business to succeed, you need a thorough understanding of the market you intend to serve. This is where creating a good business plan can help you focus more on the business's different aspects.

  1. Identify Market Need
    In creating a business plan, your starting point is to identify a need in the market that you can fill in as a retailer. This need should be urgent so that your potential customers will take the time to purchase at your store.
  2. The Products You’ll Provide
    Describe the products that will be your revenue sources. Why did you choose these products? What is your selling proposition? And how is your product different and better than the rest products in the market?
  3. How Will You Distribute Your Products?
    What are your distribution channels? What are your methods to get your products in front of your customers? Make sure that your distribution channels are carefully discussed and that it fits well into your business proposition.
  4. Describe Your Target Market
    Describe the target customers as detailed as possible. Being specific is essential to tailor your service to their needs, preferences, and convenience.
  5. Analysis of the Competition
    When you’ve already identified the market need your competitors were unable to fill, your work is to find a way to fill this gap. You need to learn everything about your competitors, their target customers, and their marketing techniques.
  6. Devise Marketing Strategies
    You need to devise your marketing strategies to topple those of your competition. There are different ways of marketing and promoting your products, you can utilize. Learn about them and work out which is ideal for your retail business.

Utilizing all the information you have acquired, you need to create a financial forecast – a model that will reflect the sales process so you can track the progress of your business. This lets you anticipate and understand how your retail business might progress.

4. Where to Get Retail Business License?

Obtaining a business license is one of the most important things to do in starting a business. You need proper licensing to run your business legally, or you risk it being closed. The steps in obtaining a business license are as follows:

  1. Contact Local/County Government Business Office

    Contact the government business office in your locality to apply for a business license. The local office will let you know if you need a license or what licenses to apply for. They’ll give you instructions on the process of application.

  2. Get Specialty Licenses

    If required by your city, county, or state, obtain specialty licenses. You need to get a permit, especially if the item you will sell is government regulated. The permits you need for these items are issued by specific government agencies.

  3. Apply for Sales Tax Permit

    After getting a general license and special permits, you must apply for a sales tax permit at the state comptroller’s office. You must pay the state sales tax collected from the retail items if there's a sales tax. This is handled by the state agency handling sales tax.

5. How to Get a Business Loan?

One of the main hurdles when starting a business is getting a loan because of the strict standards set by banks. While finding the right loan, applying, and getting approved for it seems complicated, you can get passed these hurdles if you are prepared. On that note, here are simple steps on how to get a business loan to help you finance your startup:

  1. Business Purpose, Good Character, and Ability to Pay Back
    Generally, for the bank to consider your application, it has to be for a sound business purpose. That’s why it’s essential to describe the nature and the use of the loan well. Additionally, you must have good character and a good credit history. You must also have the definite ability to pay back the loan.
  2. Prepare Needed Documents
    Different lenders need may ask for fewer or more documents. Still, they generally include your personal and business credit history, personal and business financial statements, projected financial statements, cash flow projections, a strong business plan, and guarantees from the principal owners of said business.
  3. Choosing the Right Loan for You
    Start-ups are among the businesses that find it hard to get a loan in their first year. This is because lenders often need cash flow, so start-ups are often disqualified immediately. However, some lenders offer startup loans to help you manage your day-to-day expenses. It’s better to find a lender that offers this type of loan for your retail business.
  4. Choose the Right Lending Institution
    Choosing the right lending institution is vital. You can approach lending agencies or banks you have worked with, explore other institutions and look through the Internet. Either way, you must be extra careful, truthful, and thorough in everything they ask to avoid unnecessary problems.

Taking to time to research business loans is essential. This way, you can find one that perfectly fits your needs and help your company grow. At the same time, it will ease the process as you learn the documents and the whole application process to avoid any hurdles that might derail your application.

6. What Does Retail Business Insurance Cost?

 

retail business insurance

 

The insurance cost to every company is unique to each. Every type of business coverage offers specific and essential protection. This means that your company may need one or all business insurance coverage. On that note, the cost of business insurance largely depends on the combination of the insurance coverage you need.

For instance, if your retail business is a sole proprietorship, you don’t need to include worker’s compensation in your business insurance. Similarly, you must include insurance if your merchandise needs to be transported from one place to another. You might need to include a variety of insurance coverage in your calculations, but it all depends on the type of business you are running. Every business is unique, and they have unique needs as well.

To determine your business insurance cost, the variables needed to be included are the products and services you sell, the size of your company, and the risks your employees need to face. On that note, it is essential to talk to insurance agents so that you can include everything that’s needed for calculating the cost of your business insurance.

7. How Does a Retail Business Operate?

In a retail business, the whole operation includes areas such as day-to-day operation, inventory management, customer care, and accounts. These are generally the aspects of the business that you need to focus on for successful business operations.

  • Day-to-Day Operation

    In day-to-day operations, some essential aspects you need to focus on are maintaining store atmosphere, cash handling, and security. Your store must offer a cheerful ambiance for customers to enjoy shopping and leave your store with a smile. As for cash handling, it’s essential to track the daily cash flow to calculate the profit and loss in your business. Better safety and security measures must also be applied in your store to prevent shoplifting and for your customers to feel confident shopping there.

  • Inventory Management

    It is one of the most important tasks of a retailer to ensure that your inventory and stock are appropriately managed. This way, you can avoid being “out of stock” and lose a big sale in your store. To avoid for this to happen, you’ll need to take reasonable steps to prevent loss of stock and inventory. If possible, every retail chain should have its warehouse where you can stock your merchandise.

  • Customer Care

    In business, the customers are assets you cannot afford to lose. When dealing with your customers, it should always be with a smile and assistance. Your sales representatives should always be ready to assist the customer in looking for their needs. In dealing with customers, honesty is always appreciated, so always be truthful with them. You should also never compromise the quality of your products and services.

  • Accounting

    One of the most important in operating your retail business is accounting. You need to be able to take care of the accounting to ensure that you are not losing money and are earning revenues. This, however, can be a tricky thing to do, especially for a first-time business owner. There are tools you can use, such as accounting software, but you cannot rely too much on them. The best thing is to outsource an accountant to handle your books so you can focus on the more critical aspects of your business.

8. How to Improve Your Business

Would you like to improve your business? If you’re a responsible business owner, you may want to do it, yet the best question is: how could you do that? This chapter will give you some tips that you can use to attain this goal.

It is not essential whether you are the owner with hundreds of employees or just a small number of workers; you would still require the best business process development to ensure your company will be successful in the long run. It’s about time to work for that goal. You will need to do a few things to improve your business.

First, it has to be clear to you what you want. It is what you would like to achieve within a specified period. It is essential to set goals so it will be simpler for you to realize where you should take your business in months or years to come. You must also set some objectives to remind you of your goal plan.

You also need to enhance your skills in selling. Each business uses selling skills to make more money, which is simply because it’s a process that will directly bring money to your company, so improving your selling skills will ultimately be your advantage. Do you have people who manage your company's sales and marketing program? It is necessary to get the most suitable training program for them. Each member of your organization must be skilled in it since they get the opportunity to market and sell your services or products to your target customers.

You should be religiously following the requisites cited by the government. These requirements are there for some specific good reasons, and they are often helping you to avoid being in trouble. You must also think of some other ways to promote your products. Print ads, billboards, and TV spots are typical methods; whilst these are all tried and proven techniques, they could be expensive. So, if your budget is insufficient and you cannot spend more than that, be sure to search for ways to reach out to your target clients.

Any marketing could become inefficient when it isn’t paired with appropriate information. Due to that reason, you have to collect more information that you require concerning your market and your target clients so that you can tailor your business's marketing campaign to them. In this matter, market research is fundamental, and these days, it does not need to be so expensive since you can analyze some data readily available through the web.

Also, you should not forget to encourage your staff. It is because when your company has just a few people who are not always coming to work and doing their jobs right, you will not experience extreme headaches and stress in operating your business. But, if the situation is the opposite, you must do something. There are different ways how you can get them motivated. You may offer them better benefits, incentives, and bonuses.

These are just some things you can do today to improve your business. Do whatever is possible and what will bring good for the sake of your business.

9. Why Do Retail Businesses Fail

Retail businesses fail for some reasons; I wrote about the six top reasons here. Understanding why they fail could help you avoid doing those things that drag them down. The following are the possible reasons why many retail businesses fail:

  • Poor planning. The planning stage is the most crucial element when starting a company. If it’s not complete, the business will face problems. Planning makes you ready to face problems with proven solutions. It takes effort and time; it could also kill a business concept. The key here is to take time, consult professionals, double-check, and develop a strong plan B.
  • Poor location. When you can’t find a good location, you should not settle for the 2nd good option. The location of a retail store is critical, wherein it must be where potential clients are and conveniently located so that people will not be discouraged from coming. When looking for a good location, look at the nearby businesses and determine their success. Make sure that no impediment can affect the site.
  • Poor range. A retail business has to offer what the customers want and look for. To evaluate the product’s value, the most significant thing to do is to consider the conversion rate – the number of people who buy the item.
  • Undercapitalized. Some retail businesses are running out of money. It can take place when planning is inadequate. The only way to solve this is to get instant access to more money to support the business. In many cases, it isn’t available, leading to the company's closure.
  • Bad customer service. It can kill your business suddenly, except when it has been noticed earlier and addressed immediately. Excellent customer service has been a golden rule implemented by many retail businesses today, and you should do the same thing.

10. Should You Do It Online?

Starting a business online is a great decision you can make today. Your business will have more chances of getting more customers on the web since almost everyone today shops for products or services using their tablets or smartphones. Don’t think twice if you want to have your business online. It helps to save cash as you will not have to rent an office space if you can have a space for your products at home. You will need to have a website where you will be selling your products. It’s pretty cool and practical.

Hopefully, you have enjoyed everything that you have learned here. Get started now to apply all the tips you got, and success will be on your way.

Here are some tips from Billionaire Sir Philip Green on Retail Business

Recommended Articles

  • Difference Between Retail and Wholesale Business
    You can decide whatever type of business you want to put up as long as you know its nature and your passion is in it.
  • How to Open Your Own Retail Store
    Opening your own retail store is more practicable if you are going to start small. However, even if the store that you are planning to establish is small, you still need to know the proper ways of setting up one in order for it to become successful.

1 Comment

  • jameel ahmad said on October 24, 2018
    sir, i want to open wholesale and retail both at the same time in the grocery sector. i already select location and process for documents. apart from it if any help suggests me.

    Comment

    (All the above fields are required.)

    Categories

    Popular Articles

    Join Our Newsletter