All You Need to Know to Open A Retail Store

All You Need to Know to Open A Retail Store

Visiting a brick and mortar retail shop is an experience in itself, where you can explore the different products, touch and feel the quality, maybe try out a few pieces. Even with the sudden rise in popularity of eCommerce, there is no denying that retail stores cannot be replaced. Customers prefer physical retail shops to try out products before purchasing, remove delivery expenses and waiting time, simplify returns, and engage in retail therapy.

Nearly 82% of all retail sales take place at physical shops, compared to only 18% of sales taking place online. The global market for physical retail store sales is estimated to be USD $22.13 trillion, and so there is plenty of potential for growth in the field. Although there is a significant amount of competition among physical retail stores, based on the location and retail niche it is possible for new players to establish their presence.

As technology evolves and the shopping preferences of customers change, the line between eCommerce and physical retail stores has become blurry. Many offline retail stores are expanding their capabilities online with an eCommerce platform. Similarly, several digital only brands are expanding into setting up retail stops.

Opening up a retail store can be a lengthy process, but it is equally rewarding as well. Here is a complete guide on how to open a retail store.

STEP 1: Prepare A Business Plan

A business plan is the fundamental first step of setting up any business, acting as the blue print upon which the foundation of an enterprise is built. In general, a business plan details the goals of the business, plans to reach those goals, and a general time frame. When it comes to a business plan for a retail store, other important aspects to include are the business idea, the USP, niche, products, target audience, competitors, and suppliers.

  • Business Idea

Before you start out on the process of launching your retail store, it is important to carefully analyse your core business idea. What is your retail store offering? What is the niche? What makes your store unique? Who are the target customers? Why should a customer visit and purchase from your store? Consider the answers to these questions, and whether it reinforces the validity of your core business idea.

  • Pick A Business Name

The name you choose for your retail store business will be the foundation of all its branding. When you select a name, make sure that it is different from competitors, indicates your niche, represents your business and is easy to remember. Confirm that the name has not been used elsewhere. Also, if you plan to expand to online selling in the future, check that the relevant domain names are available.

In Australia, if you are trading under your personal name or that of a business partner, there is no need to register the business name separately. However, it is advisable to register with the Australian Securities and Investments Commission (ASIC) so that you can operate in any state or region. Every business before operating in Australia requires Australian Business Number (commonly known as ABN).

Registration with the ASIC does not grant exclusive rights to a business name. If you want an exclusive business name, then you would need to register it as a trademark.

  • Customer Research

A business is nothing without customers, and that is especially true for retail stores. Identify your target audience and learn more about them. What kind of products do they like? How much are they willing to spend? How frequently do they purchase? Where can you find these customers?

Depending on your research, you can adjust and adapt your product offering and decide on a suitable location for your retail store.

  • Competitor Research

Based on your particular niche or offering, there may be several or very few competitors nearby or online. Where do your target customers currently shop for products you plan to offer? Who are the leading sellers in the area? How is their product range? How is their pricing? Keep in mind, apart from other retail shops, eCommerce is also competition to your retail shop, to a limited degree.

When you examine the competition, compare how your prospective retail store will perform in the market. Is there a particular gap that your retail store will fill? If there is less competition and higher customer demand, the chances of your retail store becoming a success increase exponentially. Conversely, in a saturated market with a lot of competition, it would be hard to launch a successful retail store.

  • Identify Products

The basic premise of a retail store is that it sells products to customers. So, of course, there needs to be planning regarding which products will be offered. Based on the size of the retail store, this can be a lengthy task. Consider the demands of your target audience and what is currently available at competitor stores and at what prices.

Aim to provide products that your target audience would be interested in and other products that would appeal to them. Expand beyond the target audience and consider what other products go along with your brand. Try to offer unique products or better prices that those offered by competitors.

Nevertheless, the size of the retail store may somewhat restrict the range of products you will be able to offer. If you start out with a smaller sized retail store, it might not be practical to have a wide range of products that could over-crowd the store. Prioritise on which products are a better offering, and feature those in your retail store. Based on customer response you can adjust your product catalogue.

  • Identify Suppliers

In a retail business model, you need to have suppliers that will provide the products to sell in your retail store. Before you finalise your retail store plan, it is important to shortlist suppliers and vendors. There are primarily 3 types of suppliers; manufacturers, wholesalers, and individual makers. Discuss your product needs, timelines and pricings in advance. Choose a supplier carefully so that you can maintain quality in products and a sufficient inventory.

It is advisable to look into multiple suppliers to reduce the risk of having a retail store without sufficient products. To safeguard your interests, consider taking legal advice when drawing up a supplier contract. Be flexible when choosing suppliers but do not compromise on quality.

At the end of the day, having good quality products and a decent variety with suitable pricings will directly influence the success of your retail store. Any drop in quality or delays can cost you customers and damage your brand image.

  • Marketing Strategies

Marketing is a core component of any new business. It is the way that your target customers will learn about your business, and be motivated to make a purchase. Depending upon the location of the retail store, devise a few marketing strategies that will work for your niche.

For any marketing strategy, the first question is where is the target audience? Based on their demographic and interests, you can shortlist marketing strategies. Common options are social media, local message boards, local papers, local radio, and niche specific forums.

A physical retail store will be most accessible for people located nearby, so it is helpful to initially plan localised marketing strategies. Once the brand gains prominence, you can expand the marketing efforts to cover a broader area.

STEP 2: Understand Retail Business Costs Involved

A business plan will help you understand and define the core goals of your retail shop. However, before you work towards launching the retail shop, it will help to understand the retail business costs involved. Accordingly, you can plan a budget and decide on the details of the shop functioning. Here are the major costs involved in a retail shop:

  • Location

The successive of a retail shop depends heavily on its location. Choose the location for your shop carefully, considering the target audience, other competitors in the area, general footfall and transportation support.

The location costs will include the rental or purchasing amount for the actual store, and any remodelling or renovation costs. The costs for the shop will also depend on the size of the store. Have a shop size that is suited for the product range you want to offer and the customer flow you expect. A too small and crowded store is unappealing, as is a too large and empty store.

  • Utilities

Other than the rental location for the retail store, there will be additional costs for utilities such as electricity and gas. Based on the location, you may have additional costs for heating or cooling.

When selecting a utility provider, a good idea is to explore the providers in the region and request quotes so that you can choose the best deal.

  • Inventory

When you are selling products from a retail store, you need to have a sufficient inventory ready with you to display, and preferably some extra stock on hand. Apart from the costs for maintaining inventory, there will also be expenses in managing the inventory and storing the products.

  • Insurance

Insurance coverage is an important cost to factor in for a retail store. This can include insurance coverage for business income, business property, business liabilities, crimes, public liabilities and product liabilities.

  • Staffing

To effectively manage a retail store, you will likely need employees and other forms of staff for day-to-day operations. Costs for staff include salaries, benefits, cost of training, payroll management, and employee insurance.

  • Equipment

Regardless of the niche of your retail store, there are some pieces of equipment that you will require. These include merchandising equipment to display the products, for example, shelves, display cases, mannequins, hangers. Additional equipment would be for setting up Point of Sale (POS) systems, payment stations and checkout points. A security system is also advisable to keep the shop and products safe.

STEP 3: Register Your Business

Once you are ready with a comprehensive business plan and have budgeted the main expenses, it is time to officially set up your business.

  • Define your legal structure*

Every business store has a legal structure which will affect taxes, asset protection, setup costs, and ability to raise funding. In Australia, there are 4 main types of business structures:

1. Sole Trader

One of the simplest forms of legal business structures, a sole trader is relatively inexpensive and easy to set up. In this format, you, the sole trader, are legally responsible for the business in all aspects. This includes for any losses, debts, and day-to-day decisions affecting the business. It gives you full control over the business and tax returns can be filed from your personal tax file number. A drawback is that you have unlimited liability, so if there are any losses, your personal assets would be at risk.

2. Partnership

In a partnership business structure, there are 2 or more people involved who would then share income, losses and liabilities.

There are three types of partnerships:

- In a General Partnership (GP) all the partners have an equal responsibility towards the business, and there is unlimited liability for each partner in case of debts or losses.

- In a Limited Partnership (LP) there are general partners with their liability based on their contribution to the business. Passive investors tend to have minimal involvement in day-to-day management of the business.

- In an Incorporated Limited Partnership (ILP) there can be partners with limited liabilities but there has to be at least one general partner with unlimited liability. In the case of loss or debt, the general partner would be personally liable.

3. Company:

In contrast to sole trader or partnerships, a company is an independent legal entity. As a result, the company holds the same rights as any individual and can take on debts, sue, and be sued. Companies are generally complicated to setup and are expensive. While personal members would not be liable for the debts or losses of the company, they would be responsible for paying full amounts of any unpaid shares they own.

4. Trust:

A trust involves assigning a trustee who would be legally responsible for the operations of the business on behalf of the beneficiaries. The trustee can be an individual or a company and requires a formal trust deed specifying the operations of the trust. Setting up and operating a trust can be expensive and the trustee would be required to conduct formal annual administrative tasks.

  • Get Requisite Licensing and Permits

The requirements for licencing and permits vary depending on the state, local laws, and specific industry. The type of business, location, and business activities can also influence the licencing and permit needs. Remember to check local council and state requirements, and apply for the recommended licences and permits to avoid legal hassles in the future.

  • Register for Taxes

When you open a retail store as a business, you would need to pay business taxes. Registration is compulsory for the tax file number. Other taxes and registration requirements are dependent upon the legal structure of the business, annual turnover, and employees. For example, the Australian Business Number (You need an ABN to trade in Australia), Australian Company Number, Goods and Services Tax (GST), Payroll Tax and various states and federal levies dependent on your business type.

STEP 4: Select Business Tools

Running a successful business involves many components, more than just managing products and sales. Minimise on the need for a large staff by utilising business tools that will save you time, effort and money.

  • Accounting

Accounting is an unavoidable component of a smoothly running business. Fortunately, there are a variety of accounting software tools available. Many connect directly with your POS system, boosting accuracy and reducing work for you. When attached with a compatible POS system, all the transactions can be recorded and synced with the accounting software, saving all the data in an organised manner.

  • Inventory Management

When you are dealing with a large number of products, inventory management can become complicated. Any mistakes in inventory can result in a missing product as requested by a customer. Setting up a barcode system is a great way to manage inventory and keep track of all incoming and sold products.

  • Payment Processor

These days, customers prefer having a variety of payment methods to choose from, including cash, debit/credit cards, and mobile wallets. To facilitate each payment method, you would require a payment processor.

  • POS System

point of sale system is the single most important business tool that you can use for your retail store. Multi-faceted, a POS system can easily integrate the functions of multiple tools and give you easy to manage results. A POS system is generally set up at checkout points to show the price of selected products, accept payment, and print out receipts.

Apart from facilitating checkouts, good quality POS solutions can help you with inventory management, accounting, advanced reporting, employee management, and customer relationship management. Multiple checkout points can also be integrated with a single system for smoother operations.

STEP 5: Set up the Retail Store

After finalising all the other details regarding your retail store, you are ready to set up the store itself. Check out how competitors have designed their retail stores for inspiration. It is not necessary to hire separate decorators for a retail store, but you can opt for a professional designer if you prefer.

Getting a retail store ready for opening involves the following:

  • Choosing a location

Select a suitable location for your retail store, which is close to your target audience and far from competitors. An easily accessible store with a size suited for expected customer traffic is ideal.

  • Setting up the store

When you have closed the deal on the physical location of the shop, it is time to design, decorate, and showcase your products. Use creativity and inspiration to design a retail store that is inviting and spacious.

  • Put POS system in place

Create dedicated checkout spaces and install the point of sale equipment as desired. Try to save space at the checkout so that you can maximise interior space for displaying products.

  • Set up payment options

Try out all the payment options you will be supporting and make sure everything is functional. Also check that the payment modes are correctly integrated with the POS system.

  • Hire and Train staff

Take the time to hire and train staff for your retail store. For customers, an important part of the physical store shopping experience is interacting with knowledgeable store employees. Ensure that the staff has thorough knowledge of the niche and products offered.

While you may prefer a more self-service model for the retail shop, having sales personnel is a great way to build a connection with customers, especially when your brand is new. Avoid having too many employees as that can be intimidating for customers and difficult for you to manage.

STEP 6: Grand Launch!

A grand opening is the best way to make your presence felt in the community and catch the attention of prospective customers. Plan a celebration or party, with festive d├ęcor around the store, maybe a guestlist for an evening event, and special deals to encourage customers to make their first purchase. The possibilities are immense, and you can personalise however you want.

The grand launch is the perfect time to impress the public with your retail store. To make the event a success, make sure to heavily market the launch ahead of time. Afterwards, you can use photographs and videos from the launch for social marketing purposes, to encourage a dialogue on your brand.

STEP 7: Consider Launching A Supporting eCommerce Website

If you have already taken the time and made the effort to launch an offline retail store, expanding your capabilities online is an easy step to further augment your brand and increase sales. An eCommerce website is a great way to reach a far greater customer base as the restrictions on location are lifted. There are minimal expenses since you do not need to rent a store, buy equipment or hire an extensive staff.

There are plenty of eCommerce platforms available at varying price points and the storefront of the website can be designed to match the look of your retail store. Existing product catalogues can be expanded to support online shopping and with some negotiation with suppliers, you can incorporate more products for the online store. Some popular eCommerce platforms include BigCommerce, Shopify and Magento.

Overall retail management is made easy with modern POS solutions that can combine transactions taking place at the retail store and online. Depending upon your preferences, you can bifurcate the sales and inventory for online and offline retail, or merge both together. By offering retail shop and eCommerce capabilities, you can establish your brand as a reliable and popular name in your particular niche.

Conclusion

The growth of eCommerce notwithstanding, there is a substantial market for physical retail shops. Customers still prefer brick-and-mortar shops to be able to touch and feel products, interact with sales people, and enjoy the shopping experience.

Opening a retail store can be very lucrative and rewarding, but if you are not prepared there can be many hassles involved. Careful planning can help you set up a retail store with minimal difficulties. Checking out the competition and making sure you are offering value to customers are both vital for the success of a retail store.

Use our tips to help guide you on the journey of launching your own retail store.

*This information is for general purposes only. Please seek professional advice to ascertain the best legal structure to suits your situation and needs.

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