How To Start A Retail Business: A 6-Step Comprehensive Guide
Look, let’s get real here! I don’t want you to search “how to start a retail business”, open up a few tabs parallelly, juggle between those tabs, and get confused about the whole process altogether. Now that you’ve already landed on this page, let this guide assist you with the A-Z of setting up your retail business. Here are a few things to keep in mind:
- This is a super-comprehensive list, broken down into easily digestible pieces that you can translate into real-world implications by acting upon them. So go through it once, build your foundation and come back to it whenever you’re stuck.
- You’ll find almost everything that you’ll need here. However, there might be a few places where there are external links deliberately included (for example, the reading list, the legal stuff, the statistics, etc.) to make sure that you get those things right, so you might want to drift off for a while there and come back to continue.
- Lastly, this guide has been divided into six sections. Click on the links below to navigate to a specific section:
*Sit down, have your snacks around, take a few deep breaths, and focus. You are about to take one of the biggest steps in your journey of setting up your retail business!*
It’s about time to clear the mist
Make things simpler for yourself, ORGANIZE! Here’s a step-by-step process of how you can do just that.
Organize all the thoughts
Brainstorm for one last time, recollect all the thoughts that have been bombarding your head, and jot them down on paper. Maybe you can use an Eisenhower Matrix to categorize them, i.e., on the basis of what’s important, what’s urgent, what’s urgent and important, and what’s neither urgent nor important for starting a retail business or you can build your own parameters to categorize the ideas.
The what, the why, and the how
Have a clear idea of the why behind the business, and the what of the business before proceeding to the how of the business using this guide. What’s the core motivation behind opening a retail store? Is it that you are extremely passionate about starting something up? Is it that you are super tired of your monotonous 9 to 5 Job? Is it that you have always wanted to start a business? Whatever it is, make sure that it shakes you up from within, otherwise, it might be difficult to last!
What kind of retail business are you exactly looking at? Is it a department store like Dillard’s? Is it a big box store like Walmart? Is it a super-specialty store like Fischer Price? Is it going to be an omnichannel (online and offline) store or only a physical store? Find your niche, and zero down on which store to open.
Now you’ll end up either fixing the idea or struggling upon freezing it! Either way, market research is the next step to validating your idea. It will help you with identifying a market need to fill. Let’s zoom in on how it’s done.
Market research is basically understanding the market and knowing where the vacancy is present for your product to fit in. It typically helps you understand why customers would want to buy products from your retail store. Let’s look at a list of things that you must take care of in order to carry out this step in a proper way:
- Find niche markets you may not have known about. There might be a hidden market for a product that you don’t even know about! Owning a shop that provides such products is indeed a lucrative option. Dig deep on the web and find out. You can study research reports and go through surveys to do this.
- Understand your target audience. What are their needs? What are the problems they’re facing with the existing products? Do not forget to create buyer personas. These typically include factors such as age, profession, income, choice of products, etc. Here’s a sample buyer persona for your reference.
You can use the free HubSpot tool to compile the personas.
- Find out what competitors are doing. What are the products or services that they are offering? What tools are they using to enhance their business? How are they changing their strategy every now and then? If you approach them it might be possible to ask them a few tips on how to start a retail business.
- Identify potential problems with your product or services. Are your products or services in-line with the customer needs? Analyze.
Now, most of this work involves going through different consumer reports, talking to consumers in person or over the phone, conducting customer surveys, and things like that, so you may consider hiring someone else to do it for you.
However, if you are the DIY kind, you can use reports from Nielsen, D&B Hoovers, and U.S. Census Bureau. Besides, if you already have a Facebook page, you can get exact insights from the Facebook Audience Insights tool. Also, if you want to conduct your own customer surveys Google Forms and SurveyMonkey can come in handy.
This is the juncture where you have all the information you need, but nothing is arranged in a proper way! Time to formalize things and give a method to the madness by building a business plan.
A method to the madness – Business plan
Even before we start, let me tell you that all the components of the plan need not be written down right away, you can build on the plan as you proceed. Understanding the components is essential though before opening a store. Here are the key components of a business plan:
- Executive summary: This basically is a brief overview of the entire plan, written not more than 2 pages. This falls at the beginning of the business plan.
- Description of the company: What is the mission statement of the company? What is the vision statement of the company? What does the team look like? These are some of the questions that you will have to answer herein.
- Products and services: What are the products or services that you offer? This section of the plan basically constitutes an in-depth description of each product or service that you offer in your retailing business.
- Market and competitive analysis: All the market research that you did comes into play here. This section should also include a SWOT(Strengths, Weaknesses, Opportunities, and Threats) analysis.
- Sales and marketing plan: Ok, you have a viable product that has a need in the market, but how are you going to let people know about this? A sales and marketing plan is the one tool that will help you effectively push your retail business into the market.
- Company management and operations: This section is all about how you will handle the day-to-day operations of the company, right from team building to ensuring the effective functioning of the supply chain, this part is everything management!
- Financial projections and requests for funding: Financials are a very important part of the whole journey. This section covers the same in detail.
If the last three points seem unfamiliar to you, it’s okay! We will be discussing those exact aspects in the next few sections. And I said, you don’t have to mention all the points in the business plan right away, you can build on it as you proceed! Time to talk about the cash!
Moneyyy, it’s a gas!
Very few things have more power in altering the course of your business than money. It’s an essential commodity that you need to open a store and hence it’s imperative that you plan this aspect of building your business in the best possible way. Here’s how you can get started on this.
How much will the whole affair cost?
Find out the cost of operation of your retail business. Here are the two types of costs that will creep up:
- Fixed costs: This typically includes the rent and lease costs, salaries of employees, property taxes, insurance, business registration costs, utilities such as electricity, water, etc., to sum it up, these are the costs that will be fixed irrespective of the volume of products that you.
- Variable costs: Contrary to FCs, VCs are those that directly depend on the volume of sales. As sales go up, so do variable costs. As sales go down, variable costs go down. These typically include your raw material costs, sales commissions, production supplies, credit card fees, shipping costs, etc.
This should help you neatly categorize all your costs.
What if things go south?
Opening a retail store is one thing while owning a retail shop for a substantial period for it to get established is an entirely different thing! Have a rough estimate of how much time it’s going to take for you to reach the break-even point, that is when the total cost and total revenue are equal.
You must have enough armor to take a few bullets at the beginning so as to come out a winner by the end of the war.
Is there a deficit?
Don’t worry, you don’t have to Google “how to open a retail store with no money”, and bang your head around getting those finances in place! To make things easy for you, In this section we exclusively talk about how you can look for alternate means of getting the required funds:
- Bootstrapping: This basically involves anything and everything inside of the outside circle! So all the money that you invest from your own savings + all the money that you borrow from your inner circle such as friends, family, colleagues, etc., fall into this category, as there’s no external funding involved herein.
- Small business loans and grants: The U.S. Small Business Administration is a special government agency that supports small shop businesses and entrepreneurs in their journey of starting up. There are a variety of schemes under which you can avail loans and grants to acquire funds for your business.
- Angel investors: These are affluent individuals who invest their own money into startup ventures. They typically help you take your business off-ground, and get started on selling. The best way to find angel investors is through networking. Ask your friends or family members if they know any such investors. Besides, you can also find angel investors on different platforms or websites such as AngelList, Angel Capital Association, Gust, Angel Forum, Angel Investment Network, etc.
- Venture capital: VC is a form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential. Although VCs won’t be of much help at the beginning of setting up a business, they will come in handy at the later stages when you want to expand your business further.
- Crowdfunding: It basically is a method of raising funds for a business or project by collecting relatively small amounts of money from a large number of contributors using an online platform. Indiegogo, SeedInvest Technology, Mighty Cause, StartEngine, GoFundMe, and Patreon are the top 6 crowdfunding platforms that you can look into.
Again, planning financials is something that all of us inherently seem to know for whatever reasons. However, if this looks intimidating, you might want to consider roping in an expert to take care of this because this is an essential aspect of any “steps to open a retail store” handbook that you’ll ever come across.
Talking about experts, the following section is the trickiest in the entire process of starting up! Let’s take a deeper dive into the law now.
What does the law say?
Let’s understand what are the legal requirements for opening a retail store! Disclaimer: Things can get pretty complicated herein, so we advise you to hire a local legal expert to take care of these aspects of your business. But, to give you a head start and get the right services from the expert, we have compiled a list of things, from documents to filings that you’ll need to open a retail store.
Register your business
Choose your legal structure. Legal structures are recognized by the Internal Revenue Service (IRS) and determine which income tax forms you have to complete and submit for your business. Here are five common business legal structures:
- Sole Proprietorship
- Corporation (C Corp)
- S Corporation (S Corp)
- Partnership (LP and LLP)
- Limited Liability Corporation (LLC)
Decided on the name yet? The name of your retail business should not only be unique and catchy but should also be simple and reflect the brand image effectively. To make sure that you’ve got a unique name, you can search for a trademark through the United States Patent and Trademark Office (USPTO) database.
If you are beginning a C Corp or an LLC, you’ll need to visit your Secretary of State’s website to ensure your business entity’s name hasn’t already been used.
EIN. Filing for an Employer Identification Number (Also known as a Federal Tax Identification Number) is another very important step in this process. Any person with plans to open new stores must file for an EIN as this is an identifier almost every business in the US and US territories — provided by the IRS — must obtain. Basically, you’ll be using EIN to report all your business taxes of your store to open.
You can check with your state to make sure you need an EIN as well as review the IRS EIN checklist to make sure you qualify. Once you’ve done that, you’re ready to apply for your employer identification number. Here’s an example of EIN.
Source: Falcon Express
Obtain license and permits
Remember your business is subject to the laws and regulations specific to your industry as well as the laws governing businesses in your area.
For example, a food service business needs to follow specific licensing and regulations for handling what it sells, but it also has to pay attention to the legalities of its marketing efforts and to trademark and copyright laws. As a retail business owner, you’ll likely need to obtain multiple retail licenses related to your field, including a resale certificate, seller’s permit, and a certificate of occupancy. The SBA is an excellent resource for licensing and permitting information at both the federal and local levels.
Open a business bank account
Why make finances confusing? Keeping your business bank account separate from your personal bank account is an absolute necessity, considering the number of transactions that are going to occur in the former. Besides, it also helps with taxes.
Obtain a business insurance
Having business insurance protects you from all the unexpected mishaps that might occur, and that is exactly why all businesses ranging from a small retail store to a huge retail chain like Walmart get insurance. There are many kinds of business insurance, and figuring out what insurance you need is the first step. Here are some common types of insurance and a basic list/description of things that they cover:
- Liability insurance: this covers your business for any legal actions due to accidents, injuries, or negligence.
- Commercial property insurance: this will help your business if any property is damaged or destroyed due to fire, storm, or theft. It will help pay to repair or replace property, inventory, and equipment.
- Commercial auto insurance: this will cover any damage caused to or by any vehicles you use for your retail business. (i.e., delivery vehicles, moving trucks, forklifts, etc.). It will pay for medical expenses, legal bills, and property damage, should one of your vehicles be the cause of an accident.
- Workers’ compensation insurance: this pays for the medical care and lost wages of any employees who are injured on the job. Most states require employers to have some sort of workers’ compensation insurance based on how many employees a business employs.
- Product liability insurance: this protects manufacturers, wholesalers, distributors, and retailers. It protects them from liability if a product they make or sell turns out to be unsafe and injures someone.
- Business interruption insurance: this will cover the operating costs for your storefront business if it has to shut down or move (for example, because of a fire or hurricane). It will cover the cost of relocation, paying employees, and paying rent.
- Cyber liability insurance: this provides liability coverage to businesses that suffer a data breach. These obviously are extremely important for online stores but nowadays have also become a necessity for physical store businesses. Depending on the insurance, it can also cover the cost of letting your customers know about the data breach, as well as providing services to customers who are victims of identity theft because of a said data breach.
- Umbrella insurance: this gives you extra coverage to help pay for anything that may have exceeded your policy limits on other types of insurance.
As a retailer owning a shop, you should at least consider general liability insurance, a business owner’s policy, and business crime insurance; and as an employer, you’re likely required by law to carry workers comp insurance, health insurance, and unemployment insurance for your staff.
Let’s now move on to the product, the store, and all the rock and roll!
Buying, selling, and everything in between
Pick a physical store location
If you’re considering opening a small business storefront where your customers can visit the store and purchase items, then picking the right location heavily determines the sales that you’re going to make. For example, if you’re located in an area with a lot of traffic already, then you won’t have to worry much about lead generation for customers, as they will practically walk in. However, the competition also equally increases, so such customers might not buy very easily.
On the other hand, If it’s in a tough-to-find location, your primary work will be to make the retail business discoverable in the first place! This ideally, should not be the go-to choice hence.
Here’s a list of factors that you should consider to pick the right spot:
- Who is your target market and where do your ideal clients generally hang out? If you’re opening up a kids’ exclusive storefront business, for example, it might be a good idea to open it near a school or in a neighborhood where the population of kids is high, so that the probability of sales increases.
- How much space do you need for the whole store? Consider the selling area itself, a back office, a break room for your staff, washrooms, a storage area to store the stock, etc.
- What’s your budget? Your location will also depend largely upon how much room you have in your budget for renovations, store design, remodels, updates, a down payment, and your monthly rent and utility bills. That may mean opting for your second or third choice location to protect your budget.
Build an online store
There were eCommerce sales worth 5,542 Billion US dollars, in 2022 alone! By going online you can literally start a retail business from home. All that you will need to start a retail store online is a properly constructed website or partnering with a popular marketplace. Let’s look at some tools to get started on this:
- Shopify: This is hands down, the most popular platform for opening a retail store online, thanks to the number of customizations that you can make herein. The level of customization this platform offers makes it a very powerful option especially for businesses starting big.
- Squarespace or Wix: These business website platforms are simple to use when compared to Shopify and offer eCommerce functionalities. So they are good options to consider as well.
- Etsy, Amazon, or eBay: These popular marketplaces will provide you with plenty of built-in traffic and handy seller tools. On the downside, you won’t have as much control over your branding, customer relationships, or fulfillment process as you would with your own eCommerce store.
Also, there are a few other things you need to take care of before opening a shop online. Let’s look into them as well:
- Homepage. The first impression is the best impression! And when it comes to a website, the homepage is the first thing that the customer sees, so give it your all, so as to make sure that it reflects your brand image.
- Landing pages. Like your website’s homepage, these are the pages where you lead your visitors when they click your ads or other CTA’s. Convincing a customer requires special skills and this is where you’ll be tested on that aspect.
- Photos. A picture is worth a thousand words! So, photos, especially product photos are extremely important in making sure that the sale happens. Make sure that you put the best pictures on the website of your retail business.
- Product description. A good description is one that has a perfect balance between educating and advertising, and hence it is both the what and the why of the product.
- Checkout page and payment gateways. The last block in the customer’s purchasing journey, the checkout page has to be simple and easy to work with for your customer.
There are two aspects when it comes to fixing the inventory in your retailing business, viz. The supply and the supplier. Let’s look into both of them now
Choosing the right vendors/suppliers is a critical step in your list of steps to open a retail business of your business as they essentially are in this together with you. To make it easy for you I have created a list of things that you should look into before zeroing down on the supplier:
- What is the type of supplier? Is he/she a manufacturer, a wholesaler, or an individual maker? Each has its own advantages and disadvantages. For example, choosing a manufacturer as your supplier will give you a lot of flexibility when it comes to designing the product. So it’s up to you to choose the best fit for your retail business.
- Fix a budget for the supplier. Estimating a budget for suppliers will help you further boil down your choices in your search. You may include shipping and delivery costs as well along with the cost of the product itself.
- Test the quality of the product. Compare the quality of products offered in person instead of trying to determine it online.
- Reputation is reliable! Try and get feedback from business owners who are already using the vendor’s product, especially the ones who have been long associated with the vendor. This will help you judge better.
- Consider multiple suppliers. Having a simple supplier is never a good option, as anything can go wrong at any point in time. Always source your products from multiple suppliers, or at least keep your options open.
One thing that hurts more than not finding a customer, is not having the product that the customer asks for! At the end of the day it’s all about the products, isn’t it? Although this part has already been covered in earlier sections (link to market research) here are a few other things to look into when it comes to choosing the products:
- What’s trending in the industry? Whatever your retail niche is, try and keep track of all the things trending in that industry. You’ll be able to do this using social media, retail blogs, magazines, and looking into what other successful retail stores are doing.
- Partner with established brands. One of the easiest ways to establish your brand image in retailing business is by tying up with ones that are already popular. This is established by the psychological theory known as the “mere association effect”.
- Consider dropshipping. If you do this you don’t have to worry about storing your products at all. You’ll just need to find a supplier who’s willing to dropship their products directly to your customers. There are many platforms such as Oberlo, SaleHoo, Printful, Sprocket, etc., where you can easily find dropshipping suppliers.
Recruit a team of soldiers
If the people you recruit don’t share the same passion for the small retail store that you share, then the ideas that you have won’t translate into actual work in the real world! Here’s a list of roles that you’ll need to fill in:
- On floor manager. From cashiers to sales associates, this is the person who will take care of everything on the floor!
- Sales associates. A sales associate is the go-to person for all your customers. They help the customers and also double up as the ones who arrange all the products.
- Cashiers. Their responsibility is as simple as it sounds! They keep track of all the cash that flows in.
- Inventory manager. This is the person responsible for keeping your inventory up to date.
- Social media manager. This is the person who will exclusively work on growing your social presence.
- Ads specialist. You may consider hiring a separate person for this job of generating traffic to your website.
- Graphic designer. This is the person who will create all the required assets for your marketing material
Let’s talk exclusively about how to open a brick-and-mortar store now!
- Retail store appearance. Appearance matters. From the way you present your inventory to the way you design the look and feel of the store in itself determine what kind of impression is created in your customer’s mind about your brand. Look into things like lighting, color scheme, arrangement of inventory, accessibility, etc. You can even use Pop-Culture references in different ways to benefit from the mere-association effect! Well although a large part of this aspect is entirely up to your styling preferences, having a consultant over to cross-check might be a good idea so that you won’t miss out on any of the specifics.
- Tools and software. Before you open a retail shop, consider looking into software to help you manage tasks like scheduling, business management, payments, etc., or use Appointy’s retail scheduler, the all-in-one solution!
- Store Policies. Your physical store is basically like your 2nd home and just like in a home, setting some ground rules for all your employees and customers makes things a lot simpler. These policies include the dress code for your employees, entry and exit time for employees, store opening and closing time, things allowed inside the store (for example are you going to allow pets?), etc.
How is all of this of any help if there are no customers in the first place for your business storefront? You’ve got to hype things up a bit so that all your potential customers know that a new store has opened. Let’s look into how to do that now.
Eyeballs to Footfalls: How to get the customers?
Branding is all about how people perceive you when they interact with your business. Right from a small business storefront to a large retail behemoth’s product cards, everything is meticulously designed to give the business a personality so as to create that strong first impression. Here are a few things to look into to do this:
- Brand name. We have already discussed the details of the business name and from the branding point of view, the name should be simple, easy to pronounce, and one that has the power to reflect the messaging of the brand perfectly.
- Brand logo. It should be simple, elegant, and emotive enough to cement the brand identity, in accordance with the name.
- Brand positioning. A brand position makes it clear who you serve. It communicates to your target audience why you are the best choice for them and what makes your products different.
- Voice, tone, and messaging: A consistent and recognizable voice across all your touchpoints makes your brand sound more human and helps connect with your audience on a personal level.
Promotion on Google
Google My Business. By registering with Google my business, you have the amazing opportunity to list your retail business directly on Google! Besides, it’s completely free and super easy to set up! Here’s an amazing blog on how RwG can help your business.
Also, if you haven’t zeroed down on a scheduling partner yet, why not consider Appointy? The official scheduling partner for Google Reserve since it was piloted in early 2017! You can thank me later 😉
Here are a few things that you can do herein:
- Add pictures that define your brand to the emails
- Add memes/funny quotes to make things relatable
- Avoid spamming, no one likes being spammed!
- Try to add value to your customers through emails. Educate or entertain instead of only advertising
Partnerships and collaborations
- Co-marketing. What’s better than advertising along with a partner whose customer demographic overlaps with that of yours! Both of you can mutually benefit from this and reach out to new potential customers.
- Co-sponsored events. Conducting events can be a costly affair and can also get overwhelming, so partnering with a fellow retailer (doesn’t matter if it will help you reduce costs and split responsibilities at the same time.
- Collaborative products. Creating products along with a retailer is a super useful trick if you manufacture your own products. Maybe create a product that specializes in what both of y’all do!
Every business owner’s sight is always on the Influencers who have made it super big. Well, it’s true that you will have a larger TAM if you partner with big influencers, it often gets super expensive and hence becomes unaffordable for new retail business owners.
The trick then is to target the “micro-influencers” instead of the mega influencers. Micro-influencers will often post a shoutout for your brand if you send them free products to test out and have a photoshoot with. Instagram is a great influencer marketing channel.
Social media marketing
Social media is a way to build a following of engaged people, who might eventually turn into customers (if they’re not already). Post content that matches your brand image. And remember – add value to their life instead of only focusing on advertising your products. This way they will keep coming back to your posts. If you have a budget to spend, Facebook Ads is a great place to start.
This one might seem like a sure shot loss-making strategy, but hear me out. At the very start of starting up, the only thing you must focus on is getting the common folk to visit the store! Because, once they step inside the store (or onto your website) more than half the job is done, and hence, luring people with some freebies is a really sneaky tactic that you can consider using.
Besides these, here’s a neat list of retail tips that you should definitely have a look at. On we go.
It all comes down to this! Here are a few things you can do to make sure that you do the opening right:
- Soft opening. Consider starting with a soft opening to test things out. Basically, it’s one last feedback call before officially launching the store. All you have to do is invite some guests, give them the official store experience and gather feedback.
- Mark a date strategically. The date of opening your store has to be chosen very strategically so as to ensure maximum footfalls. Maybe pick a national or local holiday? Or a date where there is no other opening in the locality? Plan it ahead of time.
- The party is on! Create a party environment and consider providing celebratory beverages and food to excite your new customers. Maybe consider calling celebrities?
- Offer a one-day-only flash sale or product drop
- Promote the event on your social media and ask for RSVPs to build out your customer directory.
- Partner with nearby businesses to help generate buzz.
One infinite loop
A business is not just one single race that has a start and a finish line, no. A business is a collection of races whose ending point is solely decided by the one setting it up. Remember you’re in the game for the long haul! Here are a few things that you should look into.
Consider scaling up
Why limit your business to a single store? If you have enough resources. then scaling up is the next big thing that you should focus on. Take cues from Walmart, the biggest retail company on the planet, which started off as a single store back in 1962! If you do not have any plans to open your own stores anymore, there are other ways to do this such as adopting a franchise model or teaming up with another retail store to create a new brand altogether.
Manufacture your own products
One of the best ways to ensure a consistent revenue stream is by offering your own line of products. Take the case of Amazon for example, under the AmazonBasics private label it offers so many products at affordable prices. You can give manufacturing a try as well.
Invest in similar businesses
Investment in general is a really cool tool to make money work for you. Besides, investing in similar businesses will help you elevate your own brand image as well.
What’s hip, what’s pop?
Identify the latest trends and update your business. Do not be afraid to pivot as and when required. For example, one of the biggest trends in retail business is that the industry is migrating towards being omnichannel, so not having an online presence may have a detrimental effect. Dig deep and keep yourself updated.
Tails you win half the time
Don’t be afraid to take risks. Follow a model, analyze the results, pick another model and compare, now repeat forever and ever after.
Set targets, achieve and redefine for business is one infinite loop! The orchestra is all set now! The musicians are ready, you’ve practiced enough and it’s about time to start the show! But before you proceed further, we wanted to make sure for one last time that you get everything right and hence have created a special how to start a retail business checklist that you can download right away!
Download the free checklist to start your retail business!
Save it or print it out and use it to kickstart your business!
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We part here, all the very best with your new business, and hope to see you soon some other time!
We at Appointy, help business owners grow and run their businesses with our online scheduling software. This blog was a part of our ‘Manage your Business’ category, where we provide expert tips, and resources, or simply talk about the challenges that small and medium businesses face every day.
If you have any thoughts on this blog or would like to chat about your business struggles and achievements, let us know in the comments below.
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