Starting a retail business can be an exciting venture. With proper planning and execution, you can find success and meet your target market’s needs.
While getting your retail business up and running is no easy feat Swoop is here to provide insights toward profitability, and how we can support you on this journey.
A retail business can be highly profitable if a good location is chosen and management meets the needs of the market demand.
Factors that are important in determining whether a particular retail business is profitable include;
While competition can be tough in many cases, creating a good business plan and using smart marketing strategies can better your chances in many cases.
Consider, for example, a small boutique for environmentally friendly fashion. With growing awareness and the disposition of consumers toward more sustainable goods, such a niche can draw a loyal customer base willing to pay premium prices.
Good inventory management keeps the boutique flowing with bestsellers, with the lowest overstock to minimise waste. Good vendor relationships mean better prices and access to exclusive goods.
Market demand and trends can work both for you and against you. While you need to stay ahead of trends and be attentive to market demand, you also need to not let it constantly sway your decisions. It’s all about striking the right balance.
Retail businesses that can quickly adapt to changing consumer preferences often see higher profitability. While others, who get easily distracted (shiny object syndrome), miss out by not niching down and focusing on one thing at a time.
Operational efficiency plays a huge role in profitability. Through streamlining operations from supply chain management to point-of-sale systems, you as a retailer can reduce costs and increase margins.
The use of technology helps in the automation of various processes and in obtaining insights from data on customer preferences.
If you want to stand out in the competitive retail market, niching down can give you an edge. Focus on a specific segment where you can offer unique products or superior service. Research market trends, analyse competitors, and understand customer needs to pinpoint a niche that aligns with your passion and expertise.
For example, Levis are known for their denim jeans. Although they sell other products, denim is their specialty and their brand is built around it.
A comprehensive business plan serves as a roadmap for your retail business. It should outline your business goals, target market, competitive analysis, marketing strategy, and financial projections. A well-thought-out business plan not only guides your business operations but also helps attract investors and secure funding.
While some retailers may find this unnecessary, it is better to have one and not need it than to need it and not have it. For example, if you grow quicker than expected and you are seeking funding for an expansion project, they will require a business plan as well as well-kept financial records.
Example components of a business plan:
Registering your business is a legal requirement that establishes your company as a recognised entity. Now, this step can be done yourself or you can hire a third party to complete the registration for you.
How do I register my retail business?
First, you will need to choose a business structure (e.g., sole proprietorship, partnership, LLC, corporation) and register with the appropriate authorities.
Here’s a more detailed process:
Depending on the type of retail business, and its location you may or may not need to worry about certain permits and licensing. Check with regulations before obtaining the licenses and permits for your retail business. As for insurance, you should at least get the basics to protect your business from potential risks including general liability, property, and workers’ compensation coverage.
Common licenses and permits:
Types of business insurance:
For the sake of argument, let’s assume you want a brick-and-mortar location with an accompanying online store. Choosing the right location can make or break your retail business’s success.
Consider factors such as foot traffic, visibility, and proximity to your target market. A great example of this is how large retailers position their locations. Ever wonder why Macy’s or Ulta seem to always be located near other major retailers like Sephora or Dillards? It’s because of the amount of traffic they feed one another.
Having an online presence is equally important. Build a user-friendly online store to reach a broader audience and increase sales opportunities.
Tips for choosing a physical location:
Building an online store:
Let’s talk about your products and inventory, this is where reliable vendors and suppliers come into play. Negotiate favourable terms and build strong relationships to secure the best prices and delivery schedules. A good supplier relationship can also lead to better payment terms and exclusive products.
Tips for building vendor relationships:
This is also a good time to consider where you will be sourcing from. Many times you can find suppliers outside of Canada that offer more affordable products, but if you’re seeking a local partner there are options close to home as well.
Hiring is a big decision for many businesses but a necessary one to grow. Having staff allows you to delegate responsibilities, expand your footprint, and give you precious time back to focus on the back end of your business.
When on the employee hunt, look for individuals with relevant experience, a positive attitude, and a customer-centric approach. Progress always outdoes perfection so at the very least you need employees willing to learn that have a strong work ethic. Their experience in your industry won’t matter if they don’t want to show up on time and are always calling in.
Also, give your employees the best start possible, provide comprehensive training to ensure your team is well-equipped to handle various retail scenarios.
Let’s summarise these into five steps.
As you can imagine, cash is not always king in retail, in reality, many customers no longer have it on hand anymore.
This is only one of the many reasons you need a point of sale (POS) system. A reliable POS system streamlines transactions, manages inventory, and provides valuable sales data. Choose a system that integrates with your online store and offers features like customer management, sales reporting, and inventory tracking to enhance operational efficiency.
Bookkeeping is one area you do not want to mismanage or place on the back burner. Come time to pay your outstanding invoices and quarterly taxes you will want to have your finances in order.
Set up a business bank account, track expenses, and maintain accurate financial records. Consider using accounting software to manage your finances and stay compliant with tax regulations. If the DIY approach seems overwhelming then contacting a CPA or bookkeeper in your area can lighten the load.
Marketing your business is selling yourself to your target audience. It lets them know who you are, where you are, and why you’re better than the competition. Develop a marketing strategy to attract and retain customers. Implement a mix of online and offline marketing tactics, such as social media campaigns, email marketing, local advertising, and in-store promotions. Focus on building a strong brand presence and engaging with your target audience.
Here are a few marketing strategies to consider:
When you are just starting out, this may feel like drinking from a fire hydrant. Select only one or two mediums to focus on at a time, repurpose your content, and grow from there.
It can cost tens of thousands to start a retail business. Some say you should do business between $50,000 and $100,000 while others say it can average around $48,000. These variations are wide because each retail business can come with small costs or very expensive costs.
Look at a vitamin retailer vs a tech retailer. One requires costly equipment while the other can offer products that range. It all depends on your wants.
Whether you’re starting a healthcare retail business or an apparel line, Swoop can assist in boosting your growth with loans, equity funding, and investors.
Use our platform to explore potential funding options, including loans, grants, and equity investment. Our experts partner with you and allow you to find the best financing solutions tailored to your business needs.Visit our homepage to access the resources and support you need for a successful retail venture. Jumpstart your retail business journey with confidence.
Swoop was amazing! I was looking for refinancing and they were straight onto finding me the best possible option. I would highly recommend them.
Laree Smith
Owner, F45 Cambridge
Ashlyn is a personal finance writer with experience in business and consumer taxes, retirement, and financial services to name a few. She has been published in USA Today, Kiplinger and Investopedia.
Swoop promise
At Swoop we want to make it easy for SMEs to understand the sometimes overwhelming world of business finance and insurance. Our goal is simple – to distill complex topics, unravel jargon, offer transparent and impartial information, and empower businesses to make smart financial decisions with confidence.
Find out more about Swoop’s editorial principles by reading our editorial policy.
Join the 95,000+ businesses just like yours getting the Swoop newsletter.
Free. No spam. Opt out whenever you like.
Suite 42, 4th Floor, Oriel Chambers, 14 Water Street, Liverpool, L2 8TD
View in Google MapsKingfisher Way, Silverlink Business Park, Newcastle upon Tyne, NE28 9NX, UK
View in Google MapsSuite 105A, Airivo, 18 Bennetts Hill, Birmingham, B2 5QJ
View in Google MapsAberystwyth Innovation and Enterprise Campus
Gogerddan Campus
Aberystwyth University
Ceredigion
SY23 3EE
Dogpatch Labs, The CHQ Building, Custom House Quay, Dublin, Ireland
View in Google MapsSuite 801, Level 8, 84 Pitt Street, Sydney, NSW 2000, Australia
View in Google Maps43 W 23rd St, New York, NY 10010, United States
View in Google Maps21 Dreyer Street, Cape Town, South Africa, 7708
View in Google MapsClever finance tips and the latest news
Delivered to your inbox monthly
Join the 95,000+ businesses just like yours getting the Swoop newsletter. Free. No spam. Opt out whenever you like.