So you’re thinking of setting up a retail business. How exciting! Retail businesses are great because you can skip the stages of product development by selling existing products while still creating a unique experience for customers that keeps them coming back. However, it’s not as simple as just getting started.
The startup costs are significant, you need to purchase a location and all the necessary equipment for running a retail store like a POS system, you’ve got to purchase your first batch of inventory upfront, and invest in some kind of retail marketing strategy to make sure people know your business exists. Don’t worry, we’ve broken down what you need to know to start and run a successful small business in the retail industry.
8 Most Profitable Retail Businesses
First things first, what merchandise are you going to sell? There are lots of different types of businesses in the retail space so you have plenty of choice about the sector your new business will operate in. Here are some examples of the most profitable.
Grocery store
The foundation of a business is selling something that people need. Everyone needs food! You can open a grocery store in pretty much any community and find success, especially if you also open an online store that allows shoppers to order online for greater convenience.
Stationery and bookstore
Stationery and books are the kind of merchandise that shoppers like to browse in person making it the perfect addition to any town or city and giving it a lot of potential for significant retail sales. With a compelling brand identity, you’ll attract a lot of foot traffic.
Customized gift shops
Gift stores make the hard task of finding the perfect gift easier. Especially if the gifts can be customized. The ability to give a personalized gift is really attractive to shoppers in both the in-person and online shopping space.
Cosmetic store
Who doesn’t want to look as good as they feel? The cosmetic retail industry has been doing well for a while now. Customers are willing to pay a significant price for high-quality products creating plenty of potential for profits and revenue.
Perfume stores
Perfume is a ‘try before you buy’ type of product because different customers are attracted to different scents and brands. As it’s a product that fits into both the personal care and gift categories of retail, it’s a business with a wide customer base.
Mobile store
Mobile phones are a part of day-to-day life for the majority of people now. As a result, not only is there a large target audience for mobile stores but potential for a high volume of sales as customers update their phones every few years. You’ll make money from repeat business of a high-ticket item. As long as your inventory is up to date with new releases!
Kids store
Adults aren’t the only target market you can sell to. Kids need to get clothes, toiletries, toys, etc from somewhere! So setting up a retail store that meets the needs of kids (and parents) is a profitable business idea.
Sports shop
If you start a sports shop, you will attract a lot of passionate customers willing to invest in the equipment they need for their favorite hobby. To maximize results, conduct market research into the sports that are most popular in your area.
How Profitable is a Retail Business?
Of course, you don’t want to start a new business if it isn’t going to be profitable. In general, retail businesses have a lot of potential for reliable profits despite the significant upfront costs. Expect a profit margin of around 2-3%. This might sound small but successful retail sales rely on a high volume of purchases as customers buy multiple products at once or make repeat purchases. As a result, the average annual salary of a retail business owner is $127,973 a year.
How To Run a Retail Business Successfully
So you know what kind of retail store you want to open and are excited about the profitability of your new business. But how do you set up a retail store?
Build your business idea
Work on your business idea until it’s specific and unique. You need to know more than what kind of merchandise you will sell. What’s your niche? What do you do that no other retailer can do as well? Define your value proposition.
Come up with a business plan
Now you know the what, let’s talk about the how. How are you going to make your new venture a success? Business plans usually cover elements such as who your target audience is, an analysis of the market you are entering, and how you’ll make it a success financially. Essentially you’re writing a blueprint to follow.
Develop a pricing plan
Even in the retail industry where lower profit margins and high volumes of sales are common, there are different pricing options. You could decide to go down the high quality, high price, high profit margin route and focus on the quality of your products. Or you could go down the affordability route with low prices and low profit margins knowing that more people can afford to and are willing to buy your products at that price.
Organize your finances
Business accounting involves more than just setting up a business bank account. With all the upfront costs of opening a retail store, you can’t afford to get the finances wrong. Calculate what you will need to get going considering expenses such as finding a location, buying inventory, hiring staff, and setting up an ecommerce store. With your numbers defined, you can review your financing options. You could look into getting a business loan to cover the first few months of expenses. If this doesn’t work for you for whatever reason, you could also look into investors, grants and crowdfunding.
Register your business
Wherever you are setting up a retail business, there will be some kind of legal process to follow to officially register and run the store. Research the business licenses, permits and insurance needed for retail stores and the type of merchandise you will be selling. Most retailers need a business operation license for their city, county or state. An employer identification number (EIN) is a legal requirement for hiring employees and sellers’ licenses are needed for some products. Always ask for legal advice if you aren’t sure.
Level up your skills
There are a lot of moving parts in a retail business. From inventory management to storefront design to business accounting to creating a supportive company culture that cultivates a strong team, there are a multitude of skills involved with being a small business owner. You won’t already have all of these skills so plan how you will learn them or who you will bring into your team to fill skills gaps.
Promote your business
As a new business, you need to kickstart the stream of customers coming through the door. Implement marketing techniques that will target customers who align with your target market profile. For the grand opening of a brick-and-mortar retail store, focus on local marketing techniques like posters and flyers and local SEO. Digital marketing techniques like social media and influencer marketing are effective at promoting online stores.
Optimize customer touchpoints
The key determining factor in whether a customer will make a repeat purchase and recommend your business is the customer experience. How did it feel to shop with you? Make sure all your customer touchpoints from your website to the checking out process on the in-store POS system align with the customer experience you want to provide. For example, you could add a webchat function to your website to support customers browsing online, stay in touch with customers through personalized text marketing campaigns that keep you top of mind, and make your customer service communication super efficient so you don’t leave customers waiting.
Luckily all this is possible with Podium, the lead conversion platform that is the perfect sidekick for new and growing retailers.
