The retail definition is selling goods or services to the consumer. In turn, you make money. However, starting a new retail business is not easy as it sounds. Many have failed. Due to not knowing the right components needed in this business.
Hi, akid here.
My day job from 2012 until today is Assistant Branch Manager for a respectable retail company in Malaysia. But I have involved in the industry even before joining the company. Total of experience of almost 10 years.
All I can say is, success in this industry is not just about the product or service you sell. It’s about paying attention to all details.
With that said, one must first gain an understanding of each part of a component of this business. If you don’t understand it, you don’t have a reason to pay attention to it.
In this article, I will cover each component and the importance of it. If you are interested to jump into this industry, or already have one but your sales graph is a flat line, then this article is for you.
Retail Business Definition
In short – selling WANTS or NEEDS, in the form of tangible products or services to consumers. What they bought are for their personal uses.
In-depth – Retail businesses will try to fulfill the WANTS and NEEDS of a consumer the best they can. Retailers will provide a variety of products that consumers can choose from.
Depending on the types of retail stores, buyers can expect to get different kinds of products in different categories: food, household, clothing, etc. The transaction usually happens at a real-life store.
- Walmart – Selling from foods to clothes. You can get almost anything that is needed here.
- Guardian – Focus on selling different kinds of cared products. Toothpaste, hair pomade, perfume, condom, medicine, etc.
- Padini – Consumer can get different kinds of clothes for different uses here. Right for working to casual wear, even footwear.
- 7- eleven – Mostly fast foods, beverages, medicine.
Focusing on fulfilling what consumers were looking for, within their time should be the priority for all retail owners. By having that goal, the profit will automatically follow.
That is how retail businesses can be sustainable, scale, and successful.
How The Profit Were Made?
The profit margin from a single product is small.
So mostly all successful retail businesses will focus on sales volume. Higher sales volume can be achieved if a particular retail store can provide product variety.
The logic behind it:
Let’s say you want to buy a gardening tool. Where would you prefer to buy it from? A store that only sells a shovel? Or have all related gardening tools? The answer is obvious. You will go to a store that sells more than just a shovel because you were given a choice.
And having a choice sparks feelings of attraction.
When it comes down to focusing on high sales volume, you can expect to make a net of 5 figures per day. It is possible to hit even 6 figures per day too. (Remember, your store has the element of attraction).
So having a high sales volume is a proven way to succeed in this field. As long as you provide variety.
How To Start A Retail Business
Starting a retail business is not just simply rent or owned a shop lot, display your goods, and start selling. There’s more to it. There are 6 important components that one should learn and understand before starting. These components are:
- Business plan
- Determine What To Sell
Each component must be treated as a whole. Like a steel chain, linked to each other. Missed out on one of these will make “money” fall back from any retail store.
1. Suppliers: Understanding Retail Supply Chains
It is important to know how the 1st component works.
By knowing it well, it opens to other related information such as the timing of goods arrival and who to refer to if there’s any quality issue in the goods.
For this component, 2 key players are involved: Manufacturer and Wholesaler.
(1) Manufacturer/Supplier – Basically, the factories. Manufacturers are even involved in the mixing of raw materials. They’re also taking requests in creating a certain product for a certain company.
(2) Wholesaler/Distributor – purchase the finished goods from manufacturers and sell the goods back to retailers in bulk quantities.
Retailers then sell back the goods to consumers above the purchase price.
Depending on the economic situation and certain factors involved (middle-man/shipping costs/availability of raw materials), the selling price sometimes will be way above the purchase price.
Some of the well-known favorite suppliers are from China. Because their price is cheap compared to other country and the quality wise is good too.
2. Create Retail Business Plan
Think of it as a roadmap.
As you start the process of creating a retail business, often you will found the questions of “WHERE”, “HOW”, “WHAT”, “WHEN” such as:
Where can I get cheap suppliers?
How much is my capital?
What can I do to improve customer service?
When should I consider it’s time to go big?
With soo many questions, the main purpose of creating a retail business plan is to serve as an answer for it.
Plus when things get hard, it’s easy for you to lose a grasp of your business objectives and keep stay motivated. When it does, referring back to the business plan is a good way to bring you back on track.
With that said, creating a business plan is the first thing you need to do.
In the beginning, it’s okay if your business plan did not complete. Because you will keep adding on information later in future. What’s important is what has been written down must be clear and detail.
To tell the truth, create a business plan is to create a system for your business. So it will take time to finish even for those who are blessed with knowledge. Because there will be a lot of work and research to do.
So to make things a little bit easier, what I recommend is to expand your context.
Do the networking, surround yourself with peoples who have experience in this field and asked for advice, possibly create a venture or hire them. All these things will help open your mind, improve knowledge and further your vision.
Here is some common key point in any business plan have that you should include.
Company/store vision, mission, and goals
Market analysis: Analysis of market competitors, their contribution, advantages/disadvantage they have. Also, describe customer satisfaction and how hard or easy it is to get your product.
Product or services: Clarify what product or services you sell and why customers should buy from you. Can include price pricing, monthly promotion, etc
Budget: Clarify costs related to such as renting a shop lot/stockpiling products/marketing/hiring and other related expenses.
Financial planning: Target and estimate revenue for the first few years of the business. This can include future projections. Anything related to financial statements can be included.
If you have a dream to go big, you’ll need an investor.
So another purpose of having a business plan is it will be used to attract investors to invest in your business. They are interested in reading and knowing more about your financial planning.
Success in convincing them to invest in your retail business will be a huge step forward. As you will be able to expand your business faster due to injected capital.
***On the Growthink website, you will be getting much more information on how to write a retail business plan. It was more detailed and solely focus on what factors that you should write. Highly recommended.
3. You’ll Need To Formed Team
There is no solo act behind any successful business. There’s always a great team behind it.
But what makes a team great?
In a company, there’s a Marketing, Payroll, Purchaser, HR, Accounting, etc. Because there are soo many works to do, you need to outsource all the jobs.
You may say, “I don’t need many employees for now. Because I’m Enterprise. I can fulfill the roles that lacked workers”.
If you’re thinking you can fulfill every role, you’re mistaken.
Your job as the business owner is more than sitting in the office. Looking for ways to improves sales and such, recruiting smart people, networking to find opportunities, and looking for investors to invest – that’s what you do.
As the business owner, you must know who to recruit and lead your team to achieve success.
When choosing candidates, you will look at their previous experience and proof of their expertise. But there is one important criterion that business owners often overlooked.
That’s what shapes a team from nothing to great.
Without proper instill “teamwork” in their heart, there will be a time when they didn’t want to cooperate. It is much worse when they didn’t give you the cooperation during the time you need it most.
Employees with good teamwork spirit always ready to give a full commitment, to give cooperations most of the time. Even if they are busy with personal agendas during off days, they will always find time for their work. Some good examples are willing to answering a phone call from you at midnight.
You can get a lot of candidates with a good amount of previous experience, and are experts in their expertise. But to find someone who has valued teamwork from their heart is hard.
So when you do find one, that’s the correct person to hire.
Below is the common team that you should form if you’re just starting:
- Head of the department (HOD)
For handling attendance, registering new workers:
- Payroll department
For handling anything regarding money – sales, salary, expenses, etc:
- Account department
For handling picking & buying stocks, the transportation:
Based on their expertise, place them in the right department. You’ve wouldn’t want to arrange someone good at accounting at the HR department. Do this right so they can help smoothen business operations.
One more, don’t forget about your team at the store.
Some retail owners think that their team at HQ is more important. So they give more attention there. Where it is true to a certain degree, but they forget who’s bringing the cold hard cash every day.
Yes, it was employees at the store who’ve done this.
Forming the right team for your store is the same as you were doing for your team at HQ. Below are what you need for the store:
- Assistant Supervisor
For pushing sales, promoting new product or promotions:
- Promoter/Sales assistant:
For handling customer transaction:
For handling stock receiving:
- Store Assistant
4. Determine What To Sell
This will be the key factor that decides the lives or death of a business. No matter what your store niche is, and what its product, it should provide value that benefits customers.
As you know, most startup fails to survive their first 5 years. Why?
One of the reasons is because of the wrong product to sell. No one’s buying. To avoid these mistakes, retail owners must first truly know and understand what consumers were looking for.
Studying your consumers must be done before the business starts its operation. Once you understand what consumers want to be provided for, you can decide what to sell.
Any products or services will always fall into this two: NEEDS and WANTS.
Let’s look at the difference.
Wants – Not for survival but can make consumers’ lives easier, trigger positive emotions, etc. Such as proud having expensive laptops, newly branded shoes, expensive cars, etc.
Needs – Basically any that are for consumer’s survival. Like food, medicine, care products, etc.
Here is an interesting fact about profit margin in the retail business:
(1) Products that are not for survival usually will bring in higher profit – hard to sustain and difficult to scale.
(2) Products for survival usually are low in profit. BUT, it is sustainable and the profit can be scale.
For example, a Ferrari and a carton of eggs.
A Ferrari is a high-profit product. But with that price, can you expect someone will come to buy Ferrari every day? Will potential buyers think about buying Ferrari anymore during an unexpected event such as a sudden pandemic?
Of course not.
While a bucket of eggs is really small in profit value, can you expect someone will come to buy eggs every day? Yes, because eggs are for survival.
So it is proven here that in terms of sustainability and scale, businesses that are selling NEEDS have a higher chance of success.
But that doesn’t mean WANTS is unnecessary. You’ll just need to know which that is relevant that can be included together with the NEEDS. If your store selling foods, why not selling eating utensils too?
Spoons, Forks are not a NEEDS, but when eating mostly people use that so it’s relevant to sell them together.
5. Strategic Location For Your Business
What I learned with almost 10 years of working in this field: If you want your store bringing a pile of gold every day, pay attention to its location.
Getting a strategic location is not rocket science. You just need to be picky and do research.
You can have retail stores that have a great line of products, first-class customer services, comfortable shopping environment. But due to the wrong location selection, what good can all those things do if no one’s coming?
The checklist I provided below can help you determine where is a good spot for your business.
Is it near with competition?: Picking the spot nearest to your competition is not a good idea especially if you just starting. Ideally, a good spot is a 3-5km distance from your competition. However, if your brand is already well known, this is not an issue to worried about.
Is there any shopping mall nearby?: If you decide to rent a shop lot, find a spot that is near with shopping mall. What I see is this pattern: after customers have done with the mall, they usually will come to visit your store. Because it’s near it’s easy for them to come
Are there any residents who live in the area?: One factor that determines a good spot is when the area has residents nearby. These filters are useful if you decide to open a retail store outside the town area or when there’s no shopping mall. Don’t pick an area that didn’t have residents. Sure, the rent is cheaper but how can you expect to make profits when the area is like the Sahara desert? I see too many retail stores open with no residents around and end up closed their store after just after 1-3 months of starting operations.
6. How’s Your Retail Marketing?
How well you execute your online and offline marketing campaign? How often do consumers see your advertising?
There are a lot of ways to execute this. There are expensive ways and there are cheaper ways. But more importantly, does the marketing campaign follows certain phases?
A marketing campaign will not be as effective as it should if it’s not following the right phase. So here are the recommended ways to do it effectively.
Before Launching Phase
You need to start a marketing campaign even before the launch. This campaign objective is to create raving fans. For this phase, online marketing is the best way to do it.
A good time frame to start will be a month before launch. You need to use certain advertising services to amplify the campaign’s reach. For online marketing, using Facebook ads is the best choice. The cost is cheap and effective.
In this phase, you’ll create a series of posts that can catch the interest and have an engagement to your brand. This includes stating your brand USP (unique selling point) to differentiate you from your competition.
To put it on simple terms: Create hype for your business.
During Launching Phase (Soft Opening and Grand Opening)
For this phase, you still focusing on online marketing.
But this time you will go with offline marketing too. But you don’t need to advertise on television/billboard on the other side of the road. It’s not the time yet. Just focus on cheap ways such as flyers and banners.
Below are “informed” flyers example, ready to distribute to nearby residents.
Flyers and banners still prove to be one of the most important components of offline marketing. Many said now we in the 2000s era, so these tools are obsolete.
I completely disagree.
This year, just in March and April, the company I’ve worked on just launched 4 new retail stores.
These 4 new stores make it a total of 800th++ stores just in Malaysia. Despite pandemics, they still aggressively expanding their business since they were IPO last year. It’s a giant company, yet still using flyers and banners as tools for offline marketing.
This shows us that this method is still effective. It’s just that you need to know HOW and WHEN to utilizes flyers and banners properly.
We’ll start with flyers. For the launching phase, you’ll need two types of it: Informed and Special Promotion.
Related information that needs to be included in the informed type flyers:
Eye-catching design and color
Store full address
The picture of the front store, from the outside
An informed slogan type like “We Are Open” something like that
An informed flyer will be distributed to nearby residents, mall, food stall, etc, during store soft opening. Flyers with the necessary information, eye-catching design & color, will catch people’s interest and make them want to come.
While key info that should be included in the Special Promotion flyer are:
Store full address
A picture of products that were in the Special Promotion period
The price (Effects is more powerful with time-limited discount)
The Special Promotion flyer is for the store’s grand opening period. The main objective is to increase buying power, push sales volume and maintain brand awareness.
During this launch period, roughly around 1-2 weeks, distribute as many flyers as you can. At the company I’m working on, we will print out around 2k-4k A5 size flyers and distribute them to nearby stores/residents/potential customers.
For inside store, take a few (depending on the size of the store) flyers, paste them on the wall that is visible to eyesight. Make sure it was paste at eye-level degree. Because this method will “unconsciously” make them remember your brand.
Now for the banner. Unlike flyers, information that needs to be included in the banner is just:
The slogan announcing the stores open
Picture of the front store
Print big size and hang it outside the store’s roof awning. Make sure no object blocking the banner.
The reason for doing this is to make peoples around that area noticed your newly open store. It’s like having a robot calling nearby potential customers to come visits your store on autopilot.
Actually, there is still a lot to cover. But I’m gonna stop here for a while.
For those who are interested in the retail business and have doubts/questions in mind, I hope this article helps. A good decision is to start small and scale if you just start.
In the next article regarding retailing business, I’m gonna dive deeper into a single topic like product display, marketing, scale business expansion, forming a great team, etc.
Stay tuned and see you in the next article.
**Any question to ask? Don’t be shy. Just drop your comment down below. I would love to read and reply to all of it 🙂
6 thoughts on “Retail Definition-Starting New Retail Business”
I think this kind of business is profitable nowadays only in the online domain because this pandemic has affected a lot of business and the online domain can assure you that your business at least will not reach so quickly if you have a physical store. Rest understanding this field is essential to the success of your business which will decide a long term profit.
hey, Alex thanks for the opinion. Yeah, I used to think like that during the first wave of covid. But after a while, our government thinks citizens should adapt so our economy will not go worst. So as an exception, any retail store that has, or included essential products was given permission to maintain business operations. So for retail business, there is still hope. I hope the situation here is the same in your country too.
As is very evident from your post, opening a retail business is not something to be rushed into. It takes a lot of planning and researching before you ever get anywhere near the stage of actually opening your doors.
While you may have s great idea, you need to make sure that there is s market for it and not only that, but that the market is not already saturated with other people supplying the same items.
But get it right and your set up for life.
Hey, Geoff thanks for your opinion. I believe your opinion is true. Regarding saturated, to overcome it I believe every retail company should push in developing marketing strategies and never stop for brand awareness. Plus even though many were selling the same products, every retail business is unique because what they can do is push their USP (unique selling point).
For example, me and you selling ice cream, at the same price. If I want to get more sales than you, I would try to, say, have a different way of selling the ice cream. Maybe I will do buy 2 ice cream get 1 for free. Something like that.
Thank you for this helpful article with details about how to start a retail-based business. There are a lot of factors to consider and a lot of planning in order to create a successful retail space, and it’s helpful to see all of the steps laid out here. It’s also good for planning to see how many places along the way require capital investment so that you know how much money you will need to get things started!