Retail businesses are traditional choices for entrepreneurs and offer plenty of scope for growth if the right decisions are made.. Start-up costs can be considerable although these will depend on your location and market.
Why start a retail business?
Purchasing products is firmly ingrained into British culture, driven by desire rather than need and contributing to a retail sector worth hundreds of billions of pounds a year. Whilst the industry is partly dominated by major players, independent retailers tend to emerge strongly in niche sectors where there the lower profit margins and lack of economies of scale defer big players from joining the fray. Find the right niche and the rewards can be considerable.
What skills will I need?
The ability to build personal relationships is key; large chains rely on low costs and convenience to drive sales which are often two areas where smaller outlets can’t compete. Providing an expert, friendly and reliable service in your niche is a great way to both find customers and keep them loyal. You’ll need to be able to control stock levels; overstocking can stifle cashflow whilst under stocking limits your sales potential. The capacity to deal with the stress of running a shop, particularly the long hours and the effect it can have on your private life, is essential. You’ll also need to be able to work a till effectively, source new products, liaise with suppliers and ensure all financial obligations are taken care of.
Practical experience is definitely best when you’re thinking about running a retail premises. Juggling the daily demands effectively requires experience; try to work in multiple positions to gain experience in all parts of retail management. If you’re looking to gain a professional qualification, some institutions (such as City & Guilds) offer professional diplomas in retail management and related disciplines, which may work well when combined with practical understanding.
Start-up costs vary enormously depending on your niche, location and advertising spend. You’re looking at around £50,000 minimum to start a retail business but this can easily go into hundreds of thousands if your premises needs substantial repairs. At the very least you’ll need to get the signage changed. As well as rent, you’ll also need to pay business rates and staff costs, and buy stock, a till and most likely a computer and printer for administrative tasks.
Insurance and compliance
Retail premises typically require significant cover due to the inherent risk of valuable stock and money changing hands. Buildings and contents insurance as well as public liability insurance will cover premises and stock and damage to third parties respectively. Once you take on staff you’ll need employer’s liability insurance, and you may wish to consider additional cover for money left on-site and business interruption due to unforeseen circumstances. In terms of compliance, you’ll need to comply with a whole range of legislation including the Sale of Goods Act 1979 and the Equality Act 2010, as well as employment law once you take on staff. Contact a lawyer or the British Retail Consortium (BSC) for more information.
Your first step
Gaining relevant experience is your first step if you haven’t done so already. Aim for a broad mix; experience in your niche is essential but you may also wish to consider similar positions in other sectors to widen your knowledge of the market. If you wish to take a professional qualification start looking into costs and timeframes as you may find it untenable. Once you’re ready to start your business, you’ll need to focus efforts on concretely identifying your niche and target demographic. This information will drive all business decisions; read our guide to market research for more information.