How to Start a Retail Business

How to Start a Retail Store

With the prevalence of online shopping, more and more people prefer browsing goods through online websites. The convenience of online shopping is undeniable, but physical brick-and-mortar stores remain the primary purchasing place for consumers. According to statistics from Statista, 85% of retail sales come from physical brick-and-mortar stores. Whether you’re starting a new business or looking to expand your online business through a physical store, careful planning is necessary for setting up a physical retail store. Therefore, after consulting with industry experts, we’ve compiled a list of key areas to focus on, hoping to provide you with some guidance:
  1. Generating Ideas and Defining Questions
  2. Market Research and Business Planning
  3. Choosing the Right Legal Structure
  4. Selecting a Retail Store Name
  5. Organizing Startup Costs and Financial Situation
  6. How to Register Your Retail Business
  7. Finding the Ideal Retail Location
  8. Choosing Retail Suppliers to Collaborate With
  9. Hiring Employees
  10. Exploring Marketing Opportunities

1. Generating Ideas and Defining Questions

When you contemplate the idea of opening a retail store, it’s crucial to comprehend and answer the following questions:
  • What will your business sell?
  • Who are your target customers?
  • How will you price your products or services?
  • What are the competitors in your industry and locality?
  • Who will be part of your team?
There are many other questions to answer, but opening a retail store is like starting any other business. You must identify the products to sell and understand the composition of your target audience. Creating a retail store that satisfies customer needs is paramount.

2. Market Research and Business Planning

Juli Lassow, founder and head of JHL Solutions, a retail business management consulting company, says, “Today, no idea is entirely original. Understand what choices your customers have for you and your products… Once you understand your competitors, you can formulate a competitive strategy. Will it be in price? Quality? Service? Variety? Clearly articulate what your competitive advantage is. Know how to convey this to customers through marketing and demonstration.”
If you’re unsure how to start market research, you can try three forms: primary research, where you find the answers yourself (e.g., by interviewing local business owners), secondary research, where you consult public data and records from other sources (e.g., the U.S. Census Bureau or Statistics Canada), and tertiary research, where tools like Quantcast, Alexa, and Google Trends can identify and evaluate competitors, help you find new customers, and assist in determining improvement strategies for a comprehensive understanding of the market.
A business plan is the place where you outline your business’s future goals and how you intend to achieve them. Your plan should demonstrate your outlook for the next three to five years and include milestones along the way. If you need assistance with a plan template, you can contact WAVF for help.

3.Choosing the Right Legal Structure

Deborah Sweeney, CEO of MyCorporation, states, “If you’re opening a retail store for your business, you’ll need some general business licenses and permits to continue operations and stay compliant.” Some foundational elements include:
  • Basic business operating licenses, allowing you to operate your business in the city, county, or state where you conduct operations.
  • Employer Identification Number (EIN), a federal tax ID enabling you to hire employees to work in your store and ensure your business collects payroll taxes.
  • Seller’s permit; this depends on the type of goods your retail store sells; it’s advisable to consult your state’s government office to determine if it’s required.
When choosing a legal structure, you follow the same process as most businesses. However, for retailers, becoming a sole proprietor may entail risks. Opting for a business structure that doesn’t fully attribute liability to the individual owner is a good way to mitigate risks if the business fails.
It’s common for retailers to become corporations or limited liability companies (LLCs). Both choices help limit personal liability.

4. Choosing a Retail Store Name

While the name itself doesn’t determine the success of your business, it’s essential to have a name that fits your brand image and is memorable to customers, even though it shouldn’t be the focus when opening a retail store. We also strongly recommend checking the availability of the corresponding domain name and social media accounts on platforms like Facebook, Instagram, Twitter, and Pinterest before registering the business.
If you encounter difficulties naming your business, you can use free business name generators to spark some ideas.

5.Organizing Startup Costs and Financial Situation

Once your business plan is ready, it’s time for implementation. You should have estimated figures for expenses related to purchasing inventory, paying rent, hiring employees, and covering other opening costs. Are you planning to apply for a bank loan? Some owners worry about securing commercial loans for their retail stores, which is entirely normal.
Seek government-funded loans or grants for added assurance. In the U.S., the Small Business Administration offers various financing programs that act as intermediaries between businesses and lenders to lower risks. In Canada, the Small Business Financing Program aids small businesses in obtaining loans while sharing the risk with government-supported institutions.
You can also explore angel investors, high-net-worth individuals who typically own a portion of your business in exchange for funds.
Finally, you can turn to family and friends for investment, but proceed with caution. Always ensure there are well-defined contracts—preferably written contracts rather than verbal agreements. Any minor business hiccups can strain personal relationships when you rely on family and friends, so it’s advisable to consider them as a last resort.

6.How to Register Your Retail Business

When registering your business, you first need to decide on the business structure (i.e., sole proprietorship, partnership, corporation). Next, you need to provide the unique business name (if you don’t have one yet) and register with the IRS to obtain an Employer Identification Number (EIN). Once the federal registration is complete, consult your state office to determine which local business licenses and permits you need to comply with.
Given the legal and tax considerations of these decisions can be confusing, it’s advisable to be familiar with general business laws and consider consulting a lawyer or tax advisor to meet your specific needs, ensuring you understand the financial implications of your decisions.

7. Finding the Ideal Retail Location

One of the most crucial aspects of opening a retail store is having the right location. When looking for a future storefront, try to balance rental costs and potential foot traffic. The average size of small to medium-sized stores ranges from 1,000 to 5,000 square feet. The average commercial rent for shopping centers in the most expensive states in the U.S. is approximately $26.84 per square foot. If you are opening in a smaller town or choosing a smaller-than-average storefront, you can opt for lower rents to start your business.

8. Choosing Retail Suppliers to Collaborate With

Retail store owners face countless tasks, and establishing stable relationships with retail suppliers is crucial. You need to find a supplier that not only offers quality goods at affordable prices but is also reliable and can address issues when they arise. Contacting multiple suppliers is worthwhile, as it ensures you always have a backup in case of problems. Building relationships with multiple suppliers quickly lays the foundation for your business’s success.

9. Hiring Employees

You’re almost ready to open! It’s time to ensure you have enough staff. Even if you plan to work on-site, you’ll need at least one sales assistant so you can take a day or two off each week.
Here’s an overview of average salaries for retail employees:

10. Exploring Marketing Opportunities

You’ve made it: you’ve transitioned from a business plan to business reality. You’ve chosen a location, acquired inventory, hired employees, and now you’re ready to open your retail store. It’s time to promote it so that customers know how to find you.
For busy small business owners, marketing can be challenging, but there are plenty of tools and resources to make it simple. Even without any design expertise, you can use Canva to create high-quality social media posts. In addition, you can try flyers, newspaper ads, and paid social media advertising.
After your new store opens, make sure to stay in touch with customers to turn them into loyal patrons.
Opening a retail store is not easy and requires careful planning. If you need more assistance, feel free to contact WAVF!

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