How to start a retail business (a step-by-step guide)

By Indeed Editorial Team

Published 6 July 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

If you have a creative mindset and want to work in a customer-facing environment, starting a retail business may be a rewarding career move. No matter what business you choose to create, there are always several things to consider to maximise your chances of business success. Learning what a retail business is and how to create one is a good way to ensure that you include these during the planning process. In this article, we outline how to start a retail business and define what retail means.

What is a retail business?

A retail business sells products or services to consumers for their own use. Retail businesses usually obtain goods or services from a wholesaler or large supplier before selling the stock themselves. Retail selling can take place in a variety of ways, including online, in a shop or through postal services. Some examples of retail businesses include:

  • department stores

  • speciality shops

  • supermarkets

  • convenience stores

  • pharmacies

  • charity shops

  • second-hand shops

  • e-commerce stores

Related: Highest paying retail jobs UK (with salaries and duties)

How to start a retail business

There are no set guidelines on how to start a retail business. The process differs depending on your financial situation, the type of retail business you want to start and the market you plan on entering. Try to remain flexible during the early pioneer stages so you can respond to unforeseen situations, such as new market trends, in a timely fashion. Despite the lack of comprehensive guidelines, you can consider the following steps to help you begin:

1. Write an executive business plan

Write an executive summary that outlines your business proposal and summarises its purpose. Provide a brief introduction to the retail business and overall mission. This ensures you have a reference point on which to base future decisions. You can also use this plan to document other planning elements to follow, such as market research and marketing strategies.

Related: How to name business ventures in 11 steps

2. Read up on retail law

Retail businesses have an obligation to follow a set of legal responsibilities when dealing with consumers. These legal requirements vary depending on what goods you sell and how you sell them. Research pricing information and consumer rights before continuing with your business plan.

It's also important that you obtain the proper licenses and permits to remain in compliance with the law and be able to operate. A business operation license is necessary to contribute to the area where you conduct business. Since the definition of retail involves selling goods and services, a seller's license is also required. The license you require depends on what items or services you sell, so be sure to do your research first.

3. Choose a location

This step is only necessary for individuals that plan on opening a physical shop. Research local neighbourhoods and shopping behaviours within them to ensure you choose the right place. Consider how much space you need for retail operations and remember to factor in back-office space, inventory storage and merchandise display areas. The square footage impacts the overall cost of the location, so make sure you're realistic as to how much space you need. Once you have the desired location, you can begin thinking about store layout and design.

Related: What does a retail manager do? (Responsibilities and tips)

4. Conduct market research

Conduct a competitor audit into other successful businesses in the area and determine how they established themselves in the same location. Perform research into the retail industry as a whole, in addition to the industry that your products or services fall under. Gather information on what competitors are stocking and what additional services they offer. Be open to adjusting your ideas to fill a gap in the market that's in high demand.

5. Develop brand positioning

Brand positioning is the process of putting your brand into the mind of consumers and involves identifying your unique selling point (USP). Base your USP on market research to ensure you fill a gap or respond to consumer demand in the market. Consider how your offerings are different from competitors and base your marketing campaigns on this difference. Creating a unique brand positioning also requires you to understand the wants and needs of your target audience. Use this information to pinpoint how the business meets their needs and target them in your messaging.

Related: 17 common types of customer needs (with definitions)

6. Find suppliers

Perform research into local supply companies that offer the products you want to sell. It's essential you enquire with several suppliers so you can get an average quote and find companies offering more value for money. Determine whether you're comfortable dealing with international suppliers or whether you'd prefer to shop local. Negotiate the terms of your contract to guarantee the best deal.

If you plan on selling homemade goods or services, you may still research suppliers who can provide you with the necessary equipment to run the retail business. For instance, if you're opening a homemade clothing store, look for suppliers that can offer you mannequins, clothing racks and other essential items.

7. Create a messaging strategy

A messaging strategy is a framework that outlines your communication methods and influences every piece of content connected to your business. Having an effective messaging strategy in place ensures you communicate brand positioning through every aspect of the business. It also includes how you expect employees to talk to customers and what tone to use on content platforms. A good messaging strategy also helps increase brand awareness and fosters trust in the business.

Messaging strategies mostly include visual material. Put guidelines in place for designing social media and website posts. Ensure that these guidelines allow you to reflect your brand through design and imagery.

8. Determine the marketing strategy

Put together a strong marketing plan that details how to attract your target demographic and what channels you might use to capture leads. Some retail businesses use social media and web forums to attract customers, while others choose to conduct online or in-person surveys. If you're struggling to engage with consumers, consider offering them an exclusive discount to incentivise them to interact with the business.

Focus on creating a marketing strategy that fosters awareness and trust in the brand. This is because consumers usually feel sceptical about a new brand, especially when they have an established connection with competitors. Remember to only use marketing techniques that are likely to reach your target audience. Some marketing methods to consider include:

  • social media

  • direct selling

  • email marketing

  • conversational marketing

  • paid advertising

  • video marketing

  • brand storytelling

9. Determine financials

Everything from your messaging and marketing strategies to market research requires funding. There are also several other costs to factor into starting a retail business. These include:

  • store set-up costs

  • overhead expenses

  • utilities

  • insurance

  • marketing costs

  • merchandise

  • merchandising equipment

  • technology

  • employee costs

Start by calculating how much money you've saved and then determine how much more money you need. Many start-up businesses apply for business loans or start-up loans that are payable in the future. It's important that you find a way to track your finances and ensure business revenue remains separate from your personal income. This allows you to avoid minor discrepancies when performing bookkeeping duties. Once business operations get underway, use an efficient method to generate sales and cash flow forecasts, profit and loss statements, capital requirements and break even analysis results.

10. Organise management

Consider the number of human resources required to make the retail business successful. Be sure to outline recruitment procedures, employment policies and staff benefits so that potential candidates know what to expect. Remember to factor staff training into the budget and make it a priority to teach them customer service skills. You can cut down on costs by hiring individuals who have previous experience working in retail. Before hiring employees, ensure you obtain an employer identification number (EIN). This allows you to hire employees to work for the business and ensures that the business collects payroll tax.

11. Network

Establish a reputation with local influencers and your peer group so you can continue to promote your business. Attend local networking events that allow you to introduce the business and let others get to know the face behind the brand. Business to business relationships are common in local areas and involve businesses helping one another to attract more customers.

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