How to Start a Retail Business

Finding a Location

Although a great location may not guarantee success, a bad location will almost always guarantee failure. A new retail business needs to be where the customers are. You want a location with a reasonable degree of security, access to public transportation for your customers and employees, adequate parking for commercial as well as personal vehicles, room for an office, and that all-important sales space. Where you locate will determine the hours you keep, who your clientele is, and what types of promotions you do. Also, where you set up shop will impact how long it will take you to grow. Luckily, you have lots of options.

The Homebased Retailer

Despite the benefits of running a business from home--low overhead, no commute, and technology options that make it easy to project a professional image--a retail business is one of the few businesses that is difficult to run from home. This is largely due to a conflict between needing customers to come to your place of business and the penalties of having a stream of clients visiting your home. Most residential zoning excludes retail, so your neighbors can report you to city or county officials if your business creates noticeable traffic, noise or parking problems. Some communities prohibit commercial vehicles or cars and trucks with signs on them from parking on the street.

One option for retailers who want to work out of their living room is to sell their goods and services from booths or tables at craft fairs, in cooperative booth space at emporiums or expositions, by mail order, or at flea markets. You can also sell retail on the internet.

Commercial Locations

The best retail location combines visibility, affordability and lease terms you can live with. Brick-and-mortar retailers need to be where the action is, so deciding where to put your business is every bit as important as the business you decide to go into.

Take the time to analyze the areas that appeal to you. There are three phases of choosing a location for your retail business: selection of a city, choice of an area or type of location within a city, and identification of a specific site.

In choosing a city, investigate these main factors:

  • Size of the city's trading area
  • Population and population trends
  • Total purchasing power and who has it
  • Total retail trade potential for different lines of trade
  • Number and size of competition
  • Quality and aggressiveness of competition

Once you have a general idea of what city you like, choose an area or type of location within a city by evaluating these:

  • Customer attraction power
  • The nature of competition
  • Availability of access routes to the stores
  • Zoning regulations
  • Geographic direction of the city's expansion
  • General appearance of the area
  • Sales and traffic growth prospects of the trade area
  • Demographics of neighborhoods

These are factors in narrowing down your site choices:

  • Traffic flow
  • Complementary nature of neighboring stores
  • Adequacy of parking
  • Vulnerability to competition
  • Cost of the site

Landlords

Directly related to the appearance of a retail location is the reputation of the landlord. Unfortunately, some retail landlords actually hinder the operation of their tenants' businesses. In fact, the landlord may be largely responsible for the demise of the premises and retailers' failure. For instance, some landlords restrict the placement and size of signs, forego or ignore needed maintenance and repairs, or rent adjacent retail spaces to incompatible or directly competing businesses.

Sometimes landlords lack the funds to maintain their properties. Rather than continuing to invest in their holdings and support their tenants, they try to squeeze out whatever they can get.

In addition to speaking with current tenants, talk to previous tenants of the location you have in mind. They can give you helpful information. Find out what businesses they were in and why they left. Did they fail or just move? What support or hindrances did the landlord provide? Would they rent from this landlord again?

Zoning and Planning

Your town's zoning commission can give you the latest mapping of the retail location and surrounding areas that you are considering. Here are some questions to think about:

  • Are there restrictions that will limit your operations?
  • Will construction or changes in city traffic or new highways present barriers to your store?
  • Will any competitive advantages you currently find at the location you're considering be diminished by zoning changes that will be advantageous for competitors or even allow new competitors to enter your trade area?

Most zoning boards and economic/regional development committees plan several years in advance. They can probably provide you with valuable insights to help you decide among retail locations.

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