Click to Print

Revved-Up Retail

Traditional storefronts aren't your only retail option. Here's a crash course in the fastest ways to start selling.
June 1, 2006
URL: http://www.entrepreneur.com/article/159824

Forget what you've heard about retail businesses requiring tens of thousands of dollars, long-term lease agreements and several months to get up and running. The truth is, there are plenty of retail opportunities that break all those rules, requiring little time or money to start. From online storefronts to mall-based kiosks to shop-at-home events, we found several retail businesses with plenty of profit potential.

The Latest Retail Phenomenon
When Randall Pinson took a full-time job as manager of a cell phone store during college, he expected to earn some extra money for school. He didn't expect to learn how to start an online retail business that would ultimately support him and his family.

Pinson, 29, had only vaguely heard of eBay in the spring of 2000, when his boss asked him to try to sell some phones on the website. So he followed the step-by-step instructions on eBay.com and listed a shipment of phones for sale. Less than an hour later, a woman in New York offered to buy 15 of the phones for $125 each, making Pinson's employer $100 in profit on each phone.

The 400 percent markup the store earned got Pinson's attention. He started selling cell phones and accessories on eBay himself on a part-time basis, and in 2002, he quit his job at the cell phone store and started his own online business using his last paycheck and a $2,000 American Express line of credit. By his college graduation a few months later, he was earning close to $60,000 a year selling on eBay.

Always aiming for a 50 percent markup on his sales, Pinson (eBay User ID: rocket-auctions) occasionally does much better. "My most profitable eBay sale was a piece of telecom equipment I bought for $5 without really knowing what it was. I sold it for $750."

Five years after starting, Pinson says confidently, "Anyone can make a living on eBay." His company, Rocket Auctions, based in Farmington, Utah, generated $400,000 in sales in 2005, with 2006 projections of $500,000.

To bring in that kind of money, Pinson has one full-time employee who handles the day-to-day logistics of inventory management and shipping the 400 or so items that are sold in completed auctions from the company's warehouse each week.

One of the advantages of starting an online retail business is that you can ease into it-you can easily try it out before committing, with little risk or expense. Dennis L. Prince, author of How to Sell Anything on eBay... and Make a Fortune!, recommends first taking a weekend and gathering items you have around the house, because "everyone has $3,000 to $5,000 worth of [merchandise] at their feet they want to get rid of," he says.

Then research what you've got by reviewing completed eBay auctions in the Seller area of the site for the product category you want to sell in.

Although the process of selling on eBay is extremely easy, selling stra-tegically and successfully can be hard work--"more work than you realize," says Prince, who has made several hundred thousand dollars on eBay in the last 11 years by selling in his spare time. Sole proprietors can make as much as $5,000 to $10,000 a month, Prince says. If you bring in employees, those numbers can grow substantially.

Says Prince, "An online business [has] the lowest cost and potentially highest yield for a retail startup."

The Other Online Powerhouse

eBay may be the first name in online auctions, but Amazon.com is still the gorilla when it comes to e-tailing. If you prefer dealing in fixed-price sales rather than auctions, becoming an Amazon seller may be for you.

Steve Crounse, 48, of Fredericksburg, Texas, hadn't thought much about starting a retail business until the company he and his wife, Le Anne, 48, worked for collapsed in 1999, and they suddenly found themselves without jobs. Given the opportunity to start over, they both decided the internet might have more potential than other traditional jobs.

Steve says they soon learned that "the real trick to being successful on the internet is to find a niche market with products you can't find locally." As sports fans, the pair settled on sports apparel as their niche and founded Best Sports Apparel to sell licensed caps, jerseys and T-shirts. "The bulk of our market is [made up of] displaced sports fans who can't find their team's apparel nearby," he says.

In addition to carefully choosing their merchandise and hiring a company to design their website, the Crounses also evaluated their competition, who were selling the same products but shipping in 10 to 14 days--a lifetime in online terms. So Best Sports Appareladvertised in huge letters on its website that it ships orders on the same day they're placed.

The fledgling business, started in the Crounses' attic, grossed $100,000 in 1999 and grew steadily at about 30 percent to 40 percent a year, to the point that they needed to hire employees and move into a commercial space in 2001. And in 2003, Amazon called asking to partner with them. Amazon would perform all the front-end work, such as handling credit card transactions, and take a 15 percent commission, while Best Sports Apparel would acquire all the inventory.

"We got a tremendous boost from partnering with Amazon," says Steve. "We saw a 50 percent increase in sales within just a couple of months, and [sales through] Amazon now account for about one-third of our total sales." That's a lot, considering Best Sports brought in $3.5 million in 2005. The remaining two-thirds of sales came from the company's website, which it continues to market and maintain.

Although Amazon approached Best Sports Apparel about partnering, virtually anyone can sell on Amazon, Steve says. To get started as an Amazon seller, locate what you want to sell at the website, then click on "Sell yours here." If you'd like to sell items not in Amazon's inventory, or if you plan to sell in large volumes, you'll want to register as a Pro Merchant seller, which costs $39.99 per month. In addition to selling items of their choice, Pro Merchant sellers receive volume-listing tools, frequent-seller programs, special selling rates, and downloadable inventory information.

Whether you're a Pro Merchant or not, putting your item up for sale is a snap since the product image and details are already in the Amazon system. Once the merchandise sells, you receive the sale price minus selling fees. Amazon also takes care of all the billing and payment processing.

Home Is Where the Sales Are
If your idea of the perfect retail business doesn't include the internet, then direct sales may be more your speed. Instead of having a permanent selling space, you can use your customers' homes.

In 1993, Terri Newberry, 43, was looking for a way to earn extra income without having to put her kids in day care. When a friend told her about direct-sales company The Pampered Chef, Newberry decided to look into it.

She learned that the more than 70,000 Pampered Chef consultants worldwide sell the company's line of cooking products to consumers in their homes, at friendly gatherings called cooking shows. She also heard that her $100 startup investment could yield hundreds per month in income, so she decided to try it out.

During her first month as a Pampered Chef consultant, Newberry held five cooking shows and made $502. By her fourth month, she made $1,000. "The business grew much faster than I expected," she says. In 2005, her income from Pampered Chef demonstrations was $118,000, or nearly $10,000 a month, and she is now an executive director, a position for the company's top-performing consultants.

The key to Newberry's success is discipline, she says. "Direct sales is an industry that anyone can try, but not everyone can be successful in. Some people need someone telling them what to do," and that doesn't happen in a direct-sales business.

To keep her business on track, Newberry typically works from 9 a.m. to 3 p.m. four or five days a week, plus a couple of nights a week.

Although The Pampered Chef specializes in selling cookware, Newberry doesn't believe you need to be a gourmet chef to be successful. You do, however, need to be passionate about what you're selling, whether it's cookware, cleaning products or makeup.

Before committing to becoming a direct-sales representative, carefully research the company you intend to represent. Do you love their products? Will you enjoy telling others about them? If not, keep looking for something that excites you.

Another consideration: "Make sure the company will stand behind its products," says Newberry. The last thing you need is to spend your time handling returns.

Finally, check to see how many sales consultants are already in your area. Will you be in demand, or has everyone already attended a similar home party?

Big Bucks, Small Footprint

In 2004, Richard Marston, 32, and his business partner, Gerel Ransfer, 43, took over a Southern California Color Me Beautiful kiosk with a $5,000 investment and confidence that the makeup would sell if marketed properly. A little more than two years later, Marston--who handles the day-to-day operations of the business--now has two kiosks and more than 2,000 customers, 40 percent of whom are regulars.

What sets Marston apart from many kiosk owners is his willingness to approach customers and actively demonstrate his products. He also operates his kiosks year-round, while most other kiosk owners only operate during the busy two-month holiday season, when 80 percent of kiosk sales occur.

"Opening a cart [or kiosk] is a fabu-lous way to get started and open your first business," says Patricia Norins, author of the Ultimate Guide to Specialty Retail: How to Start a Cart, Kiosk or Store, and publisher of the industry's trade journal, Specialty Retail Report. "It's low risk, and you're not locked into a long-term lease," since carts and kiosks are typically rented on a month-to-month basis.

The only major downside is the long hours--kiosks must be open whenever the mall is. Twelve-hour days are typical, although Marston works 16--from 5 a.m. to midnight most days. To staff his two locations, he has eight employees.

The upside, of course, is the money. Norins has seen kiosks make as much as $15,000 during non-holiday months, while the eight weeks of the holiday season have generated more than $120,000 for some businesses.

Marston's business is beating those numbers. In 2005, his two kiosks generated $350,000, and he projects sales of $500,000 in 2006.

As with other retail businesses, find-ing a product or industry you love is critical. According to Norins, products that typically sell the best in a cart or kiosk are personalized, such as ornaments or gifts, and easy to demonstrate, such as makeup or toys. They should also offer at least a 300 percent markup, she says.

Once you've decided what you want to sell, find a mall with a cart or kiosk available--the mall specialty-leasing manager can fill you in. But before committing to a space, check the traffic figures and the demographic profile of the mall's typical customer. Make sure it matches your target audience.

Finally, line up part-time help. The more you staff your kiosk yourself, the lower your expenses will be, but you'll want to have a backup plan in case you become ill or need a break.

Get Started Now
Why invest in an expensive retail storefront with a lengthy lease when you can have all the benefits and few of the risks of a retail business with fast and easy formats, like an online store, direct sales or kiosks? The sales potential is there, minus the hefty upfront cost. In as little as a weekend, you can be ready to retail.

The Cost of Doing Business
Just how much cash does it take to open a retail business the smart and easy way?

It takes money to make money, as the old saying goes, but fortunately, these types of retail businesses don't take a lot. Be prepared for these standard fees:

Where to Start?
Before you begin your business, you'll need to square away these details.

Unlike traditional retail stores, smart and easy retail businesses can be set up quickly, with little risk and few resources required. Here's the lowdown on what you'll need to get started:

Marcia Layton Turner writes regularly about small-business issues and is author of the award-winning book The Unofficial Guide to Starting a Small Business.