Entrepreneurship in Retail? You Got It, Just Follow These 5 Simple Rules!
Entrepreneur's New Year’s Guide
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The allure of retail is hard to ignore. When faced with the sheer ubiquity of E-commerce ventures, the apparent simplicity of classical brick and mortar retail is hard to ignore. Its tangible, you can see it with your own eyes. Now you can marry the grand old profession of India, with some new age tools.
Rule 1: Know Your Consumer:
Retail is a phenomenal opportunity, to really get to know your consumer. The simplicity of thinking about an individual shopper, really helps us get into the mind of our target consumer. Numerous E-commerce companies have now launched their own Brick and Mortar stores. I daresay, it has a lot to do with getting to know their consumers.
Entrepreneurship 101, has always clearly stated the importance of truly understanding the behaviour, the aspirations, and getting into the mind of the consumer, consuming the offered product or service. Simple techniques to aid this process include speaking with friends, and family; Brainstorming; Running small focus groups; Accosting people on a mall, on a flight and picking their brain on your intended offering.
Rule 2: Get Your Product Right:
Once you know you consumer, apply an iterative process to further get your product perfected for this very consumer. I have often discovered that even thinking about opening a Store helps me get the product perfected. Getting into the details of the consumer interacting with the product, the sales process, the packaging, the entire experience, further helps me perfect the product.
It is important to do the hard work, spend time designing, visiting suppliers, and burning the midnight oil, getting your product perfected. A store provides the perfect opportunity to see your consumer interacting with your product, which you could then iteratively perfect.
Rule 3: 2 Simple Metrics:
Lets get a little technical. Though there is no shortage of ‘gyaan’ on retail, and Brands, Malls, Consultancy companies plug a variety of metrics, I highly recommend evaluating your project with these 2 metrics in mind.
Gross margin return on footage: Known as “Gmroff”, it is often regarded as the primary metric to evaluate any retail project. Fairly easy to calculate, I would advise anyone planning to start a Retail Venture, to understand, and I mean really understand what kind of Gmroff, they are likely to achieve. Though it may differ, according to the category and location offered, targeting a “Gmroff” of 1500 Rupees is a useful place to start. GMROF = GM% x (Sales** / Sq.Ft.) *Sales for corresponding area & time frame.
Store built up costs: Notwithstanding the tendency to go crazy, when building your first store, I would highly recommend that you use inspirational techniques to keep your Store built up costs to a minimum. Why this metric is important is the hidden nature, as well as extremely impactful nature of this cost. It is not hard to overspend, and end up spending as much as 10 months of Store rent, just on Store built up costs. Anything below 1800 Rupees/Sq Foot, is an achievement.
Rule 4: Retail is about the Details:
This rule is repeated so often, that it is often considered to be a joke, but it couldn’t be more true. It is important to get into the nitty-gritties, and do the basics.
-Scope out all possible locations, Find alternatives
-Read through the LOI and contracts in detail, Negotiate Hard
-Understand the taxations as it may apply on your product
-Plan your layout in detail, save every possible inch
-Carefully observe every consumer, and be engaged in the consumer experience
Rule 5: Sell, Sell, Sell
You want to get into retail, you are now a salesman, whether you wanted to be or not. Right from individually making a sale, to hiring and training your staff, to creating a customer or distributor network, and reaching out to them for events, promotions etc.
Entrepreneurs make great salesmen, what is important to respect, and enjoy the rush of sales.
Bonus Rule 6: Fail Cheap
Retail is a phenomenal opportunity to test out a business idea, and fail cheap. An E-commerce venture, or any other larger business model requires a far larger investment, team size, and commitment. Retail is a great technique to get Rule 1, and Rule 2 right. Get to know your consumer, and perfect your product. Once you get this balance right, you would be ready to scale.