There are many retail business models. You need to be very clear which type of retail business you want to start and the advantages and disadvantages of that model. It will depend on your fuure plans, your lifestyle, family needs, personality, and basic skills.
Independent Retailer
An independent retailer builds their business from the ground up. Traditionally this has been seen as riskier than buying into a franchise, but with the emergence of 'low cost quality manufacturing' has greatly decreased the risks associated with independent retailing.
The key decision will be which products you are going to retail. One of the biggest mistakes is to start with the product and then look for the customers. You must start with the customer, so your location is probably the first thing that you will consider. You will probably have a broad idea of what you are going to offer and there will probably always be a market, but you do need to do the market research to make sure there is the interest to support a profitable business.
Retail Business Takeover
Someone who inherits or buys an existing business is taking ownership and responsibility of someone else's hard work. The foundation has already been laid.
Advantages: The biggest advantage to buying an existing business or taking ownership of an already-established retail store is time. The time to build a customer base, the time to establish branding, and the time it takes to establish credit are generally all past which means most of the hard part is behind the new owner.
Disadvantages: The existing business may have a negative image or reputation that will take a lot of time to undo. Loyal customers may not like the change of ownership. Previous owners have caused problems by opening a competing busines.
Franchise
You buy the right to use the brand and the products of a proven business model. It still relies on choosing a good location and good business management. It is not a guarantee of success as many first time franchise owners do badly with this business model. Even if successful, the business is restricted to the operational boundaries of the franchise, there is no room to expand into other business areas.
Dealership
This retail business model is a mixture of franchise and independent retailer. The licensee has the right to sell products of a particluar brand. You can purchase exclusive rights. Unlike a franchise, the dealer can sell a variety of brands and expand their business where they wish. Generally there are no fees to the licensor. Dealerships may or may not be identified as an authorized seller or by the company's trademark.
Wholesaler
Wholesalers usually directly work with the manufacturer to provide large amounts of goods to other businesses. Often, they may also be the distributor of the product as well. A wholesaler is usually only interested in volume sales and does not sell single or low-quantity lots. In cases such as this, the manufacturer sells only to its wholesalers, who in turn sell to businesses or distributors.
Wholesalers usually handle all logistics involved in getting the merchandise to the business as well as billing. Distributors in the other hand, tend to sell in lower quantity lots, purchasing the goods from a wholesaler. Often distributors are regional providers. A distributor may also act as a customer relationship representative between the manufacturer and the business, coming out to the business to suggest ways of improving sales, layout of the display and answer any questions or concerns about the product.
Online Store
Many businesses now start on the internet because the overheads are low. Not many go on to open retail outlets, but many independent retailers do expand onto the internet now, where an online store is seen as a marketing and advertising opportunity as well as a sales point.
Internet Auctions
The best known is E-bay. Many of the larger, serious auction business are wholesale operations or exclusive online retailers, but dealerships also operate through these sites.
Multi Level Marketing
Multi-level marketing (MLM) or network marketing is a business model where the selling of products depends on the people in the network. Not only is a product being sold, but other salespeople are being recruited to sell that same product or product line. It's probably not a type of business one would initially consider when discussing retail businesses, but Amway used this model quite successfully for many years. Very few MLM businesses grow very large, wastage rates are very high.
The Retail Business Consultants Solution
We combine three of these business types
- Independent Retailer
- Wholesaler
- Online Store
Our research identified the more resilient and successful retail operations were using the internet very successfully in some cases generating 50-60% of their turnover from online stores. Wholesaling was also a lucrative add on. if you have a growing internet business then you are geared up to mailing goods, so it is a very short step to expand into a wholesale operation, supplying, not just other independent retailers but also other online stores.
Please contact us if you would like to learn more about our retail business model and how we can take away much of the uncertainty involved in building a business from the ground up. |