Key learning outcomes:

  • Demonstrate the value of conducting market research prior to a product launch, creating a business plan and differentiating your business from the competition.
  • Recognise the impact of your business’s location on its success.
  • Understand the benefits and pitfalls of diversification.
  • Conclude that the customer is your livelihood – so treat them well!

Article:

1. Do your research

A lot of people start a retail business based on an idea or product that they are passionate about. This is great, but before you spend your life savings it is essential you ensure that there is a market for it and that other people will want to buy what you are offering. It is vital that you do your research to identify who your product or service might appeal to, and then look to see if there is enough opportunity to make the venture worthwhile.

Our “Market Identification” and “Market Share Analysis” articles give you step-by-step guides to work through. It will take some effort but we can assure you that the information and insight you will gain through the process will be invaluable. You might also like our article “Blue Ocean Strategy”, which explains the concept of looking for opportunities in areas where there are few competitors fighting to survive.

2. Work with a business plan

We know we are starting with the boring bits; however, the best way for you to predict your future is to plan it. A large percentage of retail businesses fail in the first two years. This is because the people who start them do so with a lot of enthusiasm but not enough planning. The more you put into the planning process, the more successful your business will be. Our article “Introduction to Business Planning” gives you an overview of the areas that you need to cover and our business planning process to help you to complete a professional plan.

One of the key things to remember is that it is unlikely that things will always go according to plan. However,  what the plan will do is give you a clear direction and focus at the outset. If you are reading this article and your business is already up and running, it is never too late to start the planning process. We work with businesses that have been operating for many years before completing their first business plan. The process helps them to assess the key areas of opportunity and growth within their business.

3. Don’t try and sell a secret

Promotion is an essential component for any business wanting to maintain or grow their customer base. Once you have completed the research on your potential customers (refer to tip one), you will be able to target your advertising and promotion dollars more effectively. Look for opportunities that are going to provide you with the greatest value for money. This does not always mean going for the lowest cost option; although, remember you need to set a budget and stick to it. For example your shopfront may be located where there is a lot of after-hours foot traffic. In this instance, you might invest in signage or an interactive display to try and capture this potential market. This might be more expensive, but may also be more effective than advertising in the local paper, for example.

Don’t forget to look for out-of-the-box options or ideas to promote your business. For example, a local restaurant might offer a dinner to people who move into the area through a particular real estate agency. This becomes a win-win partnership with the agency able to offer a gift to new owners and the restaurant getting an opportunity to bring new customers into their business.

Social media and the internet are now essential components of your promotion strategy and are an ideal way to build a profile beyond your shopfront. It does take work and there are a few key things to keep in mind. You must be consistent with your messages and you need to ensure, like any communication, that it is relevant and adds value for your customers.

It is important with any advertising or promotion to review the return on a regular basis. Make sure you are monitoring where your new customers are coming from to ensure that you are able to evaluate the success of your various activities.

4. Know your point of difference

In any business the key question you need to be able to answer is “Why should I choose to deal with you?” It sounds simple, but it is one question that we find even business owners struggle with, and often the people who work in the business have no idea of the answer. This can be a big issue because if you and your staff are not able to articulate why your business is better than the competitors, how can the message be translated effectively to the customers?

There are three ways that you can differentiate your business from your competition.

  1. You can offer a product or service that is UNIQUE or offer it in a UNIQUE way.
  2. You can offer a product or provide a service that is BETTER than your competition.
  3. You can offer your product or service at a lower PRICE than your competition.

It is important to be clear on how you want to differentiate your business from those around you. There are clear advantages and disadvantages with each strategy and you need to ensure that the one you choose is going to be right for you and your business. Refer to our learning article “Point of Difference” that will help you to determine and finetune how you are going to set your business apart from the rest.

5. Build loyalty

One of the keys to business growth is to build a loyal customer base. Higher levels of repeat and referral business will generally translate to higher levels of profitability. This is because once customers trust the product and service that you are offering, they tend to place a higher value on it, are prepared to pay more and are likely to purchase more frequently.

Businesses that only rely on a steady flow of new customers are very vulnerable to market fluctuations and will often find that there are inconsistencies in their cash flow. A smart business will work to build a loyal customer base and new customers can supplement this. Use our section on “Client Nurture” to set up systems within your business that will ensure long-term success and business growth.

6. Hire the right people

Without doubt having the right people can make or break any business. However, in retail it is even more important. Your staff will be face to face with your customers and will often be the first point of contact a person has with your business. You may think that you do not need to spend a lot to get someone to work in retail. The reality is that you want someone who is going to be professional and is going to show your product or service in the best light, so it might be worth paying a little extra to secure them.

The more time you spend ensuring that you have the right people in your business and then training them, the better. You want the people who work for you to feel as passionate about your product or service as you do. Our guide to “hiring” will help you to ensure that you are hiring the right person for the right job.

7. Choose your location carefully

Location is another thing that can literally make or break a retail business. Your rent and shop fit out is likely to be one of your major expenses, so it is important to ensure that you do it right the first time. Often an out-of-the-way location might offer a cheaper alternative, but it might also mean that you are out of the way of potential customers.

You always want to make it easy for customers to choose you. Think about the type of business that you have. Will it rely on walk-in traffic or will your business tend to come from advertising and promotion? For example, a gelato shop may rely heavily on people walking by and getting an ice cream on the spur of the moment, yet a specialty camping store could be in a more out-of-the-way location as people will be looking specifically for that type of product.

It can prove extremely costly to choose the wrong location. In fact, in some cases it costs the owners the business. Always research and spend time at the location before making a commitment. Make sure you visit the location at various times of the day and on different days. A smart real estate agent will have you view the premises when there is peak activity in the area. Also, always ensure that you ask your legal representative and accountant to review any paperwork before signing.

8. Stock the shelves

How much stock you need will depend on the type of business and the point of difference that you are looking to portray. For example, a discount store will need to sell a lot more products than a luxury goods store. Consequently, you will find that there is a lot of choice and the shelves are well stocked compared to a retail outlet that is pitching at the higher end.

The most important thing is to put a lot of thought into what you stock and how much. By their nature, humans like choice. So most retail outlets will need to offer some variety unless they are offering a very specialised product that appeals to a niche market. There is a balance; however, most people find stores where it is difficult to find things less attractive than those that are well laid out and easy to navigate.

Watch out when stocking seasonal items, as you might find that it is better to stock less and sell out than be left with an abundance of stock you need to sell off at clearance prices. The last thing to remember when buying stock is that you are buying for your customers and not for you. You need to avoid filling the store only with things that you would buy yourself or you may narrow your market substantially.

9. Stick to your knitting

Diversification is certainly a valid way to grow your business, but it needs to be done with some care and thought. Most retail stores have a theme and this is why people go into them. For example, when you walk into a shoe shop you are probably looking for a pair of shoes and you expect to find the shop well stocked with shoes. You will also expect that the person serving you will have a good level of product knowledge and will be able to help you with the fit and style you are looking for.

Imagine now you go into the shoe shop and find that the product range also includes cosmetics, clothing, candles and various other items. This may or may not work for the business. It may allow for some extra sales, or it might confuse the customer and devalue the level of expertise that was previously offered. It is important to always maintain a high level of expertise in your field as people are more influenced and likely to buy from someone who is an authority in a particular area. However, offering complementary products or services may still be a valid way to generate additional income. For example, handbags and scarves might present the shoe shop with an excellent opportunity to increase the value of transactions through upselling a matching handbag or scarf with the shoes.

10. Remember, it’s all about the customers

The most important thing to remember in retail is that it is all about the customers. Without paying customers you do not have a business. Too often we hear people that work in retail and service suggest that if it wasn’t for having to deal with customers then they would love their business. To these people we say it might be time to find a new career! To be successful in retail you need to love dealing with people, you need to love providing solutions to their problems and you need  the ability to pop a smile on your face no matter how you are feeling.

Treat every customer like gold and you will soon see your business grow through repeat and referral business. Having said that,  you will have your challenges and not every person who walks through your door is going to be reasonable or even pleasant. Remember, we do not know what is happening in someone else’s life, and while there is no place for rudeness we need to be able to rise above it. There is nothing worse as a customer than going into a shop and finding you have to be extra nice just to get the person to help you. Make sure that you and every member of your team treats every customer with the highest level of respect and provides high-end service. After all, at the end of the day, it is the customer who is paying the bills.

[wlm_nonmember]Did you enjoy this complimentary article?

OneDollarOffer

Would you like to start driving positive changes in your business? Would you like to see increased productivity and profitability? Of course you would!

As part of our commitment to being a low cost yet highly effective service to help owners and managers of small to medium sized business, we are now offering the first month of your membership for just $1! This means you will get full access to all of the learning articles, tools and tips that our website has to offer and with a commitment to upload at least another 150 learning articles through 2015 there is also plenty more learning on the way. On top of this you will also receive our weekly newsletter to keep you updated on new learning for the week and much, much more!

You can cancel at any time, however, if you see the value in what we’re offering (and we’re sure you will!) your membership will automatically continue after your trial at the low cost of just $19.95 per month. So what are you waiting for? For just $1 you are getting full access to all of our content for 30 days risk-free, so come on and join our community today![/wlm_nonmember]

 

Success is giving it your Absolute Best!