The Step-by-Step Guide to Starting a Retail Business

If you’ve been thinking about opening your own retail store but feeling overwhelmed by all the steps involved, you’re in the right place. In this guide, we walk you through everything you need to know to get your doors open and products on the shelves in a step-by-step way. 

As long as you take it one step at a time and do your research, anyone can own and operate their own store if it’s something you’re passionate about. There’s nothing quite like transforming your product or service ideas into a tangible experience people can enjoy. So if you’re ready to jump in, let’s get started!

What is retail?   

Retail is the sale of goods and merchandise from a business to the end consumer. Retail involves purchasing large quantities of goods from wholesalers or manufacturers and then selling those products to customers through retail outlets or online stores. 

Retail businesses operate on a business model where they buy products in bulk from manufacturers and other suppliers and then sell smaller quantities to customers. Their primary goal is to purchase products at wholesale prices and sell them at retail prices to earn a profit margin.

Types of retail business

There are multiple small retail business ideas, a few of them include:

Department Stores

Department stores sell various types of consumer goods categorized into separate “departments”. Some examples of department stores are Macy’s, Kohl’s, J.C. Penney, and Nordstrom. Department stores often have:

• Clothing 
• Cosmetics  
• Home goods
• Electronics
• Furniture
• Shoes 
• Toys 

Specialty Stores

Specialty stores focus on selling one category of product. Examples of specialty stores are:  

• Sporting Goods Stores – sell equipment and apparel for different sports 
• Book Stores – sell books 
• Beauty Supply Stores – sell beauty products and cosmetics

Supermarkets 

Supermarkets sell various grocery items including fresh produce, packaged foods, beverages, household products, and personal care products. Major supermarket chains include Kroger, Publix, Giant Eagle, Safeway, and HEB.

Convenience Stores  

Convenience stores sell a limited line of items that customers purchase regularly and quickly. They are open long hours and in convenient locations. Customers typically buy snacks, beverages, pre-made sandwiches and meals, and grocery items. 

Discount Stores  

Discount stores like Walmart, Target, and Costco offer low prices on a wide selection of merchandise including groceries, clothing, electronics, furniture, and more. They make money by selling high volumes of goods at low margins.

Small Local Shops

These are independent, local retailers that sell goods and services catered to their specific community. Examples are hardware stores, bakeries, craft stores, bookstores, pharmacies, and florists.    

Online Retailers   

Online retailers like Amazon sell goods and services primarily over the Internet. They don’t have physical stores and depend on e-commerce for all transactions.

Pop-Up Shops

Pop-up shops operate for a short and temporary period of time, usually ranging from a few days to a few months. They are designed to attract attention, introduce new products, and generate sales leads.

How to start a retail business?

Retailing can be a rewarding business to start. With some determination and careful planning, you can take your business idea from conception to storefront. Here are a few things to consider when opening a shop:

1. Make a Business Plan

Developing a detailed business plan is important for two reasons:

• It helps you explore the feasibility of your idea by forcing you to think through the details.
• Lenders and investors often require a business plan to evaluate your eligibility for funding.

Your business plan should cover:

• The business: What you plan to sell and how it’s unique
• The market: Who your target customers are and what needs you fulfill
•  Marketing: How you’ll reach customers and build brand awareness
• Operations: Your store layout, vendor relationships, inventory procedures
• Management team: Who will run the business day-to-day and their qualifications
• Startup costs: Funds required for initial inventory, equipment, permits, and licenses
• Financial projections: Sales forecasts and profit/loss estimates for the first 3 years

There are many free business plan templates online to help you get started.

2. Choose a Business Structure

Retail businesses typically operate as sole proprietorships, partnerships, or corporations. Important factors to consider include:

• Liability: How much personal assets are at risk?
• Tax obligations: Personal income tax vs corporate tax
• Funding options: Some structures have more flexibility to raise capital
• Longevity: Some structures survive beyond the owner

For simplicity when starting out, many new retail stores operate as sole proprietorships or limited liability companies (LLCs).

3. Secure Startup Funding

Most new stores require funding from some combination of:

• Personal funds: Savings, second mortgages, home equity loans, credit cards
• Bank loans: Typically require a good credit score and collateral
• Friends and family: Informal investing from people who believe in your idea
• Venture capital/angel investors: Professional investors who take an equity stake
• Grants and small business loans: Available from government programs

For most small retail stores, personal funds and bank loans are the most realistic options initially.

4. Choose a Location and Design Your Store

Prime retail real estate requires careful considerations regarding:

• Visibility: High foot traffic and easy access
• Demographics: Target customers live or work near the store
• Competition: There’s a need not met by other local retailers
• Price: Affordable rent and build-out costs for your startup
• Lease terms: Flexibility if business needs change over time

After securing a location, a professional store layout and attractive design optimize the customer experience and product display.

5. Obtain Required Permits and Licenses

Make sure you identify and obtain all required licenses and permits from local, state, and federal agencies. Typical requirements include:

• Business license from your city or county
• Seller’s permit or resale license for collecting sales tax
• Health department permits for any food products
• Register for tax ID number with IRS to file business tax returns
• Other permits for signage, building occupancy, hazardous materials, etc.

The process can be complex, so don’t wait until the last minute to start researching requirements.

6. Choose a Point of Sale System

Install a point of sale (POS) system to manage inventory, process payments, and produce reports. Consider:

• Hardware (register, barcode scanner, receipt printer)
• Software and monthly/annual fees
• Integration with accounting software

7. Implement Marketing Strategies for Retail Store

Now that you know how to open a retail store, develop a comprehensive marketing strategy with clear goals based on customer insights and market research. Here are a few steps to take:

Make your store visible

• Website: Create an informative and attractive small business website design to capture online customers. Make the shopping and checkout process smooth. 

• Advertise in local newspapers and magazines: Make a quarter or half-page ad that states why customers should shop at your store and what products and services you offer.

• Do outreach on social media: Create Facebook and Instagram business pages for your store. Post photos of your products and share promotions and events. Interact with customers who comment or message you.
• Make good use of windows and store displays: Keep your window displays fresh and eye-catching. Change the displays regularly to match the season. Well-designed displays attract customers walking by.

Offer promotions and rewards

• Provide discounts and coupons: Have a weekly deal or coupon that you share on social media. Offer 10-20% discounts for opening week or holiday weekends.
• Implement a loyalty program: Offer rewards like $5 off for every $100 spent or points for dollars that customers can redeem for gifts. This encourages repeat customers.

Provide good customer service

• Greet customers when they enter: A friendly hello and smile go a long way.
• Be available and attentive: Circulate around the sales floor and check on customers regularly to see if they need any help finding items.
• Offer helpful recommendations: Get to know your customers’ tastes so you can suggest new products they might like based on what they normally buy from you.
• Respond promptly to customer requests: Whether online, by phone, or in person, respond to customer inquiries and complaints quickly and work to resolve any issues satisfactorily.

Once you have followed these steps to start a retail business, the next important decision is choosing a point of sale (POS) system to handle all your transactions efficiently. As a new business owner, you want a system that is easy to set up and use, but also has the features you’ll need to grow over time. 

Sign up FREE for Hana Retail today! The all-in-one cloud-based platform offers everything you need to run a successful retail operation, from simple cash registers to inventory management, customer loyalty, and business analytics and reporting.