What is a successful retail business?
Opening a store (online or physical) is a dream for many people. It has many advantages:
- If successful, it’s easy to scale. This means high growth of sales.
- Interesting, because you deal with consumers (people not companies).
- Most retail businesses don’t require technical knowledge.
For me, having a successful retail business means 3 things:
- Being profitable
- Making money year after year (not only 1 or 2 years)
- Loving what you do.
What you need, to have a successful retail business?
I’ve been in retail for over 20 years and this is what you need to become successful in retail:
1 — High margins
Margins are extremely important. If you have high margins, you can make profit, even if you don’t sell a lot of products. Another advantage of having high margins is that you can reduce the price if you need, and still make money.
Of course, it is possible to make money with low margins. But this way, you need to be in a mass market. And being in a mass market, means competing against retail giants like Walmart, Amazon, etc.
2 — Low investment
There are two advantages of keeping your investment low:
- It’s easier to start the business, and probably you don’t need to borrow money.
- It’s easier to scale. This is the case of a physical store (also called brick and mortar store). If all you need is a small store, it’s cheaper to open more stores like your first store. On the other hand, if you need a big store, you’ll need a lot more money to scale.
3 — Selling products customers are searching for
This is a big mistake that I see all the time. New entrepreneurs open a store, selling products that customers are not searching for. If your customers are not searching for your products, you’ll have to invest in marketing to show them your products. You have to spend money on advertising, and you have to convince customers that they need your products.
On the other hand, if your customers are already looking for what you sell, you just need to have the right products at the right price.
An example of a successful retail business
A t-shirt store can be a very successful business:
- High margins. It’s possible to buy t-shirts at 3 or 4 dollars, and sell at 16 dollars or even more.
- Low investment. If you open an e-store like the one we suggest, all you need is a heat press. And a heat press is very cheap (starting at $200). But even if you open a brick and mortar store, the investment is very low. All you need is a small store (20 m2 or 215 ft2).
- The designs we sell, we are sure that have high demand. They are designs that customers are searching for.