If you’re a small business owner and successfully running an online-only store, you may wonder if an actual brick-and-mortar store would be a smart next move. After all, e-commerce giants like eBay and Etsy are trying out physical stores – should you, too?
Here are some factors to consider before moving to a retail shop:
Meet the touch test. Companies that benefit most from having physical stores often carry merchandise that customers need to feel, try on, try out, or see in person before they’re comfortable buying, says Diana Kander, senior fellow for the Ewing Marion Kauffman Foundation, an organization dedicated to promoting education and entrepreneurship. Examples might include jewelry, bikes, or specialty clothing.
Another clue that your product might do well in a physical storefront: “Your products require a good amount of customer-service help – either over the phone with your staff or in online chats – in order for the sale to happen,” says Kander.
Test-drive your concept. Dip your toe in the retail waters before committing to a shop and an expensive lease, suggests Kander. Negotiate with local vendors to carry your products in their shops. Hawk your products at trade shows, art fairs, or other events that are naturally connected to your products. Establish a temporary kiosk at a mall. Set up a “pop-up shop” – a temporary store in a mall or other retail location –for a few months. If sales are strong in any of these situations, you may want to consider opening a retail shop on a more permanent basis.
Research your local market. Once you set up a physical shop, your sales will depend greatly on that particular neighborhood or town. When you were an online seller, your market was much wider. Kander advises researching the demographics and economic climate of the area in which you’re planning to locate. Can buyers afford your product, and is there enough local demand for it? Enlist the help of experts at your local Chamber of Commerce, Small Business Administration (SBA) or SCORE chapter.
Brush up on employment laws. If you’ve been a solo operator and are expanding, you need to understand the legal issues related to being an employer – such as how to fire employees correctly so they don’t take legal action. Learn more at the SBA or by talking to an attorney who specializes in retail clients. Talk with your insurance agent about employment practices liability coverage.
Update your insurance. If you don’t already have business insurance, you’ll most likely want to consider it once you open a brick-and-mortar shop. Talk with your insurance agent about the coverage you’ll need for your type of shop.
Learn about leases. Your monthly lease may be the most expensive part of your soon-to-be-retail operation. Kander advises talking with a retail attorney before signing any contracts. She also advises signing the shortest lease you can (just in case things don’t work out) and negotiating about often-expensive, overlooked fees like those for Common Area Maintenance (CAM) – upkeep of shared areas like hallways, restrooms, parking lots, etc.
Estimate set-up charges. If you’ve been running your online shop on a shoestring, you’ll face many new expenses – in addition to your lease – when you open a shop: security deposits to your landlord and utility providers, retail shelves and structures, additional inventory, employee payroll, and more. A smart way to get a handle on expected expenses: Talk to a merchant who sells a similar product in a different town. Kander suggests looking for like-minded retailers via LinkedIn. “Most of them are more than happy to share advice, as long as you’re not competing with them in the same geographic market,” she says.
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