
A retail business is a type of business model that sells products directly to consumers (B2C). The products are generally purchased at a wholesale price and marked up for profitability. Statistics show that the retail market is growing worldwide with nearly 25 trillion dollars in sales generated in 2019. This number is projected to grow to 27 trillion in 2022. With such a lucrative and competitive market, there are a number of considerations that individuals starting or expanding a retail business should take into account.
Types of Retail Businesses
“Retail” is an all-encompassing term that can refer to several different types of businesses. Below we will dive into seven of the most common retail businesses with insight into each of the different types.
Department Stores
A department store is one of the most common types of retail businesses. They can be found in their own building, in a shopping mall, or in an outlet. Department stores generally sell a wide range of different products. Design is a key component for department stores. The products they sell in their stores are generally categorized to make the shopping experience simplified for visitors and accelerating eCommerce through on demand order fulfilment. To elaborate — an apparel department store put up signage to indicate where the women’s clothing is versus the men’s clothing.
Some notable examples of department retail stores include:
- Kohls;
- Macy’s;
- Sears.
Specialty Stores
Specialty retail stores are exactly as you would expect from the name — they specialize in a specific product. They have notoriously small product lines and they are generally experts behind everything they have their shelves stocked with. This does not mean that they only sell one product (although it can), it means that they focus on one category of products. To elaborate — a florist that only sells different types of flowers and seeds.
Some notable examples of specialty retail stores include:
- RadioShack;
- Foot Locker;
- Petco.
Convenience Stores
Convenience stores are generally smaller-scale retail businesses that have a variety of different everyday items stocked in their stores. While they may carry different types of groceries, convenience stores differ slightly from traditional grocery stores. These stores mostly consist of limited selections of basic items like bottled/canned beverages, snacks, common medications (allergy, pain, etc.), tobacco, and a small selection of electronic equipment (phone chargers, headphones). Convenience stores are not often associated with high-quality items.
Some notable convenience retail stores include:
- 7-Eleven;
- QuikTrip;
- Alimentation Couche-Tard.
Supermarkets
Similar to department stores, supermarkets offer a wide assortment of products in their stores. Some people use the terms grocery store and supermarket interchangeably, but the large difference between them is that grocery stores exclusively sell food products while supermarkets offer additional items — for example clothing, electronics, and various other household items.
Some notable supermarket retail stores include:
- Wegmans;
- Trader Joe’s;
- Publix.
Superstores
A superstore — also known as a big-box store, supercenter, or megastore — is a large-scale retail store with a wide product offering. By and large, they are a one-stop-shop. They carry a significant number of products at varying price/quality ranges. Not only is their product offering large, but the building infrastructure itself is also generally larger in size as well. They are commonly part of a chain of stores.
Some notable retail superstores include:
- Walmart;
- Target;
- Best Buy.
E-Commerce Stores
An E-Commerce store is an online store that allows customers to purchase products via the internet — either by using a web browser or a mobile application. While some other retail stores may have online purchasing options, E-Commerce retail stores are exclusively online. E-Commerce retail stores are becoming more and more popular and online sales are surging.
Some notable E-Commerce retail stores include:
- Amazon;
- eBay;
- Flipkart.
Discount Stores
Much like the name suggests, discount stores are retailers that offer products at a lower rate than the suggested full retail price. Aside from pricing, they operate similarly to department stores.
Some notable discount retail stores include:
- Dollar Tree;
- Ross;
- TJ Maxx.
How to Choose the Perfect Retail Business Idea
Ultimately, choosing the perfect retail business model should include a variety of different factors — some things to bear in mind when choosing your retail business idea include:
- Determining your niche: First things first, you need to determine what niche you fit into so that you can solidify where you stand in the retail market. You may think you have a pretty good idea of what you want to do, but sitting down and determining what niche your proposed plan fits into is important with accurately planning all other factors;
- Analyzing your personal skills and interests: You want to make sure that you have the skills necessary for success within the niche you are a part of. Although you can learn new skills, it definitely makes things simpler to already possess the necessary foundational skills for success in the industry (ex: customer service). As Confucius stated, “Choose a job you love and you’ll never have to work a day in your life.” When you can align your personal interests with your retail business, it can make your work more enjoyable overall;
- Comparing pros and cons: It can be easy to get caught up in all the potential, but you need to make sure you consider the potential cons in contrast to the pros so that you have a comprehensive list of advantages and disadvantages within your space;
- Analyzing profitability: You need to consider the profitability of the retail space you plan on entering. Understanding profitability can appear complex, but there are several straightforward methods for understanding industry profitability.
Retail Business Considerations
In addition to the factors above, there are a few different generalized matters to take into consideration when starting a retail business — regardless of the retail route you take.
- Create a business plan: The first step in a business idea, the second is turning the idea into reality by developing a business roadmap. You should physically write or type this out — not just discuss it. The plan needs to be extremely specific and include things such as products you are selling, infrastructure (e-commerce site vs. traditional brick and mortar), your target market demographics, your competitive edge, and of course, a budget. The U.S. Small Business Administration (SBA) provides great insight into writing a business plan with templates;
- Determine your name: Finding the right name for your retail business is hard, but it can be what sets you apart from your competition. Be sure to take your time and strategically create the best name for your business. Forbes provides 12 tips for naming your business that can help in this process;
- Register your business: After you have determined your business plan and chosen your name, you need to register your business for legal purposes — unless you are conducting business solely with your legal name. Registering your business is taken care of at the state and local level, so you will want to check with your state entities for more insight into what registering your business entails;
- Obtain business insurance: Business insurance is one of the most important aspects of this checklist. One natural disaster, employee injury, product shortage, or customer slip and fall case could be the downfall of all your hard work. The best business protection for shop owners should include coverage for employees/employers, products, as well as consumers. It is best to speak with a representative to make sure you are getting the necessary coverage;
- Get business licenses/permits: Most states require you to get a general business license at the very least. Others require you to get a license for the industry you operate within. Similar to above, the SBA is the best go-to for determining the licenses/permits that you’ll need to operate;
- Establish vendor/supplier relationships: You may have your own brand of products that you produce in-house, but most retail stores purchase products from a wholesale vendor or supplier. Go out and create those relationships to ensure that you have a steady product flow;
- Hire staff: Some retail stores may be able to operate as a “one-man-show,” but in most cases, you will need to have staff in place to help with the day-to-day operations. Be sure to hire staff long before opening to ensure that your business is equipped to function effectively;
- Choose a POS system: As a retailer, transactions are a large part of your business. You want to make sure that you shop around and test out the different POS systems available to make sure you choose the one that fits your business best. An effective POS system can be a life-saver — especially as your business grows;
- Market your business: Word of mouth is great, but it becomes more and more outdated as time goes on. Be sure to strategically budget and plan out your retail store marketing ventures to get your name and offerings out there. This should include a variety of avenues — paid ads, social media, and SEO just to name a few.
The retail market is a lucrative niche to enter but you need to do this as intentionally as possible for the best return on investment. Take your time and go through the steps above to set yourself and your business up for success.