Have you ever imagined transforming your passion into a bustling retail business? The journey from idea to grand opening involves many steps, including strategic planning, creative design, and meticulous preparation.
This guide will help you understand what it takes to open a retail store, from costs and registration offers to tips for promoting your store.
Table of contents
How to open a retail store
- Choose your niche
- Write a business plan
- Register your retail business
- Obtain licenses, permits, and insurance
- Learn about tax and accounting
- Scout a retail location
- Design your store layout
- Find product suppliers
- Hire retail staff
- Choose a checkout system
- Use an inventory management system
- Build your retail brand
- Plan your store operations
- Promote your retail store opening
- Expand your retail business online
1. Choose your niche
Where are you going to put all your focus? When you’re first starting a retail business, it can be tempting to try to sell everything.
Your time and resources are limited, so use them wisely. Determine the kinds of products you’ll sell and work out exactly which target market you’ll sell them to.
Here are a few tips to make that process easier:
- Think about what you love. It’s much easier to sell something when you truly care about it and believe in its potential. Start your search for a niche here.
- What could go wrong? That’s a genuine question to ask yourself. Every industry will have its obstacles and barriers to entry. Think about the things that could go wrong in your niche, and how likely you are to be able to overcome them, before making a final choice.
- Examine profitability. It’s important that you love what you’re trying to sell, but it’s just as important that other people do too. Are there any competitors? If not, why not? Make sure there’s a demand for your niche and a possibility of making a profit.
- Evaluate competitors. Some of the things your competitors are doing might work well. Others will be missing the mark. Look closely at the best and worst bits of their marketing efforts, selling, customer service, and any other areas you can research. Adopt their best strategies and improve on everything else.
2. Write a business plan
The main reason you’ll want to write a business plan is to apply for a business loan. However, even if you’re financing out-of-pocket, a business plan will help solidify your ideas and point out business needs you hadn’t initially thought of.
Business plans vary in depth and detail, but most include the following information:
- Business name and description
- Executive summary
- Business structure
- Products and services
- Target audience
- Market research and marketing strategies
- Cash flow forecast and start-up costs
- Logistics and manufacturing details
- Details of any lenders or grants secured
If all of this seems overwhelming and you don’t know where to start, feel free to use this business plan template to guide you.
3. Register your retail business
The next step is to register your business. For this step, you’ll need to choose how to structure your business. Your business structure determines how you’re taxed, how you obtain capital, your liabilities, and other factors.
Every business structure has different implications for taxation, ownership, liability, funding, and other aspects of the operation.
You have the choice of five main structures in the US:
- Sole Proprietorship
- Partnership (either limited liability or limited partnership)
- Corporation
- S Corporation
- Limited Liability Company (LLC)
The choice is similar in the UK, but there are only three main structures:
- Sole traders
- Limited companies (limited by shares or limited by guarantee)
- Partnerships
Make sure to research your options carefully, because changing your structure later, while possible, can be a hassle.
Once you decide on a legal structure, look for a registered agent and register your business with state agencies or Companies House in the UK, if applicable.
4. Obtain licenses, permits, and insurance
The next piece of the legal puzzle is getting the right licenses and permits.
For virtually any brick-and-mortar store, you’ll need a seller’s permit from your country, county, city, or state, a general business license, and a DBA (Doing Business As) if your business name is fictitious.
You’ll also need special licenses to sell restricted items such as drugs, alcohol, live animals, firearms, and adult materials.
Depending on your location, you might also need to apply for certain other licenses for a physical retail store:
- Zoning permit. Some localities might regulate what types of retail businesses can operate in specific areas.
- Health permits. If you plan to handle any food, you might require health permits.
- Environmental permits. If your business could contaminate air or water, you might need a special pollution control permit.
- Sign permit. Some authorities require local retail businesses to get a permit before they can put up a sign in public.
Researching the need for any of these special permits and licenses should be part of developing your business plan.
5. Learn about tax and accounting
Tax rules vary, depending on where your business is registered, where it operates, and its legal structure. A sole proprietor in the US, for example, will typically file taxes on the 15th of April each year. For a partnership, it’s usually the 15th of March.
The IRS (Internal Revenue Service) provides more information about this.
The deadline for filing corporation tax in the UK is 12 months after the end of the accounting period it covers. Every business’ accounting period will differ and depend on the date you set up your company. There are also variations for sole traders and other legal structures. Do your research to see what’s relevant for you.
In the UK, VAT (value-added tax) must be charged on most sales. Some products have a lower rate, and items such as food and children’s clothes do not have any VAT attached. Not every business has to be VAT registered, so check your circumstances against the information on the government’s website.
6. Scout a retail location
Once you’ve started getting the necessary permits you can begin looking for the perfect commercial space.
Knowing your target customer’s demographics is important for finding a location. If you’re selling student supplies, for example, it wouldn’t make sense to set up shop 10+ miles away from the nearest college or university.
You’ll also want to look for these six markers (VPASTA):
- Visibility
- Parking
- Accessibility
- Signage
- Traffic
- Activity
Don’t forget to consider size and space for inventory. One of the main differences between an ecommerce store and a brick-and-mortar store is the need to consider store size. Will you have enough room for inventory, visual merchandising, space for people to walk around, and a checkout counter?
If you rent too much space, you could pay a higher price per square foot, plus your store will look empty. Getting the right amount of retail space is a fine balance.
7. Design your store layout
When a customer walks into your store, make sure they’re welcomed by an enticing layout. Think about what you want them to see first. What’s going to get them into the store? Make an attractive window display that will influence a purchase. Think about which product displays will catch their eye.
When you’re merchandising, what will be placed where? Are there certain products that’ll likely be added to a basket as your customer approaches the checkout? Do two products complement each other like a hand and glove?
Consider what the checkout looks like. If there’s a point-of-sale display, you’ll need to decide what type of products to put there and how to make them stand out. You’ll also need to make sure the checkout process is easy and avoid the possibility of long lines when you can.
Make sure your store is as accessible as possible. Wheelchair users, parents with strollers, and other people with mobility challenges will need to get around. Think about aisle space, elevators, shop till or cash register height, and anything else that can help make your store inclusive.
Something that’s often left unmanaged until it’s too late is inventory storage. Think about how easy it is to bring stock into the store. Can you get to the most popular products quickly? Are you making sure your shelves are never left empty?
8. Find product suppliers
If your business were a heart, your vendors (or suppliers) would be the arteries. It’s critical to have a good relationship with them, and building your relationship starts with choosing the right vendors in the first place. If you’ve ever interviewed potential employees, onboarding a vendor can feel like a familiar experience.
Entering a partnership with a bad vendor can delay production and distribution, costing you time and money. So start by setting up criteria for what you want in a vendor. Price should be only one of several factors, including:
- Quality of the product
- Customer service
- Existing relationships
- The vendor’s ethics
- Minimum order quantity (MOQ) rules
- Expertise in your niche
- References
9. Hire retail staff
Another big difference between ecommerce and physical retail is the need to hire staff from the start. It would be very difficult (if not impossible) to manage a retail store by yourself. You’ll need to build a team and train them with the retail skills to succeed.
When you’re hiring staff for the first time, make sure you meet your country and state requirements as an employer. In the UK and in some states, you’ll need a specific type of insurance (e.g. employer’s liability insurance or worker’s comp).
You’ll also need an account for payroll, a process for verifying employment eligibility, and a process for reporting new hires to the State Directory of New Hires (SDNH). The UK government has a checklist of the seven things you must do when hiring staff for the first time.
When you’re interviewing, no matter the position, remember you’re interviewing for attitude as well as capability. It’s easier to work with someone who shares an interest in growing your business but whom you need to train on processes than the other way around.
10. Choose a checkout system
The last physical part of the puzzle to put in place is choosing the right payment system for your business.
There are two main elements of a payment system to consider: the point-of-sale that helps you take payments at checkout and the payment processor.
Point-of-sale system
Your point-of-sale system is the hardware and software that enables your business to accept payments from customers and make sales in-person. Your hardware setup can be as minimal as a mobile device (like a tablet or smartphone) and a card reader or card machine. However, most of the time you’ll want to be able to handle cash as well, in which case, you’ll also need a cash drawer.
Make sure your point-of-sale system has a quick checkout process and lets you accept a variety of payment types including credit and debit cards, contactless payments, physical and digital gift cards, and cash.
Payment processor
Some POS systems, like Shopify POS, come with integrated payment processing, while others require you to manage separate contracts, fees, and payments with a third-party provider.
Choosing a POS system with integrated payment processing simplifies your monthly costs, accelerates payouts, and reduces inaccuracies in your financial reporting due to human errors. Integrated payments also mean you’ll spend less time reconciling charges.
Contrarily, when you partner with a third party to handle payment processing, you’ll have to manually reconcile payments accepted from your card reader with your POS system, and it may take longer to receive payouts.
When shopping around for a POS system, make sure it includes details on payment processing—otherwise, you might find a surprise bill coming your way.
11. Use an inventory management system
When opening a new shop, you’ll need to think about inventory management. It’s a critical part of retail business operations, so it’s best to start off right: with proper inventory management software. Look for platforms that merge the inventory from your ecommerce store and retail store.
You can manage inventory for your online store and retail locations all from Shopify. When you use Shopify, you’ll already have inventory management features built in, as well as the option to integrate third-party platforms.
12. Build your retail brand
Building a strong brand that potential customers can emotionally connect with can drive further retail success. Your retail brand is more than just a name and a logo—it’s who you are, what your brand stands for, and why it exists.
Your branding should include components like a mission and vision statement and visual brand identity elements like a logo, colors, fonts, and layouts. This will also include establishing a brand voice and tone.
Perhaps more important than creating the brand is ensuring your entire team understands and embodies the brand. Incorporate brand onboarding into your employee training process.
13. Plan your store operations
When thinking about store operations, consider how your retail store will work with your online store or website. Maybe you’ll want to offer Buy Online, Pick-Up In Store (BOPIS), and curbside pickup options for shoppers. Supermarkets started offering Click and Collect in the UK years ago, and many non-food retailers have since picked up the trend.
Remember, use platforms that integrate online and retail operations. That’s exactly what Riess Group does when it helps Shopify merchants like Vestique optimize their retail stores. They love that Shopify has so many of these integrations ready out of the box. It’s led to jumps in sales by up to 18%.
14. Promote your retail store opening
At this point, you’ll have registered your business, and chosen your location, vendors, staff, and payment systems. All that’s left to do is promote your store and get ready for your grand opening!
While you wait for your initial inventory to arrive (and get the store ready to receive customers), think about how to market your store to locals.
You can promote your business by forming local partnerships, putting on promotional events, or even having an experiential shopping event. Print out flyers and post them locally, put signs inside and out front of your store, and consider taking ads in local newspapers.
15. Expand your retail business online
In terms of your online presence, two areas to think about are social media and local SEO. On social media, try to find local groups or pages in your niche that you can participate in while promoting your new store (as well as sharing your business page with your network).
Setting up local SEO is a long-term plan, but it starts with listing on Google. When you list your business, offer as many (relevant) details as possible so that local Googlers can find you.
Start your own profitable retail business today
With some planning and marketing, having followed the steps outlined in this guide, you’ll be ready to open your retail store!
There will inevitably be bumps in the road before you officially start your retail business, and so a strong network of support around you will help glue all the pieces together. Other than people, the right tools can bring your business to the next level.
Read more
- Find a Retail Location: 6 Options to Consider When Setting Up Shop in a New Area
- 7 Ways to Generate Revenue Before You Open Your Retail Store
- How To Make Your Retail Store Attractive To Business Investors
- 5 Successful Retail Businesses That Started Off as Side Hustles
- 5+ Ways to Build Your Side Business Without Quitting Your Day Job
- How This Gemstone Retailer Is Making Sales Magic With Healing Crystals
- POS Systems for Small Businesses: Best Features, Systems, and How to Choose
How to start a retail store FAQ
How do retail stores make money?
Retail stores can make money by selling their own products, reselling products from other businesses and brands, hosting paid workshops and events in-store, selling online, and through subscription-based services.
How much money do I need to start a retail store?
Most small retail business owners spend an average of $40,000 in their first full year of business, according to our data. However, you can technically start a retail store with $0 if you secure funding from external sources, like banks, investors, or crowdfunding.
Is it profitable to open a retail store?
It can be profitable to open a retail store if you’re strategic and do a lot of careful planning and research beforehand. Retail success is also contingent upon the tools you use. Using a comprehensive platform like Shopify can make it easier to achieve profitability in your retail store.
What do I need to start a retail shop?
You need your basic business information, inventory, space, and technology to process payments to open a retail shop. Depending on your location, you may also need additional licenses and permits.
How do you open a retail store with no money?
You can open a retail store with no money by securing external funds like Shopify Capital, a business loan, investors, a small business grant, crowdfunding, and more.
