Table of Contents
A retail business sells products directly to consumers and functions as a middleman between wholesalers/manufacturers. They might use a physical store, a kiosk, or an online store to sell the products. Retail business examples include grocery stores, electronic stores, clothing outlets, etc.
Starting a retail business can be very profitable if you find the right niche of products that you want to sell and have an efficient business plan. Before you delve into how to start a retail business you must know the types of retail businesses so you can explore various retail business ideas.
Types of retail businesses
There are several types of retail businesses:
- Retail chains
A retail chain is a chain of stores located in different regions. Branches of these chains could be located in major cities or could be in different regions of a single state. These stores usually offer a specific range of goods and services. For example, Croma, a subsidiary of Tata Digital is a retail chain selling electronic goods and durables.
Franchises sell a range of products offered by a specific brand (the franchisor) under the terms and conditions signified by the latter. Food franchises like KFC and Chai Point, logistics franchises like Blue Dart and DTDC, etc., are examples of franchise businesses.
- Specialty stores
A specialty store offers a particular category of products like clothes, organic vegetables, books, etc. Since these stores cater to a limited audience their reach is limited. Crossword, the book store, is an example of a specialty store.
This is the most common kind of retail store specialising in FMCG products. These stores usually are large stores with multiple aisles where a variety of FMCG products like groceries, bedding and other household items are stacked for the consumers.
- Convenience stores
Commonly found in residential areas, these are small grocery and FMCG stores catering to the consumers of a specific locality. The customers who reside in that area visit this store daily to buy everyday necessities like milk, curd, vegetables, etc. These stores have limited products that have a high demand.
- Factory outlets
Factory outlets are retail stores owned by manufacturers and they sell products directly to the customers at relatively low prices. These stores are located at the manufacturing facility or close to it. For example, the factory outlets of Puma.
How to start a retail business?
Here is a step-by-step guide on how to start a retail business:
- Make a business plan
Once you decide to dip your toes into a retail business in India, the next step is to make a business plan. To make a business plan you will need to answer the following questions:
- What is the range of products you will be selling?
- What is the target market?
- What are your startup costs?
- How many employees will you need to hire?
- Who will your vendors be?
- How long will it take for you to make a profit from your store?
Creating a budget is essential when making a business plan. Startup costs for opening a physical store and e-Commerce website must be calculated to know which costs more and what will be the most profitable venture for you.
Don’t forget to set a deadline for breaking even and realising profits. Also, research what licenses you will need to start your business legally in the country. You can refer to some retail business models online or try and contact some retail business owners who can shed some light on how the business functions and the challenges you may face during the first few years of your business.
- Decide on a location
Once you calculate the difference in costs between starting a physical store and an e-Commerce store, you can pinpoint what path you should take. However, make sure you figure out all the nitty-gritty details involved in both.
For example, an e-Commerce store means registering a domain name and opening a website. This would also involve preparing an e-Commerce fulfilment strategy for smooth last mile delivery.
On the other hand, a physical store would mean deciding the right physical location where there is already momentum for the goods you are selling. For example, if you are looking to Franchise Apple devices your preferred location would be an urban city where there is demand for Apple gadgets with people who can afford these expensive devices.
- Register your business
Once you select a location, it is time to register your business. You will have to decide whether your company will be a private limited firm or a partnership. The type of company you choose will have different registration processes and documentation.
You can read how to register your retail business in detail below.
- Establish relationships with vendors and suppliers
Since you are a retailer, you will need to select your vendors and suppliers. If you are starting a franchise, you will need to find a profitable franchise or if you want to open a supermarket you will need multiple vendors because you will have a large variety of products on your shelves.
Always visit a few vendors and ask them for a ballpark figure for buying items wholesale. Also factor in the transportation costs to bring these items to your store location. Once you find the most feasible supplier you can go ahead and draw up a contract.
- Create a marketing strategy
You will need an efficient marketing strategy to spread awareness of your store. If you have an e-Commerce website, you can sign up for ad plans features by social media platforms like Instagram and Facebook and launch advertising campaigns for your target customers.
A physical store would mean that you will have to put up discount offers and special offers on the opening day to attract customers to your store.
- Hire staff
Once you have registered your business and decided how many products you will be selling you will need to hire employees. If you want to start an e-Commerce store you will need a website developer and an IT team who will handle the end-to-end needs of the website.
How to register a retail business?
To open a retail business in India you first need a trade license and a shop and establishment registration to open a retail business in India. A trade license is issued by the municipal corporation of a particular area. The procedure of obtaining such a license varies from state to state as different states have different regulations.
Eligibility requirement for a trade license:
- The applicant must be over 18 years.
- The applicant should not have any criminal record.
- The type of business must be legally permissible.
Shop and establishment registration acts as legal entity proof for conducting a trade, business or profession. This license is how India defends and protects the rights and interests of the workers employed. To obtain this license:
- Visit your state’s labour department website. Some states have a completely digital process, while others have a semi-online process
- Look for the online registration form
- Fill up the online registration form
- Upload the necessary documents if your state has a fully online process
- Pay the required fee
To register your business with the Ministry of Corporate Affairs follow the steps below:
- Visit the website of the Ministry of Corporate Affairs (MCA).
- Scroll down the homepage to find an option labelled ‘Register your company’
- Navigate to the option labelled ‘Company forms download’ indicated right next to ‘Register your company’
- Click on ‘Company forms download’ to view a list of forms you can download and fill in for registration.
Clicking on the ‘Register your company’ given in step 2 will give you information on the mandatory forms you must fill in. You will also need to know the NIC code of your business to fill up the forms.
Once you have obtained the shop and establishment license and the trade license you can open your retail business. You can register your business with MCA during the course of the business.