Opening a retail store...need advice

[JodiR]

I sell new kids clothes on ebay and also have a website (not much traffic there). I have been thinking of opening a store in a nearby mall.

The mall is $1,000 including utilities and insurance. 800 sq feet. I was almost ready to do this then this happened....

It was ironic because yesterday I went into the shop where I have my clothes. The owner sells the same brands, etc, so I thought I would give it a try and have my items in with hers.

She told me that she is moving down two blocks to a bigger space. She then wans to know if I want her space. But I would only be able to sell what she doesn't. I am limited in that way. There are two nail places and many hair salons.

Where we would be is the downtown area...maybe they all stick together and watch out for each other?

So, should I have the right to sell what I want? A nail salon opened up and the owner of the clothes place was told that she is selling new baby clothes (why, I am not sure). So she went over and bought them all and told her not to do that again since she already is selling them.

The space is 1600 square feet for $750 a month + around $200 for utilities and $75 for insurance. There is a back space that someone wants to sublease. I could rent that for around $300. I would come out very nicely in the financial part.

I don't want to compete but I also don't think it is fair that I should be told what I can or cannot sell.

So, if I do this, what should I do to set me apart from her? She is closed on Sundays and Mondays... should I be open then?

I am open to any advice because I want this to work. My main concern is that I will be a nobody and was asked to do this because the space needs to be rented since she is leaving.

I would carry different sizes than her and different brands. She wants to specialize in custom items where I would have Bonnie Jean and Rare Editions, etc.

I would love to continue to work out of my home and have people come to me. But I don't know how that would work. There is a scrapbooking lady who works out of her house and has people come over 2 weekends a month. That would be ideal.

What route would you go?

 

[phorsenuf]

If there are no restrictions in what you can or cannot sell in the lease, then sell what you want.
If I was that nail salon owner I would have let her buy the clothes and then turned around and bought some more. Who does she think she is?

If you want to be in the retail business than you need to do what's best for you and not worry about stepping on others toes. It's tough to be in retail right now. Good luck.

 

[golfgal]

The woman sounds like the town bully. I would do what you want unless there is a restriction in the lease or town by-laws or something. I am sure she is afraid of competition but if she was smart she would use it to her advantage.

One problem you MIGHT run into is often the wholesellers can't sell to more then one store in a geographic area. If you are going to be using the same sales rep you might not be able to buy the lines she buys.

 

[DMickey28]

Where do you think you would get more foot traffic? Is the Mall a regular indoor mall? I would think that situation would be more ideal for traffic. The strip mall probably would cause you to do more advertising becase the random walk in traffic would be less ... people would come specifically to you or the other few stores there.

I would not let this woman dictate what you can sell ... if it's going to be headache I would not bother.

Which location is the best ... that's honestly what it boils down to for me? The 800 sq. ft. location would be a lot easier/cheaper to stock as well. Do you have the equipment to do that with 1600 sq.ft?

 

[tink_n_pooh]

Sounds like she is pretty much a business bully unless of course there is some sort of business persons association or something like that which states that you can't sell the same thing someone else is selling in the same association. There is an association like this not far from where I work, its all small businesses in a higher end lake, resort-ish area. Basically to lease space you enter into a no compete sort of agreement, it works for them and each business seems to do very well. I couldn't imagine this working or existing in many places though.

Good luck in what ever you decide to do!

 

[JodiR]

The only problem is that I need to be open mall hours, which is 10-9 weekdays and 10-5 Saturday and 12-5 Sundays. I just can't do all that myself. So I would need to hire someone which would take away from my profits.

I would be able to do the hours if I went to the downtown store in my same town.

I think I would do well in the mall, but the boutique owner in town has done well also. She says she is getting alot of customers driving 1/2 hour or more.

I have enough inventory to fill the larger space.

Tough choices. Since I also ebay (which is not much overhead except the ebay fees) that profit would make this more doable.

I have always wanted to have my own store so I just have to make the right decision.

 

[DMickey28]

Does the boutique owner have any stake in you taking the town shop? Does she need to sublet it? Does she own the building?

Of your current sale items, what would you NOT be able to sell?

You mentioned that she WANTS to go more customized which I assume would open your options up to keeping with the brands you current carry. What if she doesn't? What if she tries it and doesn't work, is going to have a problem that you are carrying those brands?

Have you looked at your current sale trends and compared what is among your most popular and if those would be items you couldn't sell?

How long has she been in that spot?

Even though she has done well there, I imagine there is a certain amount of customers that go to her specifically. They will still go to the new store to find her and since she is going to tell you that you can't sell what she is selling you won't get any of her customer's coming to your new locations. Will the new customers that come into the area just go to her store since they know what she sells?

I am concerned that having two stores that are too similar in product, one which controls the other to a certain extent is setting up the second store for failure. At least with the mall store you will get A LOT more foot traffic and random traffic. I understand about the hours though and the cost for the space.

*** My mother owned a retail shop in a downtown store situation when I was growing up and she currently owns a seasonal retail shop in a tourist spot in our town.***

 

[JodiR]

The current store owner leases the building. She told the owner of the building about me. No, the store owner has no say in what I can sell.

In reality I can sell any kids items I want. She said she is not going to sell the brands that I carry.

 

[dis-happy]

Sell what you want. But listen to this: I used to do small business bookkeeping and you are waaaaay underestimating your costs. You will want to spend more time working up a business plan and finding out how much you'll need to sell to be profitable. Food for thought.

 

[BelleWDW]

All the small retail stores in my area are hurting-no way I'd get a lease-keep selling on E-Bay because your overhead is so low

Also -do a Buisness Plan-figure out how many outfits you'd have to see to pay rent, utilities etc-Honestly in todays economy it is very , very risky

 

[Cheshire Figment]

I would also suggest going to www.irs.gov and order the following publications which will probably help a lot.

334 - Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ)
463 - Travel, Entertainment, Gift, and Car Expenses
535 - Business Expenses
551 - Basis of Assets
552 - Recordkeeping for Individuals
560 - Retirement Plans for Small Business (SEP, SIMPLE and Qualified Plans)
583 - Starting a Business and Keeping Records
587 - Business Use of Your Home
946 - How to Depreciate Property

And also, if the time can be spared and at and minimal cost take a first semester Principles of Accounting course at a local Community College. Not necessarily to keep the books, but to get an understanding of what the business is doing.

Note that most small business fail within the first few years not because the owner did not know his subject but because they did not understand the accounting.

Mike (CPA Retired)

 

[Kimberle]

I do store Accounting. I agree, there a many "unexpected" additonal costs. Many of which depend on which state, city, and even mall you are in. You first step should be to contact the potential landlord for a lease/rental agreement. Read it VERY CAREFULLY as they often have stipulations. Some of ours are for required charitable donations, co-op advertising, etc. Find out exactly what kind of taxes you will pay. Most of our stores pay property taxes of their lease, fixtures, and even office supplies. Business accounts (a/k/a, phones, internet, bank accounts etc) are much more expensive than regular accounts. What payments will you accept? What is your check policy? How will you process credit cards? What are the fees? You'll need a business license. Also, most leases are 10 years in lenght. What happens if your store doesn't work out and you need to close? Most spaces aren't "move in ready". We spend a lot of money just getting the space ready.

Owning your own business is great. Just make sure you know exactly what you're getting into. Many community colleges offer short, non-credit classes for potential business owners. Do your homework!

Good luck!

 

[JodiR]

$750 includes the rent and property taxes. Average $280 a month for utilities. Sublease the back for $300. I already have a credit card processor since I have done craft shows before.

The place was just painted and updated so it is move in ready. I know I will need mannequins and such. The newspaper does a free article on new businesses, so there is some advertising at first.

The owner has been there a year so her lease must have been a year.

Everything you are saying Kimberle as crossed my mind also but I seem to have a good understanding.

 

[JodiR]

Let's say I don't open the store. How do I get people to my home to buy. Someone local found me on Ebay and stopped over to look at my stuff. I would love this to happen frequently.

I want to deal with real people also not just Ebay.

 

[rie'smom]

$750 includes the rent and property taxes. Average $280 a month for utilities. Sublease the back for $300. I already have a credit card processor since I have done craft shows before.

The place was just painted and updated so it is move in ready. I know I will need mannequins and such. The newspaper does a free article on new businesses, so there is some advertising at first.

The owner has been there a year so her lease must have been a year.

Everything you are saying Kimberle as crossed my mind also but I seem to have a good understanding.

You're forgetting salary, employee withholding taxes, and sales taxes, if your area has sales tax. Also, many places that lease retail space demand a percentage of your profits as part of the lease. It might be $1000 but they may want 10% of the gross as well. If you have a storefront, many customers want alterations. Do you have someone who can do those? That is an extra expense.

Having been in retail, I can tell you that you need a business plan. It is not as easy as rent, utilities, property taxes, etc. Then there are always unexpected costs- not to mention shoplifting. Even security systems won't stop that because the thieves know how to get around a lot of the systems. In some cases, it is as simple as a magnet.

If the woman who spoke to you is in the same area, then I wouldn't carry the same brands. She is more established.

In this economy, I'd stick with eBay. Yes, the idea of owning a store is attractive but it is hard work and is nowhere near just 10-5.

 

[BriarfoxinWA]

Let's say I don't open the store. How do I get people to my home to buy. Someone local found me on Ebay and stopped over to look at my stuff. I would love this to happen frequently.

I want to deal with real people also not just Ebay.

Can you do some advertising listing that you sell by appointment only?

I have to add that I'm a commercial lender so I see lots of business plans and deal with many different kinds of businesses. I don't have anything really to add to the advice you've been given - all of the PP's have valid points to think about. Have you looked around to see if you could find a cheaper / smaller space to start out with? My biggest concern is that you already have 2 competitors in the area before you even open your doors, one of whom is already established with an established clientelle.

 

[JodiR]

I would not have any employees in the storefront. The mall, yes I would need to. Neither place would take any percentage of profits.

I am thinking of this all the time and crunching numbers to see how many items a day I would need to sell to make the profit I need.

It is still in the early stages so I have alot to think about.

 

[swanmom]

Are you the only one who will be in the store when it is open? Besides the obvious safety concerns, what will you do when you have to be out? kids sick? you're sick? important family events? holidays? etc. What will you do all of the things that will take your attention off the floor - for bathroom breaks, lunch, answering the phone, stocking items, recordkeeping etc.? I worked retail for years and it is much more difficult than people think. Based on my experience, I'm concerned that with only one person this will be a total burn-out for you and will leave your store very vulnerable.

 

[The Mystery Machine]

I guess my biggest question to you is how long can you operate with a loss?

You will be operating at a loss right away, with the expenses. Then you will need to make that up plus your current expenses.

 

[lovetoscrap]

Just a comment on selling out of your home--make sure you check your neighborhood rules and town codes. In many places you are not allowed to operate a business that generates "traffic" out of your home. That would make your residence a commercial area that can be illegal.