It takes a certain type of person to be a successful retail entrepreneur, with the passion and determination to make a mark in the sector they love, taking the lows with the highs.
However, building up one idea and then moving onto the next does carry some risks and whilst many start-up retailers have their eyes firmly fixed on short-term gain, it’s still important to back up plans with a solid business strategy and a close network of advisers.
In many ways, UK entrepreneurs have taken some of the characteristics of their American counterparts, namely an innate fearlessness. The nature of building up and running a retail start-up means that failure is always a distinct possibility. However, not being afraid of what the future holds and knowing when to accept defeat and move onto the next idea is what makes these individuals tycoons of the future.
It is rare for a retail entrepreneur to focus his or her efforts on just one enterprise or offering. They are more likely to have several ventures underway at any given time, often with very different product offerings. Once a business has been found which is performing well, this can be built up and sold, before focusing on a different venture.
Whilst having the courage to develop the spark of an idea into a thriving business is hugely important, there are several points that retail entrepreneurs must consider which can help on the road to success.
The first is finding a niche for their products. Identifying an untapped market can turn a business into an overnight success, particularly if consumers recognise that the product or service they are buying cannot be found elsewhere. This approach could also allow the retailer to price their product or service at a premium.
It is essential that retail entrepreneurs know their market and the profile of their customers, including who they are targeting with their goods and services. Understanding the socio-economic background of their core customer is key, as well as having a sound understanding of their likes and dislikes. Problems can arise if products are pitched without any insight into what is driving this specific set of consumers.
Seasonality may need to be taken into account and if trialling several business operations simultaneously, it may be wise to select products and services that are likely to be popular at different times of year.
For example, in the outdoor goods markets, demand for camping and skiing equipment is extremely seasonal and would allow a clear distinction between two arms of the developing business. If the business operates online and has no bricks and mortar outlets, its website can be easily adapted to reflect different product lines according to the season.
Enthusiasm for a number of different projects is no doubt important, however this must be backed up by solid, commercial foundations. Particularly in the start-up phase, where entrepreneurs see projects as less long-term than their traditional retailer counterparts, having a succession plan is key. One of the first questions a retail entrepreneur should ask themselves is, if the business is going to be run for three to five years maximum, what are the next steps?
Modern retail entrepreneurs understand the likely end buyer for their business from the outset, which allows them to groom their business in a way to make it more attractive, and ultimately maximises the end sale price.
The television programme, Dragon’s Den, serves as a good example which maps the rise of retail entrepreneurs. In the programme’s early series, pitchers went on to obtain early ‘seed capital’ funding – perhaps £50,000. Now, entrepreneurs recognise the that real value of enlisting the help of a Dragon – with their knowledge and contacts – is priceless.
To help them to make the right operational decisions, retail entrepreneurs will need to rely on trusted advisers. They might have the passion to drive the business, they may lack the market insight or depth of experience needed to see it through successfully. Advisers are there to support and challenge their decision making, rather than tell them what they can and cannot do.
Areas where strategic advice can make a significant difference include fine tuning a business plan, cashflow forecasting or raising finance. It may also be appropriate to seek specialist or technical advice about how to implement efficient stock control systems, establish an e-commerce platform or embark on a programme of International expansion.
For instance, start-up retailers often agonise over whether to embrace online tools such as Amazon Marketplace. This can be an indispensable tool for driving new business and getting exposure for stock, however in many cases promoting and growing your own website and brand can be more beneficial in the long run.
Retail entrepreneurs thrive on seeing their ideas come to life and they are often resilient in adversity. However, their passion must be supported by good business practice and a sounding board of trusted advisers to set them on the path to commercial success.
Andrew Mosby, partner and retail sector specialist at Menzies LLP.