You're opening a store, but where do you find the merchandise to sell? You have a few options. One is to attend trade shows, which are one of the most significant opportunities for retailers to meet representatives from major manufacturers, get business cards, and establish a relationship. Nearly every industry has trade shows, either regionally or even locally, if you're in a major metropolitan area. You can also contact manufacturers directly. Find out who the sales representative is for your region, or if the company sells through a distributor or a wholesaler. Research the trade magazines for your industry and read them thoroughly. You'll find listings, ads, and articles about manufacturers. Finally, there are general directories for suppliers, manufacturers, and distributors, as well as industry-specific directories. Look for them at business libraries and online.
Buying from Reps
You'll be making your purchases from either the representative working for a specific company, an independent representative handling several manufacturers, or through the manufacturers themselves. But first, become a savvy buyer. Read up on the sales trends in the industry. Learn which items are hot, and which are not. If, for example, you were opening a gift store, you'd attend gift trade shows and read up on the latest trends in trade magazines and journals. You'd scour gift store websites and browse the shelves at actual stores with an eye for what's prominently displayed and at what price. The best way to learn about your new business is to immerse yourself in it.
When you buy items wholesale you need to consider:
What are the sales terms?
Is there a minimum order?
Can you return items that don't sell?
What is the method of shipping and are there additional charges?
How long must you wait to receive the items?
How quickly can you restock?
What do you do if the items show up damaged?
What happens if the shipment never arrives at all?
Can you buy on credit, and if so, what are the terms?
Your relationship with sales representatives and vendors is very important. If you establish a good working relationship, you can then trust each other and work together for many years. The bottom line is, you need each other. Vendors make money if you continue to buy from them and you make money if their products sell to your customers.
Be wary of distributors who are too aggressive in trying to sell you a line of products not familiar to you. Know the brand and the products before buying—do your homework. And if you take item X, don't get suckered into taking items Y and Z, too. Pawning off poor merchandise with the good merchandise is an old trick.
After you become established as a retailer, you'll find that reps contact you. Be selective in what you order, since, after all, you only have so much shelf space. If you overstock, you're prepared should an item be in heavy demand. On the other hand—and this is more often the case—you're stuck with an item that isn't moving as fast as you would have hoped, or has gone out of style.
Keeping the Inventory Fresh
You will generally need to turn your stock over a few times a year. Besides how well an item is selling, you'll need to consider how often new models or styles come out and how much you want on hand at any given time. Naturally, if you're dealing with perishables, your turnover will be daily or every few days.
From web pages to catalog layout to the design and layout of your store, how well you present the goods you're selling will impact heavily on their sales. One school of thought will suggest that bestselling items be up front so people will be drawn into the store to buy them. Another theory is to have hot-selling items farther back in the store so that people will have to pass your other stock and possibly buy other items. You can put one or two samples or demo items in the window to draw customers in. However, if a customer sees the one in the window and then doesn't bother to look around, you can lose the sale and your trick will backfire. Study the layout of other stores to get an idea of how you want yours to be set up. Then work hard on a logical traffic flow that will create an easy-to-navigate store and allow customers to see the merchandise.
In department stores, you usually have to wander through the maze of fragrance counters to find the basics department. This is no accident. The more tempting (and highly profitable) products such as fragrances and cosmetics seduce the shopper on the way to the necessary purchases. Experiment with directing traffic to your high-profit items.
When you start out, you won't be making many deals. You'll be writing checks and buying merchandise C.O.D. As you build your retail business and establish relationships with vendors and sales reps, you will have greater negotiating power. You'll discuss the terms of the deal, such as a discount for a cash purchase, specific details of delivery, and possibly additional merchandise. In some cases, vendors will even split the cost of advertising with you on one of their products in a cooperative advertising arrangement. Rarely do deals include returns to the manufacturer of unsold merchandise, except in the book industry and a few others.
Of course, you'll need to prove yourself a good retailer and build your reputation to forge relationships with vendors, sales reps, distributors, and manufacturers. Over time, you'll go from looking for goods to stock to turning products away. Practically everyone who publishes a book, creates a software program, or develops a toy or game contacts an e-tailer like Amazon.com. Amazon.com can accommodate many of them because they don't need to stock the shelves. They can order just a few copies of a book and wait to see how it sells before ordering more. Their reputation helps them maintain ongoing relationships with an enormous number of publishers and manufacturers. New businesses should start small and increase their orders as sales increase. However, if you need to stock shelves, you'll become more and more discerning as numerous salespeople try to sell you their latest products.
When deciding which items to buy, consider the cost per item and determine the markup. (Is it worth your while to buy the item? Can you make enough money on it to warrant putting it in your store?) Read up on the latest trends and newest products in your industry, and stay ahead of, or at least keep pace with, your competitors. Every time your competitor has a new product available and you don't, you're losing a sale and signaling to customers that you aren't as up-to-the-minute as you should be. Consider the seasons and place orders in advance, making sure you buy far enough in advance to have items on hand for peak sales seasons, such as the end-of-year holidays.
You will make decisions on style and image. You will want to create a certain image for your store and order items that fit that image. You should look for unique items that other stores may not carry even if you only carry a few and cannot mark them up as much as you would like; these may draw customers or grab their attention once they're in the store.
You need to have a good eye for quality merchandise. This means knowing your industry and knowing the difference between the real thing and knock-offs. You need to know the types of products that your customers will buy. Study the demographics of your industry, your location, and your store or website. Know which products can be sold with accessories or other related items to get the most from a customer's buying decision. A model train set, for example, comes with numerous pieces that are sold separately.
Soak Up Information Everywhere You Can
You can learn a lot from others who have run retail businesses for many years. Successful retailers love to talk about how they built up their empires, and as a future empire builder, you need to soak up as much of that collective wisdom as possible. Join associations or the local chamber of commerce. Look at trade journals and gather as much information about retailing as you can. STORES magazine, at www.stores.org, has a wealth of retail information plus an industry buying guide that will help you put your store together, from the sign in front to the bags customers carry out when they leave. You'll also find links to numerous retail-based sites at www.retailindustry.about.com.