Retail in Detail

Ronald L. Bond

• Publisher: Entrepreneur Press
• Year: 2013
• ISBN:
  9781613082447
• Topic: Business
• Subtopic: Retail Industry
• Index: Business

Since it was first published, Retail in Detail has helped tens of thousands of retail business owners successfully start and run their businesses. It has established a reputation as a no-nonsense, down-to-earth guide for small retailers. This fifth edition has been fully updated for today’s rapidly changing retail environment in the Internet age. A new chapter contains specific tips on using the Internet for marketing and two-way communication with customers. New sections cover becoming an e-tailer, including choosing a domain name, processing credit cards, shipping and receiving, and other Internet-specific issues. Brick-and-mortar retailers learn how to assess product vulnerability to competition from Internet businesses. This essential reference contains many specific examples and case studies, based on the author’s experiences starting and successfully operating three retail stores and a bed and breakfast, as well as on the experiences of dozens of successful entrepreneurs. Worksheets can be used by beginning retailers to plan for and operate their business.

Part 1: Introduction

Since Retail in Detail was originally published in 1996, it has sold more than 25,000 copies in four editions, and established a reputation as a no-nonsense, down-to-earth guide for small retailers. It contains many specific examples and case studies, based on my experiences starting and successfully operating three retail stores and a bed-and-breakfast over a 20-year period.

This fifth edition retains the down-to-earth approach that has received positive reviews from both users and industry reviewers. It still includes worksheets that can be used by retailers to plan for and operate their businesses. It continues in the style of previous editions and makes liberal use of humor and personal experiences to illustrate important concepts.

In order to provide the latest up-to-date information, the entire book has been updated to reflect current conditions. References have been checked and modified to ensure that they are still current and valid.

In order to ensure that cost data is currently valid, dollar amounts included in the various worksheets and performance ratios were checked using Bureau of Labor Statistics cost indices for a number of items normally sold in small retail stores. The results show that, surprisingly, small retailing dollar values of the’90s are essentially the same, two decades later.

This verifies my own observations that items similar to the ones we sold in 1996 have not risen in price, but have actually declined in many cases. This is probably due to the increase in the number of items that are imported, and the general flattening of inflation in recent years due to monetary policy and the slow growth of the U.S. economy since the recession of 2008. While this is good news for consumers, it represents yet another challenge for small retailers struggling to maintain profit margins with flat prices and their own Increasing labor and utility expenses.

I hope this newly revised edition will prove valuable to you, whether you are considering opening a small retail store, or you are a new or experienced retailer who needs more information to help you operate your business.

Let the selling begin!

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Chapter 1

What to Expect from This Book

I am assuming, since you have purchased or borrowed this book (or are surreptitiously reading it at your bookstore... Look out! The clerk is watching—better buy it now!), that you or someone you know is interested in becoming a retailer. I’m also assuming that you are planning on starting small and being actively involved in the business and that you would like to actually make a profit. Don’t laugh: Some folks just want to keep busy, achieve tax deductions, or maintain a favorite hobby through owning a store. I’m also assuming that you are not planning to use this book to learn how to rise to the top of Walmart or JCPenney’s. It’s on a much more basic level than that.

If my assumptions are correct, once upon a time I was in your shoes. Writing a book about it, however, was the furthest thing from my mind when, in 1985, my wife, Susie, and I decided to open our own retail store. If you stick with me, I believe you will find the information I am about to share useful.

How We Learned the Hard Way

Before starting our store, we sought all available information and references that would help us navigate the maze of planning and startup. While we were able to obtain a lot of information, most of it was not directly applicable to small business retailing, nor was it specific enough to allow us to foresee and plan for the actual costs and events that materialized.

The Small Business Administration (SBA), for example, has a lot of information and many publications available for free. However, the government definition of “small business” covers companies with gross sales in the multiple millions of dollars. Many of the free pamphlets simply assume too large a scale of operation to be of any real use to a mom-and-pop retailer. Much of it also relates to manufacturing or service operations, which are also far removed from the reality of the small retail store we wanted to start.

We didn’t want to use their retired business executive assistance program (called SCORE), because, frankly, we wanted to do it ourselves, our way, and really didn’t want an outsider planning our shop. Ego aside, we also secretly feared that a rational, experienced businessperson might take one look at our plans and immediately fall into a fit of uncontrollable laughter at our ignorance and naiveté. This is not to minimize this resource; I’m sure these gentlemen and ladies are actually quite helpful and would never make fun of rookies such as us, but I guess we were a little apprehensive and perhaps too stubborn to admit we needed help.

In any event, we decided to proceed on our own, at our own pace, and desperately needed a how-to book, perhaps with a plain brown wrapper, that would give us detailed instructions on how to set up shop, without having to go public with our intentions. Alas! With the exception of one simplified accounting and finance handbook, we found no such resource.

We found plenty of books on business management in general, and others on how to get rich in real estate without investing a cent, but you can get this kind of information for free on early Sunday morning television infomercials. This kind of free information is usually worth exactly what you pay for it!

So, after finding out virtually everything by trial and error, I decided to try to fill this void in the information marketplace by writing down our experiences, our methods, and our failures so future entrepreneurs would have some footprints to follow, even though they may sometimes appear to have been left by a drunken sailor! Besides, with the eternal optimism of the entrepreneur I could see burgeoning book sales, huge royalties, autograph parties, talk show appearances... Whoa; back to earth! Where were we? Oh, yes, why I wrote this book!

So, if you are expecting a scholarly treatise on the science of retailing, instead of a commonsense, step-by-step instruction book on how to start a small retail store, you should probably look elsewhere.

Susie’s and my objective was to combine her talents for decorating and crafts with my skills in business and management into a tangible enterprise that would also, hopefully, produce some extra income and provide a nest egg for retirement. Of course, we also harbored that secret dream of all entrepreneurs that our shop would prove wildly successful, be franchised nationwide, and make us millionaires by age 50. OK, so we got started a little late to fulfill our Horatio Alger fantasy by 30-something! Better late than never! In fact, retailing has become an attractive option for seniors who are at or near retirement and wish to keep busy, while earning supplemental retirement cash.

After more than 20 years in the retail business, we have yet to see our store name in lights in shopping centers across the nation, but we have successfully operated three retail stores and a bed-and-breakfast in two cities in the United States. We have achieved a degree of success that gave us some additional financial security in our “golden years.” (We are now retired—well, almost.)

We have also gained a lot of experience, met many new and wonderful people (along with a few grouches), broadened our range of interests, and strengthened our relationship with each other and as a family. So we consider the venture a success. And even though we are not rich and famous yet, the first four editions of this book have sold more than 25,000 copies and we have received numerous testimonials from readers about how the book has helped them in their retail adventures. Neither of us had any real experience as retailers when we began, but we believed we had the basic ingredients for a successful store, if we planned carefully, were fiscally prudent, and executed our plans cautiously and deliberately.

Our family situation when we began was such that Susie could devote full time to the shop and I would be able to assist on a daily basis, while maintaining full-time outside employment. I also used vacation time to help during buying trips and at other times of peak need. The buying trips have proven to be what the Cajun people call “lagniappe”—something special and extra that is not expected. We have had many wonderful trips together all over the United States. We had two sons, one working part time and attending the local community college and the other in high school when we started. Both have completed their educations and have now started families and careers of their own.

We began serious planning for our first store in spring 1985, opened it in September, and operated it successfully for 14 years through a period of changing economic climate. In spring 1991, we began planning for our second store, which we opened in August 1991, in a shopping center across town from the first. In 1998, we closed this second store. In 1999, we moved to our eventual retirement location and opened another store, combined with a bed-and-breakfast. In 2000, we sold our first store and, in 2001, we closed the last store and B&B. Since then, we have maintained a foothold in the retailing arena by operating several booths in cooperative markets, as well as speaking to and advising other retailers.

Through these experiences, which can best be characterized as trial and error, we developed a reliable operating philosophy, established a credible reputation in the community, and achieved a degree of financial success, which we are attempting to share in this volume. It is our hope that the book will help you as you chart your own course into the business of retailing.

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How Information Is Organized in This Book

Since I was educated as an engineer, my thinking is pretty linear. Susie has other words to describe it, sometimes, but let’s not get into name calling! Accordingly, the material is presented generally in the order in which you are likely to need it, starting with a brief overview of small retailing and proceeding through research and planning, opening and managing your store(s), and finally, closing or selling your business. I’ve also included appendices containing useful reference materials.

Interspersed throughout the book are worksheets, tables, and figures designed to provide actual tools you can use to plan and manage your retail business. Feel free to photocopy and use them as needed.

Having made the point about sequential organization, let me also note that retailing, as life in general, does not lend itself to neat chronological sequences. Some subjects pop up unexpectedly and some issues recur throughout the business cycle. So some subjects are organized into what I considered the most appropriate chapter, rather than in strict logical sequence. All this is to say that you should read the entire book before proceeding with your plans.

Throughout the book, I have attempted to share our specific experiences relating to our retailing operations. They are identified in sidebars captioned “Our Experience.”

Other than this device, I have tried to avoid the “CNN method” of presenting information. There are no bottom-line crawls of unrelated data on each page. I have not used tired graphics or “factoids” encased in text boxes containing tips and trivia that are, well, trivial, just to provide eye candy. I am assuming that your attention span is greater than a turnip’s and that you are capable of following a logical sequence of thought for more than a few seconds. If I am wrong, I am also writing a comic book...

Oh, yes, if you find a term that is unfamiliar, look it up in the Glossary included as Appendix A.

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Chapter 2

History and Current State of Retailing

Before we get down to the nitty-gritty of starting your store, it is appropriate to step back a little and get an overview of retailing. How did retailing develop? What is it now?

History of Retailing

Remember I told you this would not be a scholarly, academic book? Well, here is my personal version of the history of retailing.

In prehistoric times, when Grog the caveman (the consumer) became hungry, he grabbed his club and headed out to find the nearest wooly mammoth (the manufacturer), whacked it over the head, carved out as many wooly mammoth steaks as he could carry, and brought them home to Mrs. Grog to cook and serve to the family. The food lasted for several days (unless there were cave-teens in the family, in which case it was gone in several seconds).

This system worked pre...