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How to open a shop

Do you dream of opening a shop of your own? This step-by-step guide to starting a retail business will help you get started...

The bricks and mortar retail industry isn’t dead – it’s just changing. In fact, a report by the Office of National Statistics states that the number of businesses both on and off the high street grew by 15% and 22% respectively between 2012 and 2017. 

Away from the high street, shopping centres are also expanding – there’s even a third Westfield heading to the London area – and more shop owners are choosing to lease retail units that enable them to create unique shopping experiences. 

As Karen Whybro from Rock the Frock bridal boutique says,“Retail is doing fine if you’re offering something different or unique to the customer. Shop owners need to be savvy and give customers a reason to come to them and buy, or an amazing marketing plan which cuts through the digital noise and immense competition.”

Take a look the four ways current shop owners are increasing their footfall.

1. Provide an experience, rather than just stock. 36% of fashion buyers in the UK say they'd like to see a cafe in a fashion shop

2. Introduce virtual reality changing rooms. 37% of fashion buyers in the UK say they'd like to see a smart mirror in a changing room

3. Offer fitted or customised clothing. 29% of fashion buyers in the UK say they'd like to see tailors in a fashion shop

4. Create attractive loyalty schemes. 71% of consumers in the UK say membership is a meaningful part of their relationship with a brand

Whether it’s offering shoppers a coffee as they walk through the door, investing in the latest digital technology, or giving your most loyal customers attractive discounts, setting yourself apart from your competitors is the true route to success if you’re looking to open a shop. 

On top of that, you’ll need to remain resilient, adaptable, passionate, and customer-focused. 

Still keen to open a shop? Read on for our comprehensive guide to launching a retail business.



Retail business plan

Richard Taylor, owner of Devon-based lighting store Dusk Lighting, describes the business plan as “perhaps one of the most important documents you will create.”

However, while a business plan is important for keeping you on track to creating a profitable business, it should by no means be rigid. As Taylor describes: “The nature of the business is that there will be peaks and troughs, as well as unforeseen opportunities which you will need to jump at.”

This means your business plan should be, as Taylor puts it, “realistic – and not just a speculation based only on hope.”

We’ve simplified how to create an excellent business plan into seven key elements.

These are:

Executive summary – this should include a succinct intro to your business, provide an overview of your business plan, and highlight the key points that you’re going to address

Business analysis – what kind of business are you starting? Explain the condition of the market, state your competitors, and detail how your business is going to sit within this picture

Marketing strategy – how exactly are you going to attract your target customer? Put together a strong marketing plan, and discuss the channels you’ll use (e.g. social media)

Products and services – what products will you stock, and what services will you provide? Give some detail on the stockists and any future growth plans you have for the lines

Management (recruitment and staffing) – what human resources do you need to be successful? Detail staff benefits, employment policies, and recruitment procedures

Financials – this needs to be detailed to secure future investment. Include profit and loss statements, sales and cashflow forecasts, a breakeven analysis, and capital requirements

Appendix – a place for any additional documents and data representation that gives the reader a better feel for your business

For more information on any of these points, make sure to take a look at our full business plan guide.


Conducting market research

First and foremost, you need to do your market research. Mayna McIntosh, founder of specialist fashion shop Hope, states: “Before you commit to a physical presence on the high street, it’s essential you conduct thorough market research. Review other successful stores, and look at how they have established themselves in your target location.”

This means it’s worth asking yourself the following questions: 

  • Is there a demand for your product in the local area? 
  • What does the competitor landscape look like? 
  • If you are completely set on opening a certain type of shop, what can you do to be different? 

Once you’ve conducted thorough market research, you’ll be able to create your shop concept and work on a unique selling point (USP).

Just keep in mind that you’ll need to consider both the retail industry in your area as a whole, and the industry in which your shop’s products and services will fall (e.g. fashion, homeware etc). 

Also remember that you’re likely to be more successful if your USP genuinely fills a gap in the market. For example, in an area inundated with homeware shops, you could hone in on a certain line of products, such as kitchenware. 

What are the main elements you’ll need to consider when conducting market research? 

  • Evaluate the retail sector in your local area – which types of shop are seeing success, and which ones are closing their doors?
  • Be open to tweaking your original idea to fit gaps in the market or areas of high demand 
  • Analyse your competitors – what are they stocking? Who are they stocking? Are they offering any additional services?

Conducting market research isn’t just about working out which products to stock and which services to offer. It’s also about learning what attracts your target market

As McIntosh says,“It’s important to conduct thorough and in-depth market research on your core target consumers. Find out what they read, where they shop, [and] how much they spend on outgoings.”

For example, say your target audience is young, fashionable, and ethically conscious – you’ll want to know what their interests are, and the types of places they shop in general (e.g. independent stores rather than huge retailers).

Most importantly, how much are they willing to pay for an item? For example, there’s no point pricing your ethically sourced jeans at £90 if 70% of your target audience believe £50 is a reasonable price to pay for good denim. 

How can you learn about your target market? 

  • Start discussions on social media and web forums such as Reddit
  • Sign up to a survey website, or literally survey people in the street 
  • Set up a focus group – advertise the discussion on social media, leave flyers, and give people an incentive to turn up!

Once you know what your audience is all about, you’ll be able to come up with some effective branding. 

We go into more detail about how to create your brand later on in the guide.


Acquiring finance for a retail business

Whatever form your business will take, setting up a shop will require a significant amount of funding. It may be that you’re starting the business with money you've saved, but in most cases, you’ll need to raise extra capital to get started. If this is the case, there are a range of options available.

We’ve partnered with a number of finance companies that are a good place to begin if you need to source extra capital. Click on the links and head on over to start looking at the different finance options available to you, and find out how much you could borrow.  

Startup loans – the Startup Loan company is a government backed scheme where you can borrow up to £25,000 with a fixed interest rate of 6% p.a.

Business loans – business loans are similar to a startup loan, except that they are not just for new businesses and don’t have the same caps. Select this option to compare business loans with KnowYourMoney.

You should also consider how you will track your finances. It's considered best practice to use a business bank account to separate your personal and business expenses and income. 

If you are interested in learning more about business accounts, our partners are a great place to compare a number of them – find out which business bank account is best for you now.


Deciding on branding, concept, and design


Your branding is effectively the common thread that ties together your shop’s name, your business’ logo, the shop’s interior design, the tone of voice you use when communicating with and advertising to customers, the way the shop’s website looks and feels, and the posts you share on social media – making all of these facets recognisable as a part of your business.

In short, branding needs to:

  • Communicate the personality of your business. Whether you’re a haughty high-end jeweller or a fun-loving chocolate shop, your branding should make your tone obvious
  • Represent the preferences of your target audience. Which colours, imagery, and communication styles tend to resonate with and draw attention from shoppers?
  • Promise a good quality product and shopping experience.

When coming up with your initial branding concepts, make sure you refer back to your market research, as this should contain valuable information on your target audience. 

Even big name companies forget to consider their target audience sometimes.

GAP's branding mishap

Take Gap, for example – after crowdsourcing critical design elements for its new logo, its rebrand ended up being a massive flop. 

Old gap vs new gap logo

Source

Why? Because the new design did not connect with Gap’s target market. Instead of warning its target market about its rebrand, Gap simply released its new designs, taking away the identity of the brand. Its audience simply did not resonate with the corporate-esque replacement, which meant they quickly reverted to the original design and wasted lots of money in the process!

When you're thinking about your brand design, make sure it's accessible. As Taylor tells us:

“We are all guilty of wanting to be perceived as ‘top end’ – however, you can achieve this too well, and frighten off your customers with the perception that your products will be too expensive and out of their budget.”

It’s also about the finishing touches.

As Jake Hardy, founder and owner of Brick Lane clothing store Number Six, adds: “You need to make sure the same passion that has driven you to start the business comes through in your branding.”

Invest in the services of a designer or design company who’ll put time, skill, and effort into transforming your vision and energy into an amazing branding concept. 

Follow these five steps to help you get your branding journey off to a flying start. 

1. Specify the concept of your shop – what is your USP

2. Define your audience and position in the existing market

3. Use market research to get to know your audience

4. Use that information to define your branding

5. Implement your branding across all customer touch points

If you’re unsure of what great branding looks like, Lush Cosmetics is a good example.

Lush recognises that branding is essential to building and maintaining a customer base. Its audience doesn't just invest in its cosmetics – it invests in its values too, which is why its core message is carried through all points of contact.

Let’s have a look at what it's done right. 

Lush cosmetics logo While simple, the Lush logo is bold, and tells its audience what it’s all about – fresh, handmade cosmetics.
 

Lush thank you email

Lush ensures its message is conveyed across all points of contact – even its thank you emails.
 

Lush’s values are part of its brand identity, and are therefore also conveyed across many points of contact.

 Whybro sums up why Lush is such a successful brand: 

“Market your REASON, not your business. Your brand has to represent everything you want to say in a very concise way, so having a WHY is crucial. Consistency and your core message are key.”

This means you’ll need to pay special attention to: 

Shop name

Your shop name should be memorable and easy to read, spell, and pronounce. Make sure you’re being original, and that the name reflects the brand identity you want to get across. 

Tone of voice and communications

How do you want your retail business to come across to your customers? Tone of voice is everything, as you’ll need to replicate it across all of your communications, whether it's a marketing email or a digital receipt.

Packaging 

Packaging is effectively free advertising, and paper bags featuring a logo are more environmentally friendly than plastic when it comes to getting the name of your shop out and about. 

Interior design

How do you want your customers to feel when they walk into your shop? What experience do you want them to have? For example, Lush is famed for its deli-style layout. Think about human psychology, too – have your popular items to the right of the door, and draw customers all the way in by placing eye-catching products at the back of the shop.

Window displays

Window displays also count as free advertising, so make sure yours are as eye catching as possible. They should be an extension of your interior design, and convey your values and a selection of your products as attractively as possible. 

In a nutshell.. 

Your brand encompasses every aspect of your shop, so you need to get it right. Make sure you come up with branding that talks to your target audience, then remain consistent by using that branding through all points of contact – from your shop name to your marketing comms.


Creating an excellent retail website

Once upon a time, creating a retail website would have been a daunting and expensive task. But these days, thanks to website builders, you can create a beautiful, professional-looking website all by yourself. The only costs you’ll need to consider are your domain name, and a monthly hosting fee. 

And that’s good, because websites are essential to the modern day retail experience. According to Whybro, “Consumers now need over 20 points of contact with a brand.” This means they’ll not only need to see your shop when they’re out and about, but they’ll also need to engage with it on social media, and visit your website while they’re browsing the web. 

Add to that the fact that the latest figures suggest 1.6 billion people around the world shop online, and chances are, if you don’t have a website, you’ll lose a lot of valuable customers. 

But it’s not all about expanding your purchasing channels. Websites are also essential for:

  • Showcasing your brand 
  • Creating awareness around your brand
  • Promoting your brand

If you’re thinking about where to start, try searching for retail templates. We’ve partnered with both Wix and GoDaddy, so you can click straight through and start searching for your ideal retail website. 

The retail templates they provide allow you to drag and drop your text into ready-made sections, so you don’t even have to think about the design of your website.

Just make sure you include the following:

  • On-brand content that presents your values, in your tone of voice
  • High quality pictures of your products and store, and images that portray your values
  • A blog section that includes articles relevant to your values
  • Your location and contact details
  • The option to share your website on social media

Most importantly, if you’re looking to create an ecommerce retail website, you’ll need a smooth checkout section. Make sure the entire process – from clicking on the product through to processing payments – is as easy as possible. And make sure you include an obvious place where customers can input promo codes!


Finding a shop premises

If there’s one thing you should not underestimate, it’s the importance of picking a good location for your shop.

No matter what you sell, if there aren’t enough customers coming through your doors, you aren’t going to succeed. If you’re difficult to find or in an area of low footfall, for example, you’ll miss out on those customers who’d otherwise spontaneously wander in to see what you’re all about.

Of course, a more specialist store might have better luck convincing customers to travel out of their way. But to achieve this, you’ll need to undertake the mammoth marketing task of showing people who you are, what you’re doing, and why they should come to see you – without them having seen your shop first. Whybro, whose store is not on the high street, affirms this: “It’s okay to be out of town, as long as there’s a reason why people should make that journey.”

A few tips for finding the best location for your business:

  • Research local towns or city boroughs. Different areas have different demographics, so while it may be feasible to open a high end boutique in one town or city borough, it won’t be feasible in another. McIntosh suggests: “The best way to identify a suitable location is to look at supply and demand for your product or service in a specific area. Bustling market towns can often present a hotbed of opportunities for independent stores and top high street brands, as there is guaranteed footfall there.”
  • Learn about the population. Visit the shopping districts and observe the people who frequent them; you’ll want to be in an area with considerable footfall from your target customers. As Hardy says, “Make sure you’ve spent a lot of time in the area, both at different times of day and on different days of the week. Pay attention to how busy the streets are, and who’s walking them.” For a more accurate picture of the local demographic, try online tools, or even meeting with a local estate professional who knows the area back to front. Just be wary that these services might charge.
  • Find your competitors. Seek out areas where businesses similar to yours have settled. Is there a particular street where fashion-lovers shop, or a corner of the shopping centre where hungry shoppers know they’ll find a bakery? It may seem counterproductive to open near your competitors, but since they’ll be attracting your ideal customers, you’ll want to be nearby – effectively benefitting from their marketing efforts. Just make sure that you have the capacity to compete with them (see Section 9).
  • Consider the cost. Certain areas will be more expensive to lease a property in than others – and unfortunately, these are likely to be the busier, more popular hubs. Paying extra may well be worth it to gain access to more customers, but if you decide it’s not, try looking for ‘up-and-coming’ places in your town. These are often cheaper than the established areas of interest, but may well see their fair share of trendsetters. Whether these areas are right for you or not will again depend on who tends to shop there, and what they’re looking for.
  • Check out available properties. Obviously, you can’t launch on your dream street if there’s no free space for you on it. Keep this in mind while exploring locations, and be wary of the areas that have ideal properties available to you. Services such as Appear Here specialise in helping start-ups locate ideal rentable spaces for their business, so this could be a good place to start.

Shop equipment and utilities

Once you’ve decided on a premises, you’ll need to kit out your shop with all the necessary equipment. Let’s take a look at what you’ll need to purchase.

Tills and retail POS systems

Your till will be at the heart of your business. And with the number of debit card payments expected to increase by 46% by 2027, you’ll need to invest in a card machine and merchant account as part of your point of sale set up so you don’t miss out on a sale. 

If you’d like to know how much a retail POS system will cost, pop a few details about your business into our short webform, and our partners will get back to you with prices and more information.

You can also request quotes from merchant account providers. Just head through to our merchant accounts form, tell us a bit about your business, and our partners will be in touch. 

Shop furniture

You’ll also need to think about how you’re going to display your stock, so look at investing in:

  • Shelving units
  • Display islands
  • Rails and hangers

You’ll also need to purchase everything you require to get your stock ready for display, such as:

  • A label maker
  • A tagging gun
  • Tag attachments

Lastly, you may need to consider practicalities like:

  • A stepladder
  • A footstool
  • A safe

Furniture and equipment suppliers 

To make things simpler, you might want to sign up to a service that provides everything you need to set up a shop in one place. Companies like Display Centre, Morplan, Shopfitting Warehouse, Equipashop, and e-shopfittings, for example, provide bespoke fittings, mannequins, point of sale equipment, carrier bags, cash registers, tagging guns, and more.

Alternatively, to save a little money, you could try buying your equipment second-hand. Doing this can work out a lot cheaper, but doesn’t always equate to scrimping on quality. Websites like eBay, preloved.co.uk, and Gumtree have been known to post listings for used retail equipment, such as till systems.

Utilities for retail businesses

According to Whybro, “You have to consider utilities such as water, gas, electricity, internet, phone, insurance, and council services such as waste collection.”

You may find it useful to bookmark resources Startups has created to help you in this respect, such as our business energy comparison page, and our guide to choosing commercial boilers for heating.

It’s vital that you shop around and find suppliers that are right for you. The atmosphere you create in your shop is important, from lighting and temperature to the music you might choose to play. Equally so are the utilities you need to run the business, which may include the internet, telephones, and water in the staff room, so be sure to find a supplier that’s affordable and reliable.

Shop regulations

There are a number of regulations that shop owners have to comply with when selling products. 

These are:

  • Sale of Goods Act – regulates English contract law and UK commercial law for goods that are sold and bought
  • Supply of Goods and Services Act – requires traders to provide services to a proper standard of workmanship
  • Sale and Supply of Goods Act – governs the sale of specific goods, future goods, and unascertained goods

The main requirement of these regulations is that the products you sell are exactly as described and of satisfactory quality. Examine your stock before setting it out on your shelves, because it’s the seller – not the manufacturer – who is considered responsible if goods do not conform to these contracts. Whybro notes: “I’d definitely recommend people have terms and conditions of sale in place before starting to sell anything.”

All of these acts are subject to amendments and specific guidelines, so you’ll need to keep up to date with them once you’ve started the business.

VAT regulations for shops 

The current VAT rate for most goods is 20%. Some goods, such as children’s car seats, have a reduced VAT rate of 5%. Then there are goods that have a 0% VAT rate, which includes most food, and children’s clothes. 

VAT registration is compulsory for businesses that have a taxable turnover of £85,000 or more over a consecutive 12 month period. However, this threshold can change yearly.

In order to pay VAT, there are a number of schemes that retail businesses can use.

These are:

The majority of retail shops will use the Point of Sale scheme to calculate VAT. Head on over to the government website to find out which calculations to use when working out your VAT return. 

Retail health and safety

Your shop premises must adhere to health and safety regulations in order to avoid accidents or injuries to staff or customers. 

The government’s HSE (Health and Safety Executive) suggests taking the following steps:

  • Carry out a risk assessment by scanning your premises for potential hazards
  • Have emergency procedures in place for events like fires or flooding, and brief any staff on what to do if such things happen
  • Install a first aid kit, and brief any staff on how to use it

GDPR was introduced in May 2018 to regulate the way in which companies use and store personal data. This applies to data belonging to employees, customers, and suppliers. 

Taylor, owner of Dusk Lighting, explains GDPR in more detail:

“Storing and using personal and business data will now have to be audited, and the business owner will have to ensure that the customer and suppliers are informed of how their data is used and stored. Owners will also need to make it clear how long the data is kept for, and ensure it is deleted at the customer's request.”


Retail recruitment

When you start up your business, you may not have the funds to hire any staff right away, and you may well be happy to hold down the fort on your own.

But when you do come to employ staff, it’s important that you hire someone that not only shares your vision, but is able to work hard to deliver it, too. 

McIntosh talks from personal experience:

“An obvious passion to work hard and deliver is a great sign when considering a candidate – starting a retail business is demanding work, and you need strong, like-minded people to join you on the journey.”

Have a read of our guide to retail recruitment for more information.


Market and promote your retail business

Before you set up any marketing campaigns, make sure you refer back to your market research. This is because successful marketing is all about knowing which channels will reach your audience. 

McIntosh hits the nail on the head. As she says:

“There’s no point paying thousands of pounds in regional newspaper advertising if your core customer is male and aged 18-24, as they probably won’t engage with this medium.”

So what are the different marketing channels you could use?

  • Get online – set up your own website, and get active on social media
  • Send freebies to local Instagram influencers – have people advertise your products to their followers
  • Hold exclusive events, such as product launches and new line celebrations
  • Advertise in local papers, or drop flyers into local cafés and pubs

Why not check out our guide to retail marketing, and find out more about how you can use these different channels to get people through your door? 


Deciding on an exit plan

While this may seem like a long way off, in the future, you may find yourself ready to consider an exit strategy.

Selling your shop

If you decide to sell the business, you’ll need to take the following steps to prepare yourself, your staff, and the shop beforehand:

  • Find a broker or consultant who will represent you and your business well. Take the time to meet with several before signing a deal with your favourite
  • When it comes to choosing an asking price, research the sales of similar businesses for inspiration. Your price has to be fair, realistic, and reflective of market conditions, but don’t under-price it (tempting as this may be if you’re keen to move on)
  • Review the conditions of your lease, both for your property and any equipment you may be renting. Will your buyer be able to simply take it over?
  • Ensure that your finances are up to date. Buyers may want to see these before they commit to purchasing the business, as they’ll want evidence that it’s a worthwhile investment to them (or has the potential to be)
  • Have a frank discussion with your employees (if you have any) about why you’re selling the business. Be clear on when it will happen, and what they can expect as a result. Be wary of your employees’ rights – it’s important that you don’t breach them
  • Consider a special sale to entice customers. This is an excellent opportunity to sell off as many of your products as possible at discounted prices

While you may no longer feel invested in what happens to your business, you should consider it your responsibility to make sure it’s sold to the right person. Ensure they have enough experience and acumen to run and grow the business well. Remember, you’re not required to accept the first offer you get!

There are also some steps to take after making the sale:

  • Look into whether you can transfer your VAT registration number to the new owner
  • Tell HMRCthat you’ve sold your business – you can do this via an online form. Bear in mind that this will impact your Self Assessment and National Insurance
  • You may need to pay capital gains tax on the amount you receive for the sale, but you might be able to claim Entrepreneurs’ Relief to lessen the amount

Learn more about selling a business here.

Franchising your business

Alternatively, you might decide to turn your brand into a franchise, which effectively means selling instructions on how to open a copy of your shop to entrepreneurs to run themselves.

You’ll find great examples of successful retail franchises across the country and in a range of sectors, with famous franchises including Spar, WH Smith, CEX, and Build-a-Bear.

Franchising is a great way to expand the business without having to dedicate time, effort, and money to opening another shop in a new location yourself, with the business owners who launch the new shop footing the bill.

Visit our dedicated franchising channel to learn more.


Summary: opening a shop

There’s no doubt that opening a shop is going to take a lot of hard work and commitment. 

Don’t jump right in. Make sure you thoroughly investigate your target market, as you’ll need to refer to that research when you’re coming up with branding concepts, deciding on your shop location, and planning marketing strategies. 

And think about what you can do to ensure that your shop is different to everyone else’s. In an age where people are searching for retail experiences, make sure people think it's worth their time travelling to your shop over another. 

Most of all, never lose that passion. People will pick up on it, whether it’s in your branding, or when you’re serving them at the till. As long as you have that, there’s no reason why your new retail business shouldn’t be successful!


Aimee Bradshaw
Aimee Bradshaw

Writer and researcher

Aimee recently joined Startups as resident expert in business tech, products, and services. Having ran her own egg delivery business from the age of 12, she is an advocate of self starters and small businesses.

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