Risks of Starting a Retail Business

Unfortunately, there's no guarantee that a new retail store or business will succeed. According to StatisticsBrain.com, only 47% of retail businesses are still in operation four years after opening. This is the third worst sector, only behind Transportation Communication / Utilities and Information. Does this mean you hopeful entrepreneurs should give up on their dream on opening their own retail store? Absolutely not, but it's important to fully understand the risks of starting a retail business. Once you've identified these risks, you can make better decisions on how to safeguard your professional investment from failure.

City Planning and Zoning

One common risk of starting a retail business is new city planning and zoning that reduces the number of customers walking into your store. For instance, if the city approves the construction of a new highway that's located on the opposite end of town, your retail business may suffer as a result. Or even if the city decides to re-route traffic in a different direction, the end result could harm your sales. To make matters worse, there's very little business owners can do to prevent this from happening. The best approach is to remain active and vigilant on matters such as this. If there's a town meeting on new road proposals in the vicinity of your business, make sure you voice your opinion here.

Consumer Trends

Of course, consumer trends is another risk of starting a retail business. You can research current trends all day long, but something that's 'hot' today may be gone tomorrow. It wasn't too long ago when the baseball card industry was thriving. If you lived in or around a large city, you probably remember seeing half a dozen or more baseball card shops open. Although there are still some baseball card shops open, most of them have closed down over the years due to lack of consumer demand. This is just one example of how consumer trends affect retail businesses.

So, what steps can you take to ensure your retail business remains relevant and popular in the eyes of consumers? One helpful tip is to stick with industries that are constantly in high-demand, such as apparel and jewelry. Consumers are always looking to purchase new clothes and jewelry, so retail businesses focused around these niches are 'safer' than other niches.

Overhead

Retail business owners who aren't fully prepared for the expenses of overhead may find themselves in financial hot water. Overhead includes (but not limited to) leasing a building, electricity, gas, water, security system, insurance, payroll, advertising, taxes, phone, and other business-related operating expenses.