Challenges for Retail Startup’s and Simple Solutions to Overcome

In Newsletter by Elargirindia0 Comments

Managing and running a retail apparel store is not as easy as how it looks. Many entrepreneurs want to start a clothing line, but not many make it past the year mark. The Apparel Industry is highly fragmented and competitive. There are a number of major players, countless niche stores, brand sand companies.

General merchandisers and foreign companies make the market even more competitive by bringing the global best practices. This calls for high efficiency and knowing tricks of-the-trade for business growth.

Lets discuss some of the main challenges that probably every retail startup should know-

  • High Rentals – Before you make a decision to rent a store, check your finances well and make a 5 year plan for major costs to be incurred. The rentals in Malls and high streets, especially in Metro cities like Mumbai and Delhi are exorbitantly High. In Mumbai, the Per square foot rate (PSF) ranges between Rs.170 to Rs.600.
    In malls, there are many related expenses like common area maintenance(CAM) Charges, Security deposit that add on to costs increasing operating expenditures (Opex).

    It is imperative for the new brands and start-ups to do the complete market research for the right location as per their business requirement and manage the rentals costs. It is important to be at strategic location generating high footfalls, translating into high sales. Some start-ups start from work from home.

  • Lack Variety – Retailers starting an apparel store generally make a mistake to start with limited variety. It is to be learned that unique variety for start-ups is important to attract customers.
    The challenge again comes in sourcing where high minimum order quantities (MOQ’s) are required. It is suggested to compromise on the high quantities but not compromise on number of designs or SKU’s.The idea of starting with a few items (or minimum viable product), also known as MVP) and building may be a great model for other businesses, however in the ever changing world of fashion you need to compete with brands that offer more.Don’t go for getting the minimum price by increasing the quantities, go for less mark-ups instead and get maximum designs. There are many firms in India that do private labeling, have designers and give maximum designs with very low minimum order quantities.
  • Merchandising and Sourcing  Most of the start-ups lack planning before executing. They fail to forecast, budget and stock allotment leading to under-stocking or overstocking, low sales and high costs.
    To plan, research & buy from a right source is the key for business success at early stage. For buyers, who try to get into overseas buying & manufacturing might find it a good option, but it can go downhill fast.
    All businesses donot require procurement from China or some low cost countries.Right sourcing is a key to a profitable business. Merchandising controls the whole business supply chain and it should be managed well. It is considered to be good practice to take help from your friends, family or company who understands the subject very well. Referrals really help in getting good discounts.
  • Unique Selling Proposition – A brand’s inspiration shouldn’t come from simply copying the most popular brands and designers. A brand become a brandby being informed, carving itown niche and giving something exclusive to consumers understanding their mind well. Apple (I-pod, I-phone, Mac) became a brand by the beauty of its product.If its unique and it gets registered in consumers mind and it flourishes.So start and waste your funds, if you are not convinced that you can sell it and it will get registered in consumers mind. Today’s consumers is very smart and not necessarily is looking for discounts and cheap things, they look for best and value for money. If a product is with good quality & unique, no matter its expensive, it sells like a hot cake.
  • High Marketing Cost – Marketing has become interactive, no longer a one-way conversation. Creating brand awareness has become increasingly complex with high number of shopping and entertainment options. Consumers are bombarded with messages and generally filter to the engaging exper Though marketing is a MUST for even start-ups now, its an expensive proposition.Generally, Small retailers do not get into ATL &BTL marketing due to high costs attached to it.However, with rising competition, it is suggested to have marketing budget even for the small retailers. Don’t miss on marketing even if its little expensive. It’s an expense to generate a revenue.Most of the retailers start with expensive marketing strategies like Loyalty point programme. Loyalty programme attracts repeated customers. It is better to integrate Loyalty programme with the POS software,to avoid confusion and customer dissatisfaction.
  • Integrated Inventory Management and POS – A real chaos in the new business comes when retailer is not able to track the inventory and sales. Most of the retailers use google sheets and excel at the start of the business thinking that it is not the right time to bear the expenses of Inventory management system.In no time, it becomes chaotic to track sales and inventory in the growing business. Even for a small retailer, it is very important to set the procress, POS and Inventory Management system at the start of the business.This expense is not worth saving. Installing easy POS is a key to learn fast. Do not get into to complications of feeding too much data. Keep it short and simple as per your requirement.
  • Market Survey – Market research surveys give you a quick, affordable way to perform market segmentation analysis. Start up retail brands often fail to conduct a proper market survey before opening a store in a particular location.
  • Retailers must conduct a proper market research survey to Identifying the competitors, Knowing the weekly and monthly footfall of competitors , conversion rate , Average Bill Value , Average selling Price, consumer mind-set, trends, pricing, running discounts, product testing and demography information in the area of operating a business.Where they choose the location, one very important factor to consider is checking the clusters as per the your business segment. If retailer decides to go into the mall, don’t forget to check on the brands that got shut in the mall in recent months/year.
    If a retailer has knowledge on the factors and driver to check in market survey, they can do it themselves. The best practices that most successful retailers adopt is to hire an expert who have network in the malls, high streets, with the brands and companies.
    Expert or a consultant who is within the network would give you right details on the sales of the competition, Average bill value and rates prevailing in the market.
  • Leasing Agreements and Negotiations – With the lack of knowledge on market, negotiations on commercials with the real estate developers or malls, often start-ups end up paying high rents and CAM(Common area maintenance) charges.
    Real estate market in retail is very dynamic and rates vary for each area, building and location. Getting hold of the right property at the right rate is not merely by luck, it by informed Being Informed is the key for good negotiation on rates of the property retailer is going to lease.Many consultants help to locate the right property. It is important for start-ups to get hold of the smart consultants who know the market very well and are impressive enough to negotiate.
    The work doesn’t stop at negotiation, before registering leasing agreement, Letter of Intent has to be signed including various factors like locking period , security deposit , profit sharing revenue etc.Before signing any agreement , the retailers must study in depth about the commercials and the scope of negotiation. After all, it is going to be recurring cost per month.

 

The Publisher of this newsletter is Elargir Solutions Private Limited – India and Singapore. Elargir Solutions is a Retail COnsulting and marketing company, specialising in new market entry, research branding and content marketing. Need a business advisory? Write to us at business@elargirindia.com or message us at +917506838052 or Whatsapp us at +6598501106

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