Thread: How to boot strap a B&M retail store.

I have an idea for a retail warehouse but would need to fill said warehouse with product for which I do not possess enough money. I was wondering if others have run into a similar situation or have any insight on ways to accomplish this. I know pre-launch testing of an ecommerce store is pretty common but I am trying to come up with possible ways to do it with B&M. How would you go about testing your market.

Options:

#1: Has anybody ever done or have information on somebody doing a JV with a manufacturer to set up a retail outlet for them carrying primarily their products for equity in your company. It seems like I might be losing control but I figure I would rather try and fail due to loss of control then never do anything because of lack of funding. This way I would be able to accomplish my dream with less capital risk on my part.

#2: Advertise a grand opening in the near future and list a website where you can sign up/ receive coupons. Then have a splash page possible with some of our products showcased. If I received enough interest open the store.

#3: Advertise similarly to #2 but have my ecommerce store built but not accepting orders. Then keep track of what people try to purchase as a way to select what inventory I should carry first in my store.

#4: Just build it and they will come. Start small with a small storefront and a few select products I think will sell worst case I dump on ebay. Mean while set up an ecommerce store/ become a drop shipper for my products.

#5: Purchase some sample inventory then list it on craigslist and see if it sells.

I am having a hard time finding drop ship suppliers for many of my keywords, some manufacturers will not sell to me without B&M, and retail space is cheap right now. The thing is without drop shippers I will have to carry the inventory and if I am carrying a bunch of inventory I figured it would not be a bad idea to sell it locally. I was thinking B&M because I could either get a warehouse to store my inventory and make it into retail or get a retail store and warehouse my inventory. I guess at the end of the day I have so many unanswered questions about how to build an ecommerce store and have been getting so much opposition while contacting manufacturers that I am looking to just import my products directly eliminating noncooperation local distributors. Then I will sell direct to my customers through B&M while I develop an internet presence.

Originally Posted by Pete799p

retail space is cheap right now.

Not as cheap as a dedicated server

Drop shipping is definitely the cheaper option. One thing you do not want to do is invite customers to a website and not be able to service them. You could offer product, customer will pay, drop ship product to them, and have an idea of what the customer will be looking for. This way the customer will get what they want and you will have an idea of what to offer in your store. If your merchandise is targeting a specific group of customers, consider an invite only website, similar to Gilt Groupe, but make sure that it has something attractive to your customers. Read more about Gilt Groupe here... VatorNews - Kevin Ryan on Gilt Groupe's hockey-stick growth

I can get retail in the town I am looking to execute this project for around $750 a month. I am looking at stocking around $50k in product. The average store in my industry sells around 11mil a year but also would include more inventory then I would be stocking. This is a rough estimate as the company also has an unestimateable ecommerce component that I cannot deduct from their stores so it is a rough average. If I could capture 10% of that in 1-2 years I would be happy. Results would be around 1mil gross with pm of 50%. 500k Gross profit so I figure about 250k EBITA. But in my experience proforma numbers are usually always way off so in reality I do not really know how well I will do. With my pricing I think I could do okay on special ordering products until I could afford to stock but I am having a hard time getting around the initial inventory.

The bleeding of money is what I am worried about. I know stocking inventory is risky and expensive and I am trying to find away around it or a way to test the market.

In regards to finding drop shippers I have been calling manufacturers directly as well as their sales reps. I have asked them if their are any wholesalers or drop shippers available. The one that said that they would sell to me all said no. The only manufactures that will sell to me as an ecommerce only store are newer brands to the market and told me that they do not have anybody in the US with their product yet.

Is there another way to look for drop shippers that I am missing. I figured I would save my time going through drop ship lists that are already probably over crowded with retailers and look for my own companies. Obviously this has not been going well. It seems like every time I find a good keyword for a niche store there are no drop shippers and every time I find a drop shipper there is a lot of competition. Since I am new to ecommerce I figure I could either pick a B&M retail model that I believe will do well and then try to develop a strong ecommerce presence or find a less competitive micro niche that will most likely not do a whole lot in sales but will provide me with valuable experience (problem has been finding drop shipping).

I think your numbers would be pretty accurate sorry I thought you were looking for projected profit sales numbers not cost expense numbers. I would probably need to raise the marketing budget but lets round up because I like to look at worst case so call it $2000+- a month so lets just call it $30000 for the year those misc. exp are always higher then you estimate. I am looking to carry a wide range of inventory. The items that I think we will sell the most volume should net about $50-$100. The larger special order items should be able to make between $500-$1000 and still be cheaper then the comps. Similar stores always have a fair amount of traffic but they also have much more inventory then I would be stocking so it is hard to say how many units I will sell.

Another nail in the coffin for this idea is that many of the items are seasonal as well but most of it will not go out of style so I will just have to box it up until next year. There will be some cloths but that should not make up more then %50 of the business.

My thoughts, reasoning, etc. for why this is a good opportunity.

There is a major retail chain with similar products that put in a small test store years ago. That store has done better then most of their large stores in much bigger cities. They have since moved from their small location to a large big box style store. This indicates that this market in robust even given the economy. However, there are a number of bad reviews for the store and many have commented on how they no longer shop there because of their higher prices although still middle of the road ( think Abercrombie vs. Gucci)

There is a similar store that was doing what I want to do and I was a frequent customer as was many of my friends. We have all commented on how we miss that store. However, their store was very old school in appearance and layout. There organization was mediocre and their product mix for certain categories was dated. There was also a lack of commonality in the stores purpose. It carried a wide range of products but not with a unified strategy. For example it was a cost leader for certain items and certain categories but a product differentiator or high-end in others. This store had low-end of one category and then high end for a different category. I used to frequent there because they had the best deals on certain things but would often have to go elsewhere for products in different categories. Still they did well. Recently the owners retired and sold off everything.

This market is a very price sensitive market and with the current economy several of the high dollar high end smaller retailers have gone under.

Overall the market has less competition then it has had in years. There is a demand for a cost leading store in my category. The only store offering my exact product mix has since retired. All of these stores with the exception of the big box retailer has had no ecommerce presence. I am hoping to eventually replicate the retired store while fixing all of their shortcomings and creating a significant ecommerce component. Because I will be importing and selling new brands that have not hit the US market yet but have been selling well in other countries with similar demographics I should be able position myself as a cost leader. Many of the competing products whose manufacturers would not sell to me anyways are price capped to maintain their premium brand image.

I appreciate all of the help and encourage excessive pessimism as I would rather not do the store then lose my a.

I think I might have an idea for how to test the market. What if I negotiate with the land lord to allow me to post my stores sign etc plus coming soon signage. Place a box outside the store where people can enter to receive a coupon/ special deal when we open. I could also install a trail camera to capture pics of the people who come to check it out. In addition I can build a website with some pictures of the items I will sell. Then have an email registration for coupons/ special deals. I can then advertise for the store using guerrilla marketing methods and see if I generate any traffic. If in the first month nobody shows any interest I scrap the project. I might be able to get the first month free if the space has been siting for a while.

Pete,

My wife started a B&M store a few years ago (A boutique for women and children - very cute) right when the economy started to really tank. Anyway, one of the biggest reasons that a store will fail is that you will probably be under capitalized. It is a killer. We did a ton of the work ourselves to bootstrap.

But there will be many expenses that creep up on you: advertising, employee costs, signage, supplies, etc. And managing employees is a whole other headache. Stick with the online store idea.

David

Originally Posted by DavidofMN

Pete,

My wife started a B&M store a few years ago (A boutique for women and children - very cute) right when the economy started to really tank. Anyway, one of the biggest reasons that a store will fail is that you will probably be under capitalized. It is a killer. We did a ton of the work ourselves to bootstrap.

But there will be many expenses that creep up on you: advertising, employee costs, signage, supplies, etc. And managing employees is a whole other headache. Stick with the online store idea.

David

This is why I was thinking that I might be able to JV with the manufacturer and get him to supply the inventory and I would take care of the store/sales end. This way I could save all of my inventory capital and use it to keep the store open. I would approach them by saying I would like to open a store dedicated to your brand and start to build your US presence. I am sure they are itching to get into this market and an opportunity like this just might interest them. However, I am starting to think that ecommerce is probably my best bet for testing this market but I just have this beautiful vision that I have had since early college and I am thinking the opportunity might be now.

Thanks everybody for the advise.
Pete

Just remember: What you want is of no consequence to what the market wants. My wife wanted a beautiful store and got it - and it cost us a lot of money when the shoppers stopped shopping.

If you can get the supplier to finance your inventory that would be amazing. Normally you have to pay upfront for your first couple of orders before they'll give you any terms at all.

Stick with the e-commerce.

David