There are many forms of ownership of retail businesses available to budding entrepreneurs. Each business model has its own list of pros and cons.
Choosing the type of retail business to start your business will depend on why you want to own a business, as well as your lifestyle, family, personality and what you sell. Will you have staff or will you manage your own business?
The following are some of the main types of retail ownership and their respective strengths, weaknesses, and support systems.
1. Independent Retailers
Independent retailers are companies that build their businesses from the bottom up to develop. From the business planning stage to the opening day, independent retail owners do it all.
The owner may hire consultants, staff and other parties to help with business ventures. The opportunities are endless. But be prepared to use many ways in this type of business, until you have your own income. Maybe a few moments before you can afford to pay someone else.
This type has a unique brand and struggle to be heard among a sea of retail giants. But, if done correctly, it can be a place to shop for local consumers.
- Independent retailers have no limits on who, how or where businesses should be prepared. He is free to do what he wants and choose a convenient location.
- Independent retailers take all decisions related to store functions. This drastically saves time which usually exists between decision making and the implementation process. Therefore, independent retailers can respond quickly to environmental changes and implement appropriate strategies.
- Independent retailers can concentrate on local areas to achieve their business goals.
- To serve local requests, retailers can determine trading hours, merchandise to be sold / released and prices as and when desired.
- Avoid job duplication, role ambiguity and excess stock due to clarity of role, resulting in increased productivity and time utilization.
- Starting an independent shop is relatively easy because it requires low investment, simple equipment and merchandise.
- Standalone shops by providing limited but deep merchandise can act as a special store to service certain consumer segments.
- Due to limited exposure and small investment, in most cases they did not stand in competition with the emergence of giant retailers and international store outlets.
- As independent stores relying on labor intensive techniques, they find it difficult to improve store productivity when it comes to stock-keeping, order, merchandising, display, accounting and dispatching.
- Undoubtedly, the bargaining power of independent retailers is relatively lacking because they offer limited merchandise. On the other hand, large retailers (such as supermarkets, hypermarkets and chain stores) because of bulk purchases, negotiate vendors effectively and offer lower prices, better quality goods and great service in a short time or in small quantities create problems for independent stores.
- Due to limited operations, little working capital, inappropriate logistics arrangements, retailers cannot have economies of scale.
- Independent retailers due to limited funds cannot participate in mass sales promotion programs so that the target market and its geographical coverage are limited.
2. Existing Retail Business
Someone who inherits or buys an existing business is taking ownership and responsibility for the hard work of others. The foundation is set, and the stick is passed for you.
This is often a scenario in family businesses, where one generation takes over from their retired parents. There is a big responsibility in carrying out the tradition, especially if your parents build the company itself like the definition of non store retailing .
- A bargaining system with suppliers will be better
- Cost effectiveness due to centralized operations
- Ease of managing store operations
- The use of advanced technology increases the efficiency of their work
- The cost of establishing a booth requires a lot of money and expertise.
- Difficulties in managerial control because branches / outlets are geographically dispersed
- Because of centralized decision making, some outlets may have difficulty adapting to local needs.
- Because of the large network outlets, it is difficult for management to monitor their daily activities resulting in communication gaps, inefficiencies, and delays in decision making.
- Costs for security stocks remain high.
Buying a franchise buys the right to use names, products, concepts, and business plans. The franchisee will receive a proven business model from an established business.
Make sure you are on board with all the company’s practices and what they stand for because you are expected to represent those values in your store. And know what costs you will expect to absorb, and when the parent company will bear the bills.
Retailers may find business models from licensed dealers as a combination of franchise and independent retailers. License holders have the right (sometimes exclusive) to sell product brands. Unlike franchises, dealers can sell various brands and generally there are no fees for licencors.
The dealer may or may not be identified as an authorized seller or by a company trademark. Think of cars and trucks as the most common example of a dealer like the weakness of an online business .
- Providing one-stop shopping experience.
- Rental shops rent property, personnel and other costs which result in less burden on the lessor.
- Get regular monthly income in the form of rent.
- Employee management, displaying and managing merchandise, re-ordering goods, handling complaints and so on are handled by individual tenants.
- Operational hours can vary from store to store based on goods and / or services sold.
- Items sold / business lines are limited.
- If the tenant performs well, the shop owner can increase the rent or the tenant himself can cause problems by changing / not complying with the rules and regulations of the agreement.
- The bad image of one tenant can damage the image of the entire store.
5. Network Members
This type of store is similar to a franchise or dealer except that its relationship with a larger brand name is about purchasing power for supplies and services.
In this model, you are not placed under the strict guidelines or regulations that your store must follow. And often, there isn’t even the slightest sale that you have to pay every month as long as you maintain a certain volume of purchases.
6. Network Marketing
Multi level marketing (MLM) or network marketing is a business model where product sales depend on people on the network. Not only products are sold, but other salespeople are recruited to sell the same product or product line.
7. Consumer Cooperatives
Consumer Cooperatives are retail outlets owned and managed by members of their consumers. A group of interested customers (members) start retail operations by investing money, receiving stock certificates, choosing members to carry out daily activities and sharing profits based on investments made or certificates held.
The reason for organizing consumer cooperatives is that local retailers cannot meet consumer needs (whatever the reason). Therefore, consumers are left with no choice but to open their own shop.
- Limited expansion
- Profits are shared by members
- They sell usually important commodities at reasonable prices
- The main goal is social service not to gain profit