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Retailing

Retailers sell products to consumers via storefronts or internet based on-line stores. A retailer may manufacture their own inventory, buy it from wholesalers or directly from the manufacturer when the manufacturer does not require or use wholesalers to distribute their products. The initial cost to set up a physical retail store front can be quite high. Even when the retailer opens a leased shop in a strip shopping center finish out and initial inventory costs can easily exceed $100k - $200k. The competition for retail sales is usually strong, especially when retailers offer goods and products that are readily found in nearby stores. On-line product sales are increasing annually for many types of products, especially those that are well understood and can be accurately described using text and photos on the internet.

Keys to success:

Competitive advantage is achieved by retailers when they have exclusive access to desired products and goods in their geographic area. Depending on the price - say less than $100, most consumers will not travel more than 30 miles to competitively shop the item. The higher the price tag, the further a field the consumer is willing to travel to get the best price for comparable merchandise. So location near large concentrations of consumers who desire your wares is most important. However, you need to recognize that if you are obviously successful, you will draw in competitors. Exclusive agreements with wholesalers for a geographic area, help deter competitors.

The barriers to entry for on-line retailing are much lower. A few thousand dollars for a custom designed website or several days invested in learning the ropes or on-line store fronts like ebay are your initial non-inventory costs. Today billions of dollars of retail goods are sold via ebay, amazon, froogle, and other on-line store fronts. Here shoppers do not experience the travel time issue, so cost and return guarantees become the primary drivers of shoppers. As a result, the competition can be quite brutal. Again, exclusivity of product supply will help mitigate the encroachment of competitors.

Resources:

The National Retial Federation - The place to visit to find the latest legislative issues facing retailers. Also a good source for books on various aspects of retailing.

US Small Business Administration An excellent resource for answering business start-up questions.

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