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View Full Version : Starting a retail shop help required !



gk0505
08-13-2009, 02:28 PM
Hi all,

This is my first post in this forum, I want to start a Computer retail store in my area. As there are very limited stores, I think it will be a good business to venture into.

Now what I want is a basic guide on

-how much inventory to stock up at first.
-How do I tie up with PC manufacturers/Distributors/Wholesalers.
-What is the payment system between me and them? is it monthly basis?
-I know i can set the product price anywhere under the MRP but what minimum % margin on each product?
-What if I buy a product from the wholesaler at $10 and then after a month the market rate drops to $5. Then how do I cover my actual cost?

I would appropriate your inputs as this will help me get stable in life also get me started earning :)

Thank you

vangogh
08-13-2009, 02:59 PM
Hi gk. Welcome to the forum. This isn't my area of expertise, but I'll see if I can give it a try at answering your questions.

First I think this is the kind of thing that's going to require some capital on your part. If you don't have the money on your own you may need to get a loan or find someone willing to invest in the company.

Inventory - You're really going to have to figure this out based on what you think the demand will be. Once you've been in business awhile you should have a good idea for how quickly different products sell and know better how many to order and stock.

I'm guessing you could find a sample of your market and maybe give them some kind of survey. You could list the products you're planning on ordering and ask them to pick the 5 they're most likely to buy in the next month or two. That might give you a sense of which products you'll need to order more of.

As far as hooking up with PC manufacturers/distributers/wholesalers I would imagine most have websites with the information you need. With the payment it could be unique to each company, though I would think you'd be buying products at a lower cost than you'd be selling them for. One reason I suggest you'll need capital. You're going to have to spend first to acquire your stock.

The minimum % margin is something you'll have to figure out. You'll need to look at all your costs and what you hope to make and factor in the expected demand and sales value to come up with the margin you should use. There are formulas to do this and hopefully someone who knows them will post behind me.

If you buy a product for one price and then the market demand for that product and the price people can get it for drops below what you spent you're probably out of luck unless the wholesaler is willing to buy them back from you. It's part of the risk of doing business. Ideally that won't ever happen, but sometimes you'll make the decision to buy something and it will turn out it wasn't a good decision.

What you would do is not get upset, but see yourself in a new situation and figure out how to make the best of it. You could hold onto the product in the hopes the price will go back up or maybe you could use it as a way to entice people to buy another of your products. Maybe you give them product 1 for free if they buy product 2. And product 2 is priced so you make enough profit to counter the loss on profit 1.

Hope some of the above helps.

orion_joel
08-13-2009, 08:55 PM
Hi gk0505, What Vangogh has said is good advice and i will look to add a little if i can.

I will mirror Vangogh's, thoughts on finance, it is not cheap to purchase your initial stock, and the big chance is that the distributor's will not consider giving you terms (eg pay in X days). Especially for the first few orders, if not even the first month or more, they will often want payment up front before delivery.

When you are considering the level of stock that you want to hold initially will depend on money factors. such as
- The size of the store, you want to make it look full but not over flowing, as well as maximise the sales space.
- The type of product that you are going to focus on

The idea is not really to tie them up, the key people you are looking for are the Distributors and wholesales, the chances of a single computer store being able to purchase direct from the manufacture is quite slim. The companies you would possibly be looking for are like Ingram Micro, and Synnex, both should have a .com website, or if not in the states, may have a local one. Otherwise you will need to look around for smaller local suppliers.

As mentioned payment would probably start out cash before delivery or Cash on delivery. Basically this comes down to an attempt to cover their risk. The wholesaler wants to know you will pay up before giving you credit. Sometimes you can get a small account with a small limit, however you would need a good business track record i would imagine and if you are just starting the store then this probably wont exist.

Regarding Pricing this is always the big question, but for some industries also a touchy one. While it may be true that if you set your prices low you may make more sales, there is also a consideration that you will have to make many more sales to cover your costs. MRP or RRP is a very good guide for quality computer stores to consider, you could discount a little if you want to compete with another local store similar to your own, but the last thing you want to be doing is attempting to compete with the likes of Walmart, or other big chains. It just does not work for small stores to try and compete on this sort of price structure in the long term.

One thing that i have found on the common little accessories in that $5-$20 price range is that the pricing does not often move a lot, maybe a little with currency fluctuation. However not a lot. The things in this price bracket that may move a lot are memory, and anything that is highly volatile. There is nothing you can really do, but take it as it comes. If it is any consultation, you may buy something for $5, that normally sells for $10, and if it drops to a RRP of $5 you are not so much losing money, but breaking even.

What it comes down to is the Computer business can be volatile, and not so straight forward, but if i can give any advice, dont compete with the big boys, the only outcome is you lose.

vangogh
08-13-2009, 10:12 PM
I'll echo what Joel said about trying to compete with the Walmart's of the world. You're not going to be able to do it since they can buy products for much less and do more volume. You can have a higher price if you can add some value into the basic buying of a product. A more knowledgeable sales staff for example could get people into the store even if the prices are higher.

With pricing you might find that some items you won't make much or even any money on, but you stock them to get people into the store. Joel mentioned things like memory. Maybe you do sell those barely above cost in order to get people coming in and out of your store. Since they're there anyway they may buy something that you do make a good profit selling.

Paul Elliott
08-13-2009, 10:31 PM
Welcome to the entreprenuerial world, GK.

By all means talk with people already in the business. You may need to go to a near-by town to avoid them believing they are training their own competition, but get some other similar business owners' advice.

Certainly you shouldn't ever try to out "WalMart" WalMart. However, you can look at the things that WalMart, Sams, Radio Shack, and BestBuy sell. Stock higher quality brands. Look for the features and gadgets they don't offer and offer those.

Offer other services such as virus removal, registry repair, spyware removal, etc. Offer cleaning and dust removal. Offer repairs of all sorts.

You might even take older models in trade and do a second-hand business in refurbished computers.

Paul

Paul Elliott
08-13-2009, 10:47 PM
I want to start a Computer retail store in my area. As there are very limited stores, I think it will be a good business to venture into.

What are your training and experience?

There may be a reason there are "very limited stores" in your area. Be VERY critical of your decision and do a lot of research BEFORE you ever put up a dime!

Is yours a city, town, or rural area?
Have there been other retail computer stores in your area?
What happened to them and why?
What is the population in your service area?
What is the average income of a family in your area?
What is the average age of the population in your service area?
Do they have the money to buy premium computer products?
Will they spend their money on your products?
How will you reach the population of the people who will buy your products?
Once you get them into your shop, how will you induce them to return?
Do a careful analysis of the computer trends especially during the past 18 months.

I would suspect that the retail computer store is a greater risk than, say a clothing store--higher inventory costs, more likely to become obsolete without notice unlike clothing and seasonal changes, etc. The history retail computer stores has a lot of blood in the streets over the past 30 years, so proceed with great caution.

BY ALL MEANS start with a well-researched Business Plan with strong Financial and Marketing sections.

If you need stability in your life, it may be better to put whatever money you have into gold bullion and wait for the economic trends to reveal themselves more concretely.

Paul

gk0505
08-14-2009, 02:23 AM
What are your training and experience?

There may be a reason there are "very limited stores" in your area. Be VERY critical of your decision and do a lot of research BEFORE you ever put up a dime!

Is yours a city, town, or rural area?
Have there been other retail computer stores in your area?
What happened to them and why?
What is the population in your service area?
What is the average income of a family in your area?
What is the average age of the population in your service area?
Do they have the money to buy premium computer products?
Will they spend their money on your products?
How will you reach the population of the people who will buy your products?
Once you get them into your shop, how will you induce them to return?
Do a careful analysis of the computer trends especially during the past 18 months.

I would suspect that the retail computer store is a greater risk than, say a clothing store--higher inventory costs, more likely to become obsolete without notice unlike clothing and seasonal changes, etc. The history retail computer stores has a lot of blood in the streets over the past 30 years, so proceed with great caution.

BY ALL MEANS start with a well-researched Business Plan with strong Financial and Marketing sections.

If you need stability in your life, it may be better to put whatever money you have into gold bullion and wait for the economic trends to reveal themselves more concretely.

Paul

Thanks Guys for your support,

Well I am a software engineer with SUN & Microsoft certification as well good in hardware stuff.

I live in India. the place where I am currently opening is right next to a well settled IT store it is not that big just (350sqft) same as mine. These guys have around 4 - 5 outlets in the city. I might get walk-in business from them. but at the cost factor I guess I will be a bit cheaper as I don't need so much of monthly working capital at start (Only 2 staff and only 1 outlet).

- Its a city called Mumbai. Finance capital of India, Lots and lots of PC store (Including Big Brands) but I hardly know 1 or 2 small ones in my area, the reason I am sure about my area is because the people living here are not bothered about negotiating the product cost. Obviously I would want to spread my brand after a year or so with selling franchises. I have sources with Radio, Billboards, Newspaper, Multiplex theater, Malls. So marketing wont be an issue


- LOL, India is densely populated. in my area itself should be 40000-80000 peope.

- Average income in a family should be approx Rs.40000-60000 ($1000-1500) per month. This figure looks small compared to states but it can be counted as "rich" here.

- 35-40% is my target market i.e. age: 17-33yrs. In fact I will also be putting in Mobile Phones (at least that will pull the crowd and make it look as if my shop is in business :p)

- I will basically stock products ranging from Rs 1000 - 200000 ($50-4000) which will include PC accessories, Branded laptop & desktops, Mobile phones, Genuine Computer Softwares.

- India is booming in retail I don't see it difficult. It must be doing good that is why others have jumped in right?

Also if anyone here has the store policy terms template, please do send me a copy !

Thanks !

huggytree
08-16-2009, 10:32 AM
I typically get my products for 58%-60% of list price. I sell them for 80% including tax
so i make roughly 15% on materials

I would stock the minimum needed to start out. Ask suppliers how many you need to buy to get a discount. Then decide if thats enough $ to be worth buying in bulk. Long term thats how to either lower your price or make more profit depending on if you will pass that savings to the customer. I recommend keeping that money as extra profit.

I would never sell a product at a loss. Ive given some items away to charity that I couldnt sell. I ended up making profit on them because I bought them at such a low price and you can deduct full MSRP off your taxes.

gk0505
08-17-2009, 06:14 AM
@huggytree

Can you pm your store terms & policy template? I need to create it for my shop.

huggytree
08-18-2009, 07:03 PM
im a plumber...no store, no terms or policy template..

so when taking any advice from me keep in mind our businesses are completely different..just explaining how my market it

janiels
09-04-2009, 05:42 AM
I also suggest that you get insurance for your business, just in case something bad happens.. you'll never know.

haaru2010
03-22-2010, 12:19 PM
gk0505, How's your business going on, I am new to this forum and new to the business world, I also want to start a retail shop in mumbai,

but I am stuck at sourcing inventory step, can you tell me how do you buy inventory i.e. from wholesalers or big distributors ( like rashi peripherals, redington).

I am desperately looking for this information please help?

many thanks:)

taat.pringist
05-18-2010, 05:36 AM
Good day,
I would suggest to commit an informal market research. Spend 1-2 hrs at a local shopping center in your city (Mumbai, right) and ask, say 100 persons, about what they think about your idea. The results may give you some new directions..

Zatch
06-22-2010, 04:19 AM
Hi gk. Welcome to the forum. This isn't my area of expertise, but I'll see if I can give it a try at answering your questions.

First I think this is the kind of thing that's going to require some capital on your part. If you don't have the money on your own you may need to get a loan or find someone willing to invest in the company.

Inventory - You're really going to have to figure this out based on what you think the demand will be. Once you've been in business awhile you should have a good idea for how quickly different products sell and know better how many to order and stock.

I'm guessing you could find a sample of your market and maybe give them some kind of survey. You could list the products you're planning on ordering and ask them to pick the 5 they're most likely to buy in the next month or two. That might give you a sense of which products you'll need to order more of.

As far as hooking up with PC manufacturers/distributers/wholesalers I would imagine most have websites with the information you need. With the payment it could be unique to each company, though I would think you'd be buying products at a lower cost than you'd be selling them for. One reason I suggest you'll need capital. You're going to have to spend first to acquire your stock.

The minimum % margin is something you'll have to figure out. You'll need to look at all your costs and what you hope to make and factor in the expected demand and sales value to come up with the margin you should use. There are formulas to do this and hopefully someone who knows them will post behind me.

If you buy a product for one price and then the market demand for that product and the price people can get it for drops below what you spent you're probably out of luck unless the wholesaler is willing to buy them back from you. It's part of the risk of doing business. Ideally that won't ever happen, but sometimes you'll make the decision to buy something and it will turn out it wasn't a good decision.

What you would do is not get upset, but see yourself in a new situation and figure out how to make the best of it. You could hold onto the product in the hopes the price will go back up or maybe you could use it as a way to entice people to buy another of your products. Maybe you give them product 1 for free if they buy product 2. And product 2 is priced so you make enough profit to counter the loss on profit 1.

Hope some of the above helps.

I agree with what vangogh had said. Just an additional, you could also make a competitors check before you enter on the business. I worked for a company before and we also do this. Someone in our company will pretend as a buyer on our competitors and see what is their new products, products on promo, how much is their prices and you if you are good in talking to people you can also get some hint from them. You could ask some questions like, what is your best selling products and what is not. By this way you can have some ideas on what products you are going to buy more and what are just for options.

I hope I had contributed something to help you.

Small Biz Break
06-22-2010, 12:53 PM
Gk0505:

I can’t say for certain how some of the programs work in India, but I was in computer hardware for about 15 years here in the US. We sold computer memory to OEMs, VARs, Master Distributors and some retail chains.

It sounds like from your scenario, you may need to purchase from VARs or Master Distributors. When we sold our product to these companies, we had contractual terms to include price protection due to regular pricing fluctuations common in the industry. Plus, these companies required “flexible” return policies.

With this being said, you can see if the VARs and Master Distributors would pass through these terms to you. In the beginning, they probably won’t until you prove to be a stable customer (in volume and on-time payments). However, you should still investigate these options to minimize your liability. You may find that they will give you these terms once you hit a certain sales volume.

As far as competing on price, I highly recommend you look to bundle services with your products instead. You will be able to maintain profit margins while building a better relationship with customers for continued business. Competing on pricing alone is usually the weakest advantage - especially for a small business.

Do the customers in Mumbai only care about pricing?

Best of luck. I hope this helps.