Have you ever imagined transforming your passion into a bustling retail store? The journey from business idea to grand opening involves many steps, including strategic planning, creative design, and meticulous preparation. 

This guide will help you understand what it takes to open a retail store, including retail terms you’ll need to know and startup costs, as well as tips for driving your first customers.

What is a retail store?

A retail store is a permanent location where businesses sell their products. These are also known as brick-and-mortar stores, and examples include boutiques, department stores, and convenience stores.

Is opening a retail store right for you? 

Starting a retail business is exciting. You’ll have a storefront to manage, and a way to connect with customers in person. It’s no surprise that Shopify merchants with brick-and-mortar stores generated an average of 81% of their total sales in person.

However, opening a retail store isn’t the best move for every entrepreneur: 

• It’s expensive. Studies estimate you’ll need an investment of around $40,000 to open a permanent store. Run a retail cost analysis to check these upfront costs are worth your while.
• Margins are slim. Rent, insurance, and staffing are additional costs that eat into margins, which end up significantly lower than an exclusively online retail business. 
• It adds operational complexity. You’ll need to hire employees, prevent losses, and train your team on how to handle customers. You’ll also need retail technology, such as Shopify POS, to manage your store. 

How to open a retail business

1. Choose your niche
2. Write a business plan
3. Cover the legal foundations
4. Find a retail location
5. Find products to sell in your store
6. Choose a checkout system
7. Hire and train retail staff
8. Build your retail brand
9. Plan your store operations
10. Promote your retail store opening
11. Expand your sales channels

1. Choose your niche

Where are you going to put all your focus? When you’re first starting a retail business, it can be tempting to try to sell everything. Your time and resources are limited, so use them wisely. 

Every retail industry has its own obstacles and barriers to entry. Think about the things that could go wrong in your niche and how likely you are to be able to overcome them before making a final choice.

Clarify your target customer and value proposition

Determine the kinds of products you’ll sell and work out exactly which target market you’ll sell them to. It’s much easier to sell something when you truly care about it and believe in its potential. Start your search for a niche here.

Once you’ve found a product to sell, think about what makes them different. This is your unique value proposition—a reason for customers to buy from your store over a competitor’s.

Evaluate competitors and market demand

It’s important that you love what you’re trying to sell, but it’s just as important that other people do too. Are there any competitors? If not, why not? Make sure there’s a demand for your niche and a possibility of making a profit.

Some of the things your competitors are doing might work well. Others will be missing the mark. Look closely at the best and worst bits of their marketing efforts, selling, customer service, and any other areas you can research. Adopt their best strategies and improve on everything else.

2. Write a business plan

The main reason you’ll want to write a business plan is to apply for a business loan. However, even if you’re financing out of pocket, a business plan will help solidify your ideas and point out business needs you hadn’t initially thought of.

Retail business plans vary in depth and detail, but most include the following information:

• Business name and description
• Executive summary
• Business structure
• Products and services
• Target audience
• Market research and marketing strategies
• Cash flow forecast and startup costs
• Logistics and manufacturing details
• Details of any lenders or grants secured

If all of this seems overwhelming and you don’t know where to start, feel free to use this business plan template to guide you.

Choose a business name

Your brand name is perhaps the most important part of any retail business. Customers see it at every stage in the retail journey: when they walk past your store, view your social media posts, or see their transaction on their bank statement. 

The best business names are:

• Short
• Memorable 
• Easy to spell 

Tip: If you’re stuck for ideas, use a free AI business name generator to get your creative juices flowing. Type in the things you sell or the target market you’re going after, and get a shortlist of business name ideas you can build upon. 

Estimate startup costs

Studies estimate that it costs just less than $40,000 to open a retail store. However, it’s possible to open a new store on a smaller budget. Costs depend on your chosen location, store size, and the type of products you sell. 

Estimate how much you’ll spend opening your store as part of your business plan. Include both one-off and recurring expenses such as:

• Store rent 
• Insurance 
• Permits and licenses
• Inventory 
• Advertising and marketing costs 
• Fixtures and fittings
• Staff salaries 
• Utilities 
• Cleaning and store maintenance 

Secure funding

Even if you’re opening a retail store on a smaller budget, you’ll need upfront cash to get your business up and running. 

Establish how you’ll fund your new venture as part of your business plan. That might include:

• Funding from family and friends
• Personal credit cards
• Business loans like Shopify Capital
• Small retail business grants
• Crowdfunding 
• Angel investors

Each of these business funding sources have their pros and cons. For example, a personal credit card can lean on your personal credit score to lock in a lower interest rate, but your personal assets might be at risk if you struggle to make repayments. Weigh up your options and confirm you can pay any funding back (if required) to choose the one that’s right for you. 

3. Cover the legal foundations

Once you’ve finalized your business plan and have a clear direction of the future of your retail store, it’s time to cover the legal foundations. 

Register your business

Your business structure determines how you’re taxed, how you obtain capital, your liabilities, and other factors. Every business structure has different implications for taxation, ownership, liability, funding, and other aspects of the operation. Make sure to research your options carefully, because changing your structure later, while possible, can be a hassle. 

You have the choice of five main structures in the US:

1. Sole proprietorship
2. Partnership (either limited liability or limited partnership)
3. Corporation
4. S corporation
5. Limited liability company (LLC)

The choice is similar in the UK, but there are only three main structures: 

1. Sole traders
2. Limited companies (limited by shares or limited by guarantee)
3. Partnerships

Once you decide on a legal structure, look for a registered agent and register your business with state agencies. This will give you an employer identification number (EIN), which you’ll need when you hire employees.

Obtain licenses, permits, and insurance

For virtually any brick-and-mortar store, you’ll need a seller’s permit from your country, county, city, or state, a general business license, and a DBA (doing business as) if your business name is fictitious.

You’ll also need special licenses to sell restricted items such as drugs, alcohol, live animals, firearms, and adult materials. 

Depending on your location, you might also need to apply for certain other licenses for a physical retail store:

• Zoning permit. Some localities might regulate what types of retail businesses can operate in specific areas.
• Health permits. If you plan to handle any food, you might require health permits.
• Environmental permits. If your business could contaminate air or water, you might need a special pollution control permit.
• Sign permit. Some authorities require local retail businesses to get a permit before they can put up a sign in public.

Learn about taxes and accounting

Federal tax rules vary, depending on where your business is registered, where it operates, and its legal structure. A sole proprietor in the US, for example, will typically file taxes on the 15th of April each year. For a partnership, it’s usually the 15th of March. The IRS (Internal Revenue Service) provides more information about this.

The deadline for filing corporation tax in the UK is 12 months after the end of the accounting period it covers. Every business’s accounting period will differ and depend on the date you set up your company. There are also variations for sole traders and other legal structures. Do your research to see what’s relevant for you. 

In the UK, VAT (value-added tax) must be charged on most sales. Some products have a lower rate, and items such as food and children’s clothes do not have any VAT attached. Not every business has to be VAT registered, so check your circumstances against the information on the government’s website. 

Tip: Shopify Tax helps maintain compliance everywhere you sell. From collecting sales tax to filing your returns, you can do it all from your Shopify admin. Ailee Fei, founder of Daily Charme, says: “We no longer need to manually update sales tax information, saving us countless hours and reducing the risk of errors. It’s been a game-changer for our small business.”

4. Find a retail location 

Once you’ve started getting the necessary permits, you can begin looking for the perfect commercial space. 

Use demographics and foot traffic to choose a site

Knowing your target customer’s demographics is important for finding a location. If you’re selling student supplies, for example, it wouldn’t make sense to set up shop 10 or more miles away from the nearest college or university.

You’ll also want to look for these six markers (VPASTA): 

• Visibility
• Parking
• Accessibility
• Signage
• Traffic
• Activity 

Design your store’s layout and inventory storage

Think about what you want customers to see first. What’s going to get them into the store? An attractive window display that will influence a purchase. 

When a customer walks into your store, make sure they’re welcomed by an enticing layout. Think about which product displays will catch their eye. What will be placed where? Are there certain products that will likely be added to a basket as your customer approaches the checkout? Do two products complement each other like a hand and glove? 

Sustainable footwear brand Keen, for example, pairs sneakers with t-shirts to help customers discover products from multiple categories.

Also consider what the checkout looks like. If there’s a point-of-sale display, you’ll need to decide what type of products to put there and how to make them stand out. Make sure the checkout process is easy and avoid the possibility of long lines when you can.

Above all, your store should be as accessible as possible. Wheelchair users, parents with strollers, and other people with mobility challenges will need to get around. Think about aisle space, elevators, shop till or cash register height, and anything else that can help make your store inclusive.

Something that’s often left unmanaged until it’s too late is inventory storage. Think about how easy it is to bring stock into the store. Can you get to the most popular products quickly? Are you making sure your shelves are never left empty? Do you have security systems in place to deter shoplifting?

Test your concept with a pop-up shop or temporary space

If you rent too much space, you could pay a higher price per square foot, plus your physical store will look empty. Getting the right amount of retail space is a fine balance. If you’re unsure, consider starting with a pop-up shop or temporary space. 

Jewelry brand The Inspiration Company took this approach. It opened 80 pop-up shops across the United States to test market viability before committing to a permanent location. 

5. Find products to sell in your store

Speaking of inventory, now’s the time to source products to sell through your new business. 

Identify suppliers

If your business were a heart, your vendors (or suppliers) would be the arteries. It’s critical to have a good relationship with them, and building your relationship starts with choosing the right vendors in the first place. If you’ve ever interviewed potential employees, onboarding a vendor can feel like a familiar experience.

Entering a partnership with a bad vendor can delay production and distribution, costing you time and money. So start by setting up criteria for what you want in a vendor. 

Price should be only one of several factors, including:

• Quality of the product 
• Customer service
• Existing relationships
• The vendor’s ethics
• Minimum order quantity (MOQ) rules
• Expertise in your niche
• References 

Establish inventory management practices

Inventory management is a critical part of retail business operations, so it’s best to start off right with proper inventory management software. 

Look for platforms that merge the inventory from your ecommerce store and retail store. When you use Shopify, you’ll already have inventory management features built in, as well as the option to integrate third-party platforms. This lets you:

• Track inventory levels across every sales channel (in-store and online)
• Quickly ring up customer orders at checkout 
• Set safety stock alerts to prevent stockouts 
• Generate detailed inventory and sales reports, such as ABC analysis and valuation reports 

6. Choose a checkout system 

There are two main elements of a payment system to consider: the point-of-sale (POS) that helps you take payments at checkout and the payment processor. 

Point-of-sale system

Your POS system is the hardware and software that enables your business to accept payments from customers and make sales in person. 

Your POS hardware setup can be as minimal as a mobile device (like a tablet or smartphone) and a card reader or card machine. However, most of the time you’ll want to be able to handle cash as well, in which case, you’ll also need a cash drawer.

Other important POS software features to consider include:

• Order management
• Automatic discounts
• Custom email or digital receipts
• Email carts
• Payment processing 
• Refunds and exchanges 
• Customer profiles 
• Loyalty programs
• Staff roles and permissions 

Payment processor

Make sure your POS system has a quick checkout process and lets you accept a variety of payment types, including credit and debit cards, mobile payments, physical and digital gift cards, and cash. 

Some POS systems, like Shopify POS, come with integrated payment processing, while others require you to manage separate contracts, fees, and payments with a third-party provider. Shopify POS also offers alternative payment options like Shop Pay and Shop Pay Installments, which unify a customer’s order and payment details in the Shop app. 

Integrated payments simplify your initial costs, accelerate payouts, and reduce inaccuracies in your financial reporting due to human errors. It also means you’ll spend less time reconciling charges. 

Contrarily, when you partner with a third party to handle payment processing, you’ll have to manually reconcile payments accepted from your card reader with your POS system, and it may take longer to receive payouts. 

7. Hire and train retail staff

It would be very difficult (if not impossible) to manage a retail store by yourself. You’ll need to build a team and train them with the retail skills to succeed.

Build a hiring plan and staffing budget

While going through the hiring process, make sure you meet your country and state requirements as an employer. You’ll likely need:

• A specific type of insurance (e.g., employer’s liability insurance or worker’s comp)
• A bank account for payroll
• A process for verifying employment eligibility
• A process for reporting new hires to the State Directory of New Hires (SDNH)

When you’re interviewing, no matter the position, remember you’re interviewing for attitude as well as capability. It’s easier to work with someone who shares an interest in growing your business but whom you need to train on processes than the other way around.

Onboard staff on POS

Every new employee should be brought up to speed with your store’s operations. Put together an onboarding program that teaches them how to use your POS system, offer excellent customer service, and follow store policies.

Tip: Your choice of POS system has a great impact on how easy (and quick) it is to train new retail staff. With Shopify, for example, store processes—including inventory management and payment processing—are unified by default, giving you just one system to train new staff on. It’s helped retailers like Monos reduce POS training time to just half a day. 

“We train our retail staff not only on POS but the full online experience as well, which helps them understand how everything like order processing, refunds, and promotions work,” says director of ecommerce and customer experience Mike Wu. “Having it all on the same platform makes it much easier to connect the dots and gain a full understanding of the business, which results in better customer service.”

8. Build your retail brand 

Building a strong brand that potential customers can emotionally connect with can drive further retail success. Your retail brand is more than just a name and a logo—it’s who you are, what your brand stands for, and why it exists.

Your branding should include components like a mission and vision statement and visual brand identity elements like a logo, colors, fonts, and layouts. This will also include establishing a brand voice and tone.

Perhaps more important than creating the brand is ensuring your entire team understands and embodies the brand. Incorporate brand onboarding into your employee training process. 

9. Plan your store operations

Day-to-day operations might not sound like the most exciting part of opening a new retail business, but they’re important. Policies and procedures keep the customer experience consistent, while also helping to manage inventory and serve shoppers quickly.

Opening, closing, and cash-handling procedures

Key components to cover in your retail operations plan include:

• Opening and closing procedures
• Returns and exchange policies 
• Order fulfillment processes 
• Physical inventory management
• Promotions and pricing
• Staff management and scheduling
• Cash handling procedures

Returns, exchanges, and inventory management

Unfortunately not every product you sell will exit your retail store indefinitely. Some items make their way back through a return or exchange. 

A unified commerce platform like Shopify helps with the inventory management processes associated with returns and exchanges. Customers can buy online and return in-store (or vice versa), while store associates push through their refund from the POS system. 

In the case of an exchange, Shopify automatically logs the return of the old SKU and the sale of the new one to avoid inventory discrepancies.

Set up your retail tech stack and data

Retail technology lets you run your store like a well-oiled machine. At its core, you’ll need a point-of-sale (POS) system—known as the command center of any retail store—to process payments, log inventory, and track customer data.

To streamline operations, this POS system should integrate with other tools:

• Inventory management systems
• Customer relationship management (CRM) platform
• Email marketing tools 
• Workforce management platforms
• Customer loyalty apps 

If you’re selling omnichannel, consider how your retail store will work with your online store or website. Maybe you’ll want to offer buy online, pickup in-store (BOPIS), and curbside pickup options for shoppers. In this case, opt for a unified commerce solution like Shopify that’s capable of unifying customer, order, and inventory across every sales channel. 

That’s exactly what omnichannel commerce agency Riess Group does when it helps Shopify merchants like Vestique optimize their retail stores. They love that Shopify has so many of these integrations ready out of the box. It’s led to jumps in sales by up to 18%. 

10. Promote your retail store opening 

At this point, you’ll have registered your business and chosen your location, vendors, staff, and payment systems. All that’s left to do is promote your store and get ready for your grand opening!

While you wait for your initial inventory to arrive (and get the store ready to receive customers), think about how to market your store to locals. You can promote your retail company by:

• Creating social media accounts for your store
• Establishing relationships and forming partnerships with other local businesses
• Putting on promotional events for the local community
• Hosting an experiential shopping event
• Printing out flyers and posting them locally
• Putting signs inside and out front of your store
• Taking ads in local newspapers to find new customers

11. Expand your sales channels

Brick-and-mortar might be what you’re focusing on right now, but it doesn’t have to be your only sales channel. One-quarter of in-store shoppers have already researched brands online before they head in-store. 

Capture these shoppers with a unified commerce platform—one that unifies your inventory, order, and customer data anywhere you sell. Shopify is the only platform to do this by default. It gives customers the seamless omnichannel experiences they demand from retailers they shop with, all without increasing technical complexity. 

With no need for patchy middleware or integrations, a leading independent research firm found retailers using Shopify POS’ unified commerce solution benefit from: 

• 20% faster implementation times
• 34% lower data migration and transition costs
• Omnichannel sales growth of more than 150% quarterly, on average, year over year

Open an online store

Combining your retail store with an ecommerce website offers the best of both worlds. Local shoppers can head to their nearby store to browse products, while those further afield get a similar (albeit digital) experience through your online store. 

Both channels can work in tandem and help you offer omnichannel customer experiences through services like:

• Buy online, pickup in-store
• Buy online, return in-store 
• Local delivery, where nearby shoppers can buy online and have your retail staff deliver the order from the physical location

Selling online is also the perfect way to capture local searchers. Claim your Google Business Profile and create specialist landing pages that target local searches, such as “shoe store in Denver.” Offer as many (relevant) details as possible—including your store’s address, opening hours, and directions—to turn online shoppers into foot traffic.

Sell through social media

Half of Gen Z audiences say they’ve made a purchase while browsing social media platforms like TikTok, Instagram, and Facebook. Even if you’re targeting older demographics, the same is still true: Social commerce sales will surpass $1 trillion by 2028.

Make your store visible on these social sales channels by:

• Joining local groups or pages
• Running social media ads 
• Partnering with local influencers or creators
• Using local hashtags
• Geotagging the city your store is in 

Tip: Launch native storefronts on these social commerce platforms directly from your Shopify admin. Install Facebook & Instagram, Google & YouTube, and TikTok sales channels to sync your product catalog with each channel, then tag products in your organic posts to divert followers towards a purchase.

Consider marketplaces

Marketplaces like Amazon and Etsy are the first port of call for 40% of shoppers. Boasting huge audiences of potential customers already looking for the products you sell, it can be a complementary sales channel to generate revenue while you get your retail store up and running.

That said, there’s a tradeoff between reaching potential customers and a cut to your profit margins. Amazon, for example, takes between 8% and 15% of the total sale price in commission. 

Marketplace also safeguards customer data—you’ll struggle to retarget customers who’ve already bought from you elsewhere. It’s why marketplace selling is most effective when combined with other owned channels (e.g., your retail store or ecommerce website). 

Start your own profitable retail business today

There will inevitably be bumps in the road before you officially start your retail business, and so a strong network of support around you will help glue all the pieces together. Other than people, the right tools can bring your business to the next level.

Shopify has all the tools you’ll need to open a profitable retail store. More than just a POS system to ring up orders, Shopify lets you manage every aspect of your business from a single back end—whether that’s collecting customer data, running omnichannel loyalty programs, and unifying inventory data everywhere you sell. 

This article originally appeared on Shopify and is available here for further discovery.