Challenges for Retail Startup’s and Simple Solutions to Overcome
Managing and running a retail apparel store is not as easy as how it looks. Many entrepreneurs want to start a clothing line, but not many make it past the year mark. The Apparel Industry is highly fragmented and competitive. There are a number of major players, countless niche stores, brand sand companies.
General merchandisers and foreign companies make the market even more competitive by bringing the global best practices. This calls for high efficiency and knowing tricks of-the-trade for business growth.
Lets discuss some of the main challenges that probably every retail startup should know-
High Rentals – Before you make a decision to rent a store, check your finances well and make a 5 year plan for major costs to be incurred. The rentals in Malls and high streets, especially in Metro cities like Mumbai and Delhi are exorbitantly High. In Mumbai, the Per square foot rate (PSF) ranges between Rs.170 to Rs.600. In malls, there are many related expenses like common area maintenance(CAM) Charges, Security deposit that add on to costs increasing operating expenditures (Opex). It is imperative for the new brands andstart-ups to do the complete market research for the right location as per their business requirement and manage the rentals costs. It is important to be at strategic location generating high footfalls, translating into high sales. Some start-ups start from work from home.
Lack Variety – Retailers starting an apparel store generally make a mistake to start with limited variety. It is to be learned that unique variety for start-ups is important to attract customers. The challenge again comes in sourcing where high minimum order quantities (MOQ’s) are required. It is suggested to compromise on the high quantities but not compromise on number of designs or SKU’s.The idea of starting with a few items (or minimum viable product), also known as MVP) and building may be a great model for other businesses, however in the ever changing world of fashion you need to compete with brands that offer more.Don’t go for getting the minimum price by increasing the quantities, go for less mark-ups instead and get maximum designs. There are many firms in India that do private labeling, have designers and give maximum designs with very low minimum order quantities.Merchandising and Sourcing – Most of the start-ups lack planning before executing. They fail to forecast, budget and stock allotment leading to under-stocking or overstocking, low sales and high costs. To plan, research & buy from a right source is the key for business success at early stage. For buyers, who try to get into overseas buying & manufacturing might find it a good option, but it can go downhill fast. All businesses donot require procurement from China or some low cost countries.Right sourcing is a key to a profitable business. Merchandising controls the whole business supply chain and it should be managed well. It is considered to be good practice to take help from your friends, family or company who understands the subject very well. Referrals really help in getting good discounts.
