Getting a physical storefront

Getting A Physical Storefront for Your Business

Friday, August 15, 2014

Despite the rise of online shopping, there are plenty of people willing to try their luck at running a bricks and mortar business. And that’s no surprise, seeing as the traditional storefront business model has been around in one form or another, literally, for centuries.


Getting the basics right

While the type of business can vary greatly, there are some basic rules that seem to be common, no matter which storefront business ideas are being analysed.

“Running your own business is challenging and not for the faint hearted. It is also one of the most rewarding experiences of my life. I’ve had customers thank me profusely and some abuse me,” says Dale Pruser, who set up her shop, Creative Costumes, in the upmarket Melbourne suburban of Prahran, 18 years ago.

And the hard work behind any successful business should start long before you respond to any “shop for lease” ads. Pruser says that in the same street as her shop many businesses have come and gone in the past year alone: a café, a new shoe store, a trendy clothing boutique, a rug store, a hairdressers and a kids’ craft shop.

She suggests it may have been that they didn’t take enough time to research the local market. “Before starting my business I did loads of research into where I should set it up. I defined my ideal customer, used Australian Bureau of Statistics demographics to find out where they lived, and choose a shop within that area – after checking there were none already providing a similar service,” she says.

Another entrepreneurial store owner, Daylan James, operates Melbourne's three Enni fashion boutiques. The business was founded in 1977.

"Clothing still works in a physical storefront as customers see value in touching and feeling the garments as well as trying them on," he says.

"We find the suburban strip shopping experience is well suited to our demographic of women aged 30 to 60 years old, who tend to value their time and are prepared to pay a little more for the convenience, particularly if it is backed up with superior service and personalised advice, which is still hard to replicate well online," James says

And far from taking business away, an online presence can help drive customers to the physical storefront, in addition to the option to buy online.

To lock in repeat business, James’ customers receive their orders quickly, gift-wrapped with a personal note, showing how the personal touch can be replicated online.


Cashing up for the long run

Potential shop owners need more than determination, research and what they believe is a killer storefront business idea, however. Securing your funding is essential.

"When you set up your financing make sure you allow enough money to survive the first year. We turned over just $50K in the first year. Without a cash flow buffer, my business would have failed in that first year because it takes time to grow a business," advises Dale Pruser, whose business now turns over $1 million and employs eight people. 

When it comes to fronting the bank for a loan, David Henderson, a long-time business adviser to small businesses and medium retail operations, says that the most important thing is "knowing your stuff" and presenting it in a way that shows potential lenders that you really understand what has to happen to stay in business.

"For instance, you need to know how many items you have to sell every day, or every week, and at what profit margin."


Winning by design

Retail is not fundamentally complicated, Daylan James says, before conceding that there are many moving parts that must be working in unison. The value of layout to the business is often underestimated, and getting it wrong can be fatal.

"Store design must complement the product and the staff and level of service must also present a consistent experience," James says.

"The physical design of a store can play a big role in getting people through the door. We recently renovated one of our stores and saw an 18 per cent increase in sales over the next 12 month period. The stock was the same, the staff were the same, but the design of the store changed people’s perception.

Since coming into the business, James says he's renovated two stores and added a third to the chain. "Fitting out a store is far more expensive than I first anticipated, but it’s hugely important," he says.

"The sourcing of stock and funding of a new store needs to be carefully planned. For a clothing business you might have to place orders for stock three to six months in advance. This takes a lot of planning and can be a big strain on cash flow when you first start up."

Business adviser David Henderson (Enni is not one of his clients) agrees that the fit out is usually the most difficult capital expenditure so you need to work out how much to invest in it, and if you can save costs. "If you're selling budget goods, an expensive fitout will work against you."

"Another point to be aware of is that your lease might have some potentially costly fitout clauses."

For instance, many shopping centre operators, Westfield included, require a new fit out as a condition of lease renewal to keep their properties looking fresh and up to date.

Millennia of commerce proves shopfronts work, but it’s still important to do you research and get the basics right.