Marketing to a niche customer is a good idea, but consider some alternatives to an expensive retail operation
I'd like to open a sports store to sell products just from the four major sports teams in a city. I have sales experience but don't know where to start setting up a retail company. —N.S., Greenville, S.C.
Restricting your inventory and appeal to a local niche is a good impulse. Business experts often recommend narrowing your customer base and target market.
However, the costs involved in operating a physical retail location are substantial. Think rent, utilities, taxes, and insurance, not to mention inventory, marketing, and personnel. With such a narrowly focused product line, can your store really do enough sales volume to cover overhead and turn a profit?
"National sports chains buy wholesale in such volume that they're able to stock a wide variety of inventory," says Robert G. Kramer, a retail and marketing consultant. "In a small operation, with items just from local sports teams, it'd be very difficult to support the overhead."
One way to find out whether your business idea is feasible is to write a business plan, Kramer says. A business plan will help you pencil out your fixed and variable costs and project reasonable revenue figures.
How to Assess the Market
The business planning process will also take you through an analysis of your competition, another area that may be an obstacle, says Dave Lavinsky, co-founder of Growthink, a strategic planning firm. "Is there really a need for this store? Who else is currently selling these items—local sports stadiums and national retailers like Champs? If there is no directly competing store in your area, maybe there is no market," Lavinsky says.
Bob Phibbs, small business consultant with The Retail Doctor, notes that licensed sports memorabilia carries a high price point and can be easily purchased online, many times with free shipping. "We're coming out of a recession and black-market goods are still fairly prominent," he adds.
If a brick-and-mortar store looks like it has a good chance of succeeding, your local Chamber of Commerce, community college entrepreneurial training program, or municipal business development office can help you with selecting a location and getting the proper licenses and permits.
If your business plan results are unfavorable for a retail site in your area, you might consider subleasing a part of a sporting goods store or securing a kiosk in a mall, Kramer suggests, and recalculate the numbers for those options. The store-within-a-store concept will reduce your overhead costs and the larger business's marketing efforts will bring new customers in contact with your products.
Another idea is to go the ecommerce route and opening a small business on one of the storefront portal. "There's very little startup cost or ongoing overhead online and all you need to do is establish a domain name that represents what you're selling," Kramer says. Another benefit of a virtual operation is that you can offer far more items than you'd be able to afford to keep in inventory at a physical location, Lavinsky says.
Your best chance of succeeding—online or offline—is to find a source for unique, authentic sports memorabilia that your customers cannot find elsewhere. Autographed equipment, pictures and other collectibles are for sale at places like eBay (EBAY), but your site might be appealing if it aggregated items just for the athletic organizations about which your customers are passionate.
Get online and do some more research, including a survey of who else is selling the items you might stock, how much they're charging for it, and how successful they are. With a better idea of how this idea is working elsewhere, you'll be able to make a more informed decision on your own plans.