How to Open a Shop and Start a Retail Business in the UK

Ryan Patrick

• 17 min read
How to Open a Shop and Start a Retail Business in the UK

Opening a shop can be worrying, especially after the heavy blow that hit retail sales during the pandemic. The brick-and-mortar industry hasn't returned to its pre-pandemic levels. However, this doesn't mean you should dread opening a shop and starting a UK retail business.

Fortunately, with a creative mindset and passion for working in a customer-facing role, you can open up and thrive in your retail business. Regardless of the business type you can launch, there are vital factors to consider that will boost your chances of success.

This blog is an eye-opener about what retail business requires and how to open one. If you incorporate these elements in your planning, you will enjoy a fulfilling career choice.

What is a Retail Store?

A retail business engages in the selling of goods or services to the final consumer for purposes of consumption. Most retail companies acquire the stocks from a wholesaler or any other significant supplier and then sell them to the customers. Services can be distributed via the Internet, by a shop, or by post, and they can also be sold via other methods. Examples of retail shop businesses include:

  1. E-commerce stores
  2. Charity shops
  3. Pharmacies
  4. Supermarkets
  5. Second-hand shops
  6. Convenience stores
  7. Department stores
  8. Speciality shops

How to Open a Shop and Start a Retail Business

There is no fixed formula for starting a retail business. It depends on several factors, such as the amount of capital, the kind of retail business you want to start, and the market in which you intend to operate the business.

You must be ready to constantly change in the first stages to counter rapidly evolving market trends, such as the new markets. While there may not be a detailed roadmap, the following steps can guide you as you get started:

1. Create a Retail Business Plan

A well-detailed business plan is a vital document you must create. It should outline your business concept, funding and expenses, marketing strategy, and development plan for your goods or services.

However, while a business plan is valuable for focusing on creating a lucrative business, it should not be rigid. Business planning is not a linear process; it has its ups and downs, so you plan your company thinking about possible success and various misfortunes in the shop.

Your retail business plan should have the following key elements:

1. Executive summary

The executive summary serves two essential functions: summarising the main goals of your business planning and getting the reader's attention, which is vital when seeking financing. It is crucial to start with well-written introductory paragraphs in which you will list your goals, motto, and principles.

2. Business analysis

Your business analysis should highlight your business strategy, organization, competition, and niche. Ensure that you incorporate factors that make the start-up of your retail business possible, establish that the market is coming or is stable, and determine that there is no similar business. Bring out the major competitor brands and their market share, then show how your business can take a proportion of this market share.

You must conduct a proper target market analysis before engaging in any branding or marketing process. For instance, looking into the core consumers, knowing what they read, where they buy products, and how they spend their money. This will help you convince potential investors of the possible success of your business idea.

Without this research, you will not be in a position to know where to advertise, how to communicate your brand, or whether there's a market for your product. Still, desk research is not enough. Sometimes, surveys on the high street or in temporary stalls could broaden your studies.

3. Product or services

This section should explain the nature of your retail shop. Your reader must know what products or services you plan to sell and what inspired you to sell them. Make your reader see how these products set your shop apart from the rest in your area.

This is the perfect opportunity to sell your business if you want funding. Convince the reader why your stock is a significant investment and back it up with statistics or research. Adding the name of the products you will stock provides the reader with data on your suppliers.

But if you're focusing on your handmade creations or inventions, ensure you include copyright or patent information.

You can also include a section outlining your growth plans. For instance, you may expand your market or add more suppliers after a specific time.

4. Marketing strategy

Your brand image and plan are essential to your marketing strategy. Therefore, you should explain how the branding will resonate with your prospects. Ensure you include the designing firms you're ready to work with and at what cost.

After that, describe the strategic steps that you will take in the process of increasing brand awareness. For instance, a good marketing strategy incorporates online and traditional marketing efforts. Examine various marketing channels and the approximate costs for the campaigns outlined should be examined.

Even though nearly 3.48 billion people use social media now, handbills or posters are still relevant in passing information. To every approach to future campaigns, always look back at your target audience, how they use social media, and the results of other businesses' marketing efforts.

5. Management plan

Investing in the human capital for your shop to thrive is essential. You have to persuade the reader that you either know how to manage your shop or have plans to hire a competent manager.

Start by detailing your information and describe how you have developed the necessary knowledge working as an independent shop owner. This may include managerial experience, leadership training, and technical know-how in interviewing and hiring. If you have a manager in mind, best state their qualifications and experience to increase their hiring chances.

Then, start thinking of how you will recruit the ideal shop assistants. You can also consider enrolling in a government apprenticeship scheme or using your recruitment experience to hand-pick great candidates and make hiring successful.

Remember to include your qualification certificates and CV in your business plan appendix.

Finally, outline any compensation or benefit your employee may receive. This includes:

  1. Performance-based commissions or bonuses
  2. Guarantee pay
  3. Stock options
  4. Pay supplementation like company vehicles, paid time off, and insurance

Since there's a lot to consider, use your checklist to ensure you cover everything. First, show that you have calculated and determined the capital necessary for the start-up of a business. Explain how you will use the funds and define what potential investor will likely benefit from the investment.

Then include sections covering the costs of:

  1. Inventory
  2. Utilities
  3. Rent
  4. Marketing
  5. Loan repayments
  6. Salaries
  7. Transport
  8. Legal support
  9. Insurance
  10. Expenses
  11. Council tax
  12. Miscellaneous

2. What's your product or service?

Starting a new shop is good, but since you will face little competition, it will be hard to succeed if you don't have a higher-quality or unique product or service. Retail shops that sell necessities like bread and milk have also followed suit to capture the new income from the segment.

Start by addressing the critical question: What pain do you relieve, and where are the gaps?

Opening a shop without solving any specific problem is unwise because people will likely purchase what they need. Conduct a competitive analysis to learn who your competitors are, what they are good at, and how you can do it better. Research the Internet and your locale in search of examples.

Although not every retail shop can offer unique quality, ensure you have unique selling points like

  1. Excellent customer care
  2. Competitive Pricing
  3. Reliable aftercare

Additionally, success strongly depends upon the connections with qualified suppliers, which is especially significant for small business people.

3. Choose Company Structure

In the UK, there are business structures you can choose to register your retail business:

  1. Sole Trader: In this form of business, an individual goes into business under their name, funds the company themselves, and is solely responsible for debt and employment. Although all revenues and profits will be yours, you will equally take full responsibility for the losses. At times, as the income level of your business rises, you have to shift to another tax bracket.
  2. Online Store: An ecommerce store works like a retail store where all sales are made through the Internet. There are many potential customers across the country. You can reach many customers, but delivery can be problematic. Entering the market via an online retail store has far fewer expenses and takes a little more time to start a business.
  3. Limited Company: A limited company has a more complex structure that requires more paperwork and filing. Its main advantage is that it separates your business operation from you. This means you won't own your retail shop's debts and obligations. Any profits are taxed at 20%, except reduced goods with a 5% tax. A limited company can be helpful for an individual with a significant income, but it is not necessarily suitable for starting a retail business.
  4. Partnership: This structure is often co-owned in families that are into business since they have existing relations; hence, creating partnerships becomes easy. Decision-making and accountability are commonly divided equally, but fairness in the partnership is left to the individual partners, which can sometimes be unfair.

4. Register the Shop with HMRC

Register your business with HMRC for legal recognition, reporting, and tax compliance. Your Store will only be exempted if it has a turnover below £1000 annually. However, it's essential to keep records of your revenue and expenses.

So, it's recommended that you register your retail shops with HMRC to stay safe. You should register the shop before the end of the first tax year if your annual turnover exceeds £1000.

When registering, you need to:

  1. Submit your name and address
  2. Register for VAT
  3. To know how much tax, you need to pay HMRC, check:
  4. Calculate your business expenses
  5. Does your shop have employees and their roles?

5. Conduct Market Research

Before investing in the brick-and-mortar premises on the high street, it's essential to conduct market research. First, analyse success stories and how similar stores have positioned themselves in the chosen area.

Consider the following questions:

  1. Do people in the local area need your product?
  2. What are the current rivalries like on the market?
  3. How can you avoid being lost in the crowd when opening a specific kind of shop?

Once you have conducted your market studies, you can design your shop concept and look for a unique selling proposition (USP).

Remember to analyse the general retail sector in your location and the particular sector your shop belongs to (for example, clothing or home goods).

You will probably get better results if your unique selling proposition fills a void. For instance, if you operate in an environment with many homeware stores, you may focus on a particular product niche, such as kitchenware.

Market research is not simply about selecting what products and services to offer but what will appeal to consumers.

Collect all the information possible about your primary consumers. You need to know what newspapers they read, where they shop, and how much they spend. For example, if your audience is young, trendy, and conscious about purchasing from ethical brands, they prefer boutiques to corporate giants.

Additionally, if they are willing to pay, selling an ethnically denim jacket at £80 is pointless if your audience thinks it's fair price to be £50.

Knowing your audience well can help you develop effective branding. You can then see what is and is not currently available to your target audience.

6. Finance your retail shop.

Getting the right finance is very crucial to the success of the retail store business. Budgeting and monitoring your income and expenditure is not less important. Here are some methods for financing your retail business:

  1. Personal savings: This type of funding is used mainly by new entrepreneurs. Having funds lets you pay for necessities and other costs without borrowing, enabling you to retain all revenues. The primary disadvantage of this funding is gathering enough funds to start your business.
  2. Investors: investors aren't just rich people interested in financing small businesses. You can use crowdfunding platforms like Kickstarter and Indiegogo to raise money from online donors who contribute to the projects that interest them. As your small business expands, you can sell shares to raise more capital, though the capital will come with you giving up a percentage of ownership.
  3. Business loan: If you have insufficient capital and no investors and want to grow your small business quickly, you can opt for a loan. You can obtain loans from building societies, banks, and lenders. A solid business plan can help you secure a loan at favourable interest rates. In most cases, loans last 1 to 5 years, so you must generate profits to repay the loan.

Handling your business finances

Managing finances is crucial when starting and operating a business, which you can achieve through accounting. Whether you're flying solo or have a group of staff to work with, efficiency with finance is paramount.

Opt for the software if you cannot afford an accountant in your new business. These tools make it easier to deal with complicated numbers; issues such as expenses, taxes, and the like are easier to handle. Each new business should consider using accounting software, so we have given you some of the best options.

Here are examples of free accounting software you can use for your small business:

  1. Wave: This is simple accounting software used by small businesses such as retail shops at no charge. Its features include income and expenditure management, invoices, and receipt scanning. Wave accounting software is free, but others, like payment processing payroll services, come with charges.
  2. Manager: This is also a free, easy-to-install, easy-to-use, highly flexible accounting software for retail business management. It includes inventory control, sales, billings, receipts, expenses, and accounts and balance sheets. The manager is available in a free version for single users and a paid cloud version.
  3. GnuCash: This is free software designed for managing personal and small businesses, and it is nicely suited for managing small retail outlets. It provides basic accounting facilities such as the double-entry bookkeeping system, tracking expenses, and simple inventory control. It is more plain in terms of interface, but more of a substantial instrument for those for whom a free and functional program is essential.

These are some of the options that should enable proper management of your retail shop finances.

7. Open a Business Account.

A separate bank account for your retail shop has several advantages over your personal account. The advantages include:

  1. Streamline your capital
  2. Deduct business expenses and manage taxable income
  3. Business credit cards help you to pay for goods at a lower interest
  4. Access to business experts
  5. Low-interest business overdraft

Every bank offers different bank accounts, so it is advisable to compare options before selecting one for your small shop. If you are still in doubt, you can ask other business people within your network.

You can open a high-interest savings account separate from the business one. This will assist you in having constant savings you can use to clear debts or any other future expenses on the company.

You must also find out about the legal requirements of having a shop. Just leasing a store and starting your business does not mean it is final, and you can begin trading. As an owner, you'll have obligations you must meet, including:

  1. Opening hours: The government controls your operating hours and will depend on the size of your shop.
  2. Health and safety: It is, therefore, the shop tenant's responsibility to ensure that the necessary fire safety, gas, asbestos, and electrical checks are conducted and that appropriate measures are installed.
  3. Technology use: If you use CCTV, follow the rules and regulations of the Information Commissioner's Office.
  4. Business rates: Almost all commercial ventures located on non-domestic premises, such as shops, warehouses, etc., are subject to business rates determined by the local authority.
  5. Insurance: Any retail business should take business and public liability insurance. This will pay compensation if a customer suffers an accident or loses property in your Store. Employers' liability insurance is a must-have if you have volunteers or employees.
  6. Lease legalities: When obtaining business premises, it is vital to study the lease agreement to interpret who is responsible for which responsibility between you and the property owner. It is also good to seek the legalities of documents to be signed by a solicitor.

There are also several regulations you must comply with when selling products. They include:

  1. The Sales of Goods Act regulates the sale and purchase of goods and outlines rules for commercial transactions and contracts in the UK.
  2. The Sale and Supply of Goods Act regulates specific goods sales, unascertained goods, and future goods.
  3. Supply of Goods and Service Act: obliges traders to undertake services to the proper standard of workmanship

These regulations state that the goods you sell must correspond to the product description and be satisfactory. You should examine your stock before the sale because you're legally liable for such goods as the seller, not the manufacturer, if the products do not meet these requirements.

9. Decide on Your Branding.

Branding is the unifying thread that connects your shop's name, logo, interior design, communication register, website design, and social network profile because all these belong to your business.

Your branding should:

  1. Reflect your shop's personality, whether you're an excellent baker or a fashion designer
  2. Ensure you align with your prospect's preference, such as imagery, colour, and communication style
  3. Create a quality product and unforgettable shopping experience.
  4. When creating branding concepts, look back at the market research to ensure it is effective and aligns with the target audience.

Did you know that even giant brands can occasionally forget about the audience? Ensure your brand design is friendly so that it won't intimidate your customers into thinking they cannot afford to use your products.

Finally, don't underestimate the importance of branding. It is a significant component of your business that is directly observable and interacts with customers. If your design skills are inadequate, it can be best to consult the services of a professional designer to make your ideas come to life.

When branding, ensure that:

  1. Shop name: Your retail shop name should be unique and easy to read, pronounce, and spell. It should also be memorable and reflect your brand identity.
  2. Packaging: packaging is free advertising for your business. So, your paper bags should include your logo and be environmentally friendly.
  3. The tone of your communication: What kind of image do you wish to convey of your retail business to the customers? Your choice of words should remain consistent with the marketing email and the digital receipt.
  4. Interior design: Let your interior design make your customers feel how you'd want them to feel when they walk into your shop. So, before designing, consider the experience you would love them to have. Use human psychology by positioning your best-selling products to the right of your entrance and pull customers deeper into your shop by displaying eye-catching items at the back.
  5. Window display: This is also a free advertising method, so it should be eye-catching. Your window display should be an extension of your interior design, conveying your values and product selection in a way that is as eye-appeasing as possible.

To open a shop, you must differentiate yourself from competitors by welcoming your customers with a cup of tea as they enter, rewarding loyal shoppers with special offers, or investing in cutting-edge digital tools.

Also, a good proprietor must be strong, flexible, enthusiastic, and customer-oriented.

10. Create Your Retail Website.

Websites are essential in the current world of retailing. Customers must physically observe your brick-and-mortar store location and interact with the firm through social media and its website. With over 1.6 billion people shopping online globally, it is disadvantageous not to have a website.

You can begin with online store choices from payment processors such as Square Online, which permits customers to create a store without a fee. However, you will incur a fee per transaction.

When setting up your shop website, consider the following:

  1. Your content must align with your brand's tone and value
  2. Create relevant articles
  3. Use high-quality images of your products and shop
  4. Provide your contact information and location
  5. Include social media sharing options

When developing your retail website, ensure there's a seamless checkout process. It is crucial to make it as easy as possible for the consumer to transition from choosing a product to making the payment.

11. Find a Shop Premise

Finding the right location for your shop is your best decision. Regardless of your product, the success of your retail shop hinges on customer traffic.

When your business is complex to locate or in a low-traffic location, you will miss potential customers who might have come. Speciality stores may attract impulse customers who are ready to travel. However, this requires some promotion to create awareness of your brand, and they have to force themselves into your store without prior exposure.

Let's check tips for finding a good location for your shop:

  1. Research local areas: Demographic differences exist between various towns and city boroughs. You must measure where your product or service is most suitable. For example, opening a high-end boutique in an affluent area may succeed but fail in a budget-conscious location.
  2. Identify supply and demand: Choose the streets with a high density of foot traffic, as these locations are ideal for independent retailers and brands. A busy area will help maintain a consistent flow of customers.
  3. Locate competitors: Identify spaces with trading styles similar to yours that are successfully operating. A business can open near competitors because competitors draw in your target market. The effectiveness of using this strategy is to target the customer base they've developed, depending on how much competition you can handle.
  4. Consider costs: prime shops in high-traffic areas have a high rent tag because of increased footfall. If you have a tight budget, rent your shop in an incoming area with lower rates but still have trend-setting customers interested in your brand.
  5. Understand the local population: Visit your business's potential location and observe people who visit there. You can see foot traffic at different times and days of the week to get a well-rounded view. Ask your local real estate professionals or use online demographic tools for more profound insight.
  6. Explore available properties. Providing ideal retail space in your area is essential. Therefore, ensure that the location you're eyeing has property that meets your shop's needs.

12. Get Shop Equipment and Utilities.

After you've picked up your premises, you need to equip your retail shop with the necessary equipment.

Here is a list of the vital things you need to purchase:

1. Till and point of sales system (POS)

Your till is one of your company's critical working components. With sales expected to increase by 46% by 2027, businesses must have a card machine and a merchant account for their POS system to ensure they do not lose out on sales.

2. Equipment supplies and furniture

To make things easier, start looking for a service that will provide the tools and applications you require to establish your shop. Some companies supply fittings, mannequins, and POS equipment.

However, to reduce the initial costs, one can buy used equipment from platforms like eBay or Gumtree. This option can be cheaper than the other two without compromising on quality.

3. Business utilities

As a business owner, you must consider utilities like electricity, Internet, gas, and waste collection. It's essential to choose suppliers that suit your shop's needs. The atmosphere you create at your shop, including temperature, lighting, and background music, is vital.

The utilities for running your business, such as phone services, Internet, and water, are equally important. Select suppliers who are affordable and dependable.

13. Employ Staff

Hiring staff is crucial to ensuring that your shop runs smoothly. Managing every aspect of your retail shop alone is impractical, and you will unlikely be available every business hour.

Staffing comes responsibilities such as registering with HMRC as an employee, handling national insurance contributions, matching pension contributions, and paying taxes for your employees. Hiring staff comes with various responsibilities.

Outlining your recruitment strategy, staff remuneration, and other employee policies is pertinent, and they must be apparent to the applicants.

You should also allocate some funds for training the staff in customer service, as this is a critical area. To minimise the cost, you can employ people with prior experience in the retailing industry.

14. Market your retail shop.

Although you will be selling a particular product or service in your shop, your primary task will be selling the shop. Through market research, you can find the target customer that a business needs. Therefore, ensure that your brand and customer experience correspond to the customer's wants.

Here are the marketing channels available for you:

  1. Go online: create a website and be active on social media.
  2. Use influencers: Influencers are individuals with massive followers. You can send them freebies; they can advertise your products to their followers.
  3. Hold events like new line celebrations and product launches.
  4. Use traditional methods by advertising in local newspapers and dropping flyers in local pubs and cafés.

When marketing your business, you need to develop the story behind your brand and have a coherent message that summarises your reasons for the industry. This is relevant for retail start-ups launching a business within a saturated ecosystem; a grand brand narrative helps stand out.

15. Have an exit plan

When starting your business, it's vital to have an exit plan in case you want to exit it.

In case you decide to sell your shop, follow these steps:

  1. Find a consultant or broker who will be suitable to represent your business. It is advisable to talk to several people before settling on the one.
  2. The pricing strategy should be fair, and reasonable, based on comparing similar businesses sold in the market. Do not underprice, no matter how eager you are to sell.
  3. Review your lease terms for the property and rented equipment to transfer the property to the buyer properly.
  4. Keeping all your financial documents and data current is important because investors will require evidence of the business' worth.
  5. Talk to your employees about the sale, when it will happen, and what they should expect. Respect their rights.
  6. Hold a sale to clear inventory at a reduced price.

Do not be hasty when selling the business; ensure the new buyer can run the business and develop it further.

Form Your Company with Incorpuk Today

At Incorpuk, we will help you through the company formation process and file your confirmation statements to help your business stay compliant. Whether you're a UK resident or a non-UK resident, our team is ready to provide guidance and help you establish your company in the UK. Contact us here today.

Winding up

If there's something constant, people will always shop. Although retail trends might have changed and ways to purchase products have evolved, an eye-catching shop will attract customers. Although there's stiff competition in the retail sector in every niche, you can ensure you have made your new shop perfect. Start by creating a business plan, sourcing great products, and have a killer marketing strategy. With these, you will open a new shop and succeed. Incorpuk can answer your questions regarding starting a retail business in the UK. Contact us here.