EP 7 Preview: So you want to be in retail?

04 November 2014
The risks of retail.
EP 7 Preview: So you want to be in retail? Image : 114

Tonight’s episode of Dragons’ Den SA sees a retail theme running through it and there are no suprises here; South Africans love to shop! Our wholesale and retail sectors are cashing in on a sustained spending spree and it’s our insatiable need to consume that keeps this retail machine well-oiled.

Romantic as starting a retail business might seem, delusions of grandeur can fast conflict with reality; opening a retail store is not without risk and business owners must ensure a matrix of criteria are met when hoping to run a successful outlet.

Firstly, retailers will always be at odds with the economic climate because a large degree of their success is based on the liquidity of their consumers; no disposable income means no sales.

Other risk factors to consider are changing trends. Changing tastes and preferences are a constant threat to the retail owner, we live in an era where products hit our shelves one day and are obsolete the next; to sell is an ever-changing activity. To minimse this risk, it’s advisable to enter into consignment deals with manufacturers. Remember, they are open to negotiation, as they too want to shift product.

It’s not all bleak, in an economic downturn it is possible to turn adversity into advantage. Rent, for example, can be significantly cheaper during dark financial times as property owners generally scramble to lease space. Key to success for retailers during a recession is the product offer; selling cheaper solutions to luxury goods at a reasonable price point can work.

Online retail stores are an increasingly popular alternative to a retail space as the CAPEX of a shop front is eliminated, but online offerings are not without risk either. Hacking and credit card fraud is a constant challenge, as is online data theft which means a number of preventative measures need to be implemented before start of business. This includes full disk encryption and hard-drive encryption, this reduces chances of database hacking and it preserves sensitive information, such as credit card numbers.

We’ve barely touched on retail business challenges, there is also an abyss of hidden risks that would need to be negotiated. Do you still want to open that store?

Tune in to Dragons’ Den SA tonight on Mzansi Magic at 19:00 to find out more about the complications of the retail space.

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