Be your own boss. How good is a retail business?

[adbie]

I will share more of what I know (mostly first-hand knowledge from family's small biz) after my lunch appointment.

Husky, please start the ball rolling if you don't mind

[Husky]

Sure. Just to put things into perspective, most of my experience/knowledge of the retail industry I have comes from working in retail chains. Adbie, I think it will be quite a complete picture after you share what you know about family businesses. Where shall we start? Hmm... Okay, I think I know what.

A lot of my friends have been asking me why don't I start my own retail pharmacy? Be your own boss, they say. Not that the idea didn't cross my mind, but I have yet to come up with a good strategy to compete with the giants.

Typically, people think that the giants tend to charge higher prices compared to private retailers. That doesn't apply for my industry (healthcare) though. Walk into any shopping complex and chaces are you will find at least one pharmacy from W, G or U. The most effective way for a distributor to reach the consumers would be to get the three major chains to sell his product

Pharma companies typically give chain stores better cost prices and also pay extra money to have their products displayed in prominent spots. This allows the chain stores to actually sell things at a lower cost than private retailers.

Not impossible but it's really quite tough. Any good suggestions?

Originally Posted by adbie

I will share more of what I know (mostly first-hand knowledge from family's small biz) after my lunch appointment.

Husky, please start the ball rolling if you don't mind

[adbie]

My parents operate a small retail shop in a small neighbourhood. Income used to be quite comfortable, especially considering the fact that they are uneducated. But because they are older now, they have to hire some relatives to help and thus earn less now, but still more than enough to get by.

I said their income is "quite comfortable". How comfortable exactly? I won't give numbers, but I'll say this: if I had started out like them instead of becoming a salaried employee, I would be making more.

Moreover, they had some opportunities to expand their business, start more shops, and even move up the value chain by becoming distributors, wholesalers and even importers. But they didn't. They were in a comfort zone and decided not to take the risks. In hindsight, if they had gone ahead, chances are good that they'll be making even more- some of their suppliers are good examples.

In terms of income, I would say running a small neighbourhood retail shop is almost equivalent to an above-average working professional. And you get to enjoy the freedom and have control to do what you think is right for your business, be it in expansion or in utilising modern management and technology.

Why didn't I take the plunge? I would like to. But thanks to being "educated" and being "too aware" of the (small) risks, my plan is to save up first, just in case. I'm giving myself 5 years.

Being educated also introduce another complication: opportunity cost. Will I miss being a salaried working professional, the monthly pay that's auto-credited in my account, and the annual leave?

Hopefully the fire in my belly does not die.

[bjhchong]

adbie: you have many options & is currently in your own "comfort zone"... my guess is you don't belong to the "hungry, anything goes" category

If I were you, I'd rather do what I like (while making my salaryman pay) at night & hope something blossom... at least there's no pressure there...

[Husky]

Originally Posted by adbie

In terms of income, I would say running a small neighbourhood retail shop is almost equivalent to an above-average working professional. And you get to enjoy the freedom and have control to do what you think is right for your business, be it in expansion or in utilising modern management and technology.

What's your idea of average working professional income?

Originally Posted by Husky

What's your idea of average working professional income?

My guess is 7k. And I agree with poster that many retailers - those that survive - earn more than that. The problem is survival.

7k is too high. Its more like 4.5k to 5k which is the CPF cut off for self-employed.

The safest retail businesses are in neighbourhood shops with low rental but high sales, esp those selling necessity goods like food and groceries. you can find them in "small neighbourhoods" like mentioned above. Not so safe are those with high rentals like in major malls and big town centrals, eg toa payoh central and jurong central. But high rental usually means high human traffic, so unless sales and margin are good, risk is high.

Sorry, to continue: worst are those with bad locations but high rental, eg some shops in big malls.

So all in all, it's possible to make good income as a small retail operator, but watch your risks. To make big income, you have to expand and move up the chain like what above poster mentioned.

[bjhchong]

Retailman,

That about boils down to mama-shop or chup huay tiam kind of business, isn't it?...

Thing is, there's easy entry to be reckon with, others will see the easy model & latch on (to your neighborhood)... soon you will be in the middle of a price war, etc., won't you?

Besides, although it would seem a simple model to take. From what I can observe from my friend's parents' shop, it has a wide range of issues to handle: distributor for goods, how to compete with the NTUC/Giant/Carrefour, the 7 days week, customer-loyalty, shop-lifting, vandalism, etc, etc...

Ah well, theorists like me, always have a criticism for any stuff... Perhaps it is a risk thing to take (these competitors and all)... I guess I am a bit chicken-hearted about participating in a retail business.