The retail industry has had many changes as technological advances have developed over time. No longer are mom-and-pop shops strong enough against large competitors. The biggest shift happened when Amazon emerged as the largest retailer online. Rather than going to a brick-and-mortar store, consumers do not have to leave their home to find and easily compare products to purchase.
Despite these constant changes in the retail space, there is still opportunity for growth in specialized stores with more depth and less breadth. One example is in the pet space. Many pet owners want to visit a store to physically see and feel the products available as they may not be able to trust it online, or get the product they are looking for on time.
Retail stores have also become more attractive by also offering additional services related to that specialized field. Like the example above in the pet industry, some pet stores can sell supplies along with services like grooming so it is a one-stop-shop for the pet owner. Most retail stores focus beyond products but also the services.
Within the retail category, it is important to understand the inventory and sales processes. Retail franchises are much stronger options compared to mom-and-pop shops as they usually have a recognizable brand or style that consumers would be more comfortable with. You will also have the support and systems in place from franchisors to support you if you have minimal business experience in the retail space.
Through our online business platform Vetted Biz, we have reviewed and analyzed over 2,900 businesses and franchises. For the businesses we have studied in the retail space, we have seen a range of investment amounts that can start at $54,000 and can go all the way up to $1.5 million. Based on the retail business you decide to choose, it can be a very large retail space in a high foot-traffic location, or a small shop in a local neighborhood. Additionally, in our research, the average royalty fee was around 5.7%, and the average marketing fee is 2.5%. When studying the SBA analysis for the 7(a) loans disbursed from 1991-2019, franchises in the retail industry had a paid in full rate of 50.29% and a charged off rate of 14.91%. Although it had the highest charged off rates compared to the other industries, its paid in full rate was relatively better compared to the other industries. What is more important to understand is the specific business within the industry and how it can do in the future.