There are five types of retail ownership:
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In independent retailer is one who builds his/her business from the ground up. From the business planning stage to opening day, the independent retail owner does it all. He/ she may hire consultants, staff and others to assist in the business endeavor. The opportunities are endless.
Advantages: There are no restrictions on who, how or where an entrepreneur should set up his/her business. The freedom to do what one wants to do is the biggest advantage in this form of business. It can be extremely fulfilling.
Disadvantages: Because of the ease and flexibility of getting started, there can be a lot of competition in a particular area for a certain type of customer. Every business decision rests on the owner(s). There is no branding, no preset guidelines and a great deal of risk in this business model.
Support: Other than small business resources online, in print or sponsored by the various government and trade organizations, there isn’t much in the way of support for the independent retailer.
Existing Retail Business
Someone who inherits or buys an existing business is taking ownership and responsibility of someone else’s hard work. The foundation has already been laid.
Advantages: The biggest advantage to buying an existing business or taking ownership of an already established retail store is time. The time to build a customer base, the time to establish branding, and the time it takes to establish credit are generally all past which means most of the hard part is behind the new owner.
Disadvantages: The existing business may have a negative image or reputation that will take a lot of time to undo. Loyal customers may not like the change of ownership. Previous owners have caused problems by opening a competing business.
Support: A well-established business will usually have a written set of procedures or policy manual. Staff members already in place have the knowledge to help guide a new owner.
Purchasing a franchise is buying the right to use a name, product, concept and business plan. The franchisee will receive a proven business model from an established business.
Retailers may find the business model of a licensed dealership as a mix of franchise and independent retailer. The licensee has the right (sometimes this is exclusive) to sell a brand of products. Unlike a franchise, the dealer can sell a variety of brands and there generally no fees to the licensor. Dealerships may or may not be identified as an authorized seller or by the company’s trademark.
Advantages: All of the business operation processes have been established. The franchisee receives help from a network and customers may already familiar with the name. The marketing strategy has already been put in place. Most all of the risk associated with starting a retail business has been reduced.
Disadvantages: Franchisees pay a fee, or royalty, based on sales each year. Startup costs relating to the franchise may be high. One of the biggest disadvantages of owning affranchise is the lack of flexibility and freedom.
Support: Franchisors usually provide all the marketing, training and ongoing support needed to run a successful business.
Multilevel marketing (MLM) or network marketing is a business model where the selling of products depends on the people in the network. Not only is a product being sold, but other salespeople are being recruited to sell that same product or product line. It’s probably not a type of business one would initially consider when discussing retail businesses, but Amway used this model quite successfully for many years.
Advantages: Generally very little startup funding is needed to operate this type of business. Network marketing provides freedom from conventional retailing businesses and offers a greater interaction with all types of people. For those willing to invest the time, huge profits can be made.
Disadvantages: Too many unscrupulous multilevel marketing schemes exist. Some systems require their dealers to be more interested in recruiting new members than in selling the products to consumers. It may be difficult to operate without a storefront. ü Support : Most network marketing systems offer motivational materials, training and support.