Wondering how to start a department store? We take you step-by-step from start to success.
The Big Box Challenge
Department stores typically conjure up images of big box retailers or anchor stores at the local mall. Clearly, names like Target and Macy's are market leaders in the department store sector of the retail industry.
But in its simplest form, a department store is a retail establishment that offers a range of options in a variety of product categories or "departments". When seen from this perspective, the idea of launching a department store startup becomes more manageable and less intimidating for entrepreneurs. Although your ultimate vision may be a chain of big box or anchor stores, for now it's important to scale your vision to fit within your capital and operational parameters.
Department Store Value Propositions
Before you do anything else, think about the things that make your department store unique. With so many entrenched competitors in the marketplace, you'll need a unique value proposition to compete. Price is probably not a competitive option because the big box chains can buy larger lots at lower costs.
So if you can't compete on price, you'll have to compete on service and products. You can specialize your store to focus on consumer segments (e.g. kids and families), merchandise quality (e.g. only luxury products), or product categories (e.g. a media and electronics department store). Whatever specialization you choose, conduct research to determine whether there is adequate market demand for your business model.
Department Store Space Requirements
Department stores took a hit during the recession and many department retailers closed their doors for good. Although that knowledge can be scary for an entrepreneur trying to launch a department store, the upside is that there are probably multiple department store spaces available for lease in your local area.
A short-term lease with an option to renew for a longer term is ideal for department store startups. However, most landlords are hesitant to offer attractive pricing on short-term leases. If the space has been vacant for a while, you can use that information to negotiate more favorable terms for space located in malls or outlet centers.
Best Practices for Writing a Department Store Business Plan
You know that a business plan is important. The only problem is that you don't have any idea how to write one.
Fortunately, you don't have to tackle your department store's business plan by yourself. These days, there are tons of great resources and solutions available to support the business plan writing process.
Our Business Plan Help section discusses some of the business plan resources other entrepreneurs have found useful.
For the most part, department stores target local customers. You may think you know your community well, but it's worth doing some additional homework on your area. How will potential changes impact your new department store? Does the community have the right demographics to support your new business? Great demographic data can be obtained from the Census Bureau, so that is a good place to start any site location research project.
Don't Overlook the Competition
Prior to opening a department store within your community, it's a smart move to determine what the competition looks like. We've provided the link below to help you find competitors in your city. Complete the form by entering your city, state and zip code to get a list of department stores that are close by.
Is the local market large enough to support another department store? If not, you had better be sure that you are doing things much better than the competition.
Talk to People Who Are Already in the Business
If you are seriously contemplating launching a department store, it's essential that you learn as much as you can from somebody who is already in the business. If you think your local competitors will give you advice, you're being overoptimistic. The last thing they want to do is help you to be a better competitor.
On the other hand, an individual who has a department store outside of your community may be willing to share their entrepreneurial wisdom with you, given that you don't compete with them in their area. In fact, they are often very willing to share startup advice with you. In my experience, you may have to call ten business owners in order to find one who is willing to share his wisdom with you.
How does one go about finding an owner of a department store in another city who you can speak with?
Simple. Let your fingers do the walking by using the link below.
Benefits & Drawbacks of a Department Store Acquisition
An acquisition can be a great way to enter department store ownership. But it's important to evaluate the benefits and drawbacks of buying a business before you decide on either an acquisition or startup approach.
BENEFITS: A good department store will deliver revenue and ROI from day one. Even more, the right department store acquisition can place you in a market leadership position from your first days as a business owner.
DRAWBACKS: On the downside, department store acquisitions can be difficult to adapt to your unique business philosophy so it's important to make sure the business is capable of achieving your ownership goals before you initiate the buying process.
Don't Rule Out Franchising
Your chances for becoming a successful entrepreneur go up significantly if you go the franchising route and leverage their successful brand and track record.
Before starting a department store, you ought to investigate whether purchasing a franchise might help you on your entrepreneurial journey.
The link below gives you access to our franchise directory so you can see if there's a franchise opportunity for you. You might even find something that points you in a completely different direction.
These additional resources regarding starting a business may be of interest to you.
If you sell to department stores, this isn't the right place for you. These resources are more appropriate for you:
If you are interested in starting a different kind of business, please browse our directory of guides below.