Buy Internationally Sell Locally

Buying in bulk and selling retail has traditionally been a way of going into business. Even Sam Walton, the original founder of Walmart, started that way. In the past, having a good retail business entails having good sources to supply the goods. The sources not only must be able to provide the desired goods but also do so at prices that enable retailers to make reasonable profits. Since prices drop as quantities ordered increase, this practice favors the large retailers then. Over time, many mom and pop shops were squeezed out of business by brick and mortar megastores providing almost everything under the sun at prices that the former were unable to compete.

Since the early 2000s, the entry of online giants like Amazon and eBay has changed the retail landscape. Consumers were attracted by the convenience of shopping on the internet and having the goods delivered to their homes. Many traditional brick and mortar retailers were hard hit by the wave of consumers going online for their purchases. Even then, the bulk of all purchases by consumers are still made at brick and mortar stores today. As a result, there were reports recently of online retailers opening physical stores in a reversal of the trend.

Despite these rapid changes in the retail scene, there are opportunities for start ups to get into the retail business. One change favoring entrepreneurs today is the explosion in the availability of goods worldwide for bulk purchases. The minimum quantities that a retailer needs to purchase has gone down considerably. There are many websites and forums linking manufacturers or wholesalers to retailers. However, the elephant in the room namely Alibaba dominates this area. Alibaba provides an online platform for producers of goods to sell them worldwide. Thus the small retailer no longer has the disadvantage of limited sources of supply. Due to the widespread availability of all types of goods, the price disadvantage faced by small retailers continue to shrink. Thus, one can easily purchase items internationally, at low cost to retail in the local market. Even with tariffs imposed, the low prices paid for these goods should still enable retailers to make a good margin.

With the supply problem solved, entrepreneurs can concentrate on the retail aspect of the business. This is the part that entrepreneurs can be creative. There is competition on both sides, online as well as brick and mortar. Consumers shopping on the internet have the disadvantage of not being able to touch and feel the merchandise. Thus having a physical store solves this problem though at a considerable cost. In an earlier article, I mentioned having a brick and mortar store to display products but not keep any in stock. This way, the size of the brick and mortar store can be kept small to minimize the rent.

There may be other ways of reaching to consumers to touch and feel the product without a physical store. For instance, one can organize a modern version of a Tupperware party for people to actually have experience with the product. The person organizing it can then place orders online and arrange for deliveries on the same day. There are others ways in which entrepreneurs can get consumers to overcome the disadvantage of not being able to touch and feel the product. The challenge is to get the right formula for a successful start up.

 

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