By Karen E. Klein Q: I want to open a specialty gift boutique in time for the holidays. What advice can you give me so I can get off to a great start?
---- M.M., Santa Rosa, Calif.
A: The best startups are those that have months of research, thought, and planning -- and adequate financing -- behind them. So, if you've done your homework and won't be opening your doors on a wing and a prayer, you've already accomplished a lot.
If you haven't put exhaustive time and effort into researching your concept, evaluating how viable it is, and learning everything you possibly can about your competition, do that now. While catching holiday shopping season is certainly important to many gift businesses, don't let pressure to open make you rush into something you're not ready for or don't have the capital to do right.
Before you open, make sure you're starting with the right mix of inventory, experts say. Because small specialty stores are usually limited by physical space and available capital, it is important to tailor your concept to operate within a relatively narrow niche, so that your selection can be as good or better than your competition. What are your rivals offering? Can you sell something they can't? How are they doing? Keep your concept focused and do it better than anyone else locally.
Another important inventory point is making sure that your merchandise mix allows for higher-ticket items. More expensive products will give you the markup you need to cover your basic occupancy expenses. You can't expect to cover increasing costs through increased volume alone, since boutiques and smaller stores often survive on limited foot traffic and modest annual sales volume. "Most specialty stores use keystone [50% markup] as a guide, but it's important to price judgmentally and not by formula," says Hilary Stern, who opened the D'Ilaria Italian Ceramics shop in West Hollywood, Calif., two years ago. Make sure you aren't charging more than your competitors for the same merchandise, she says.
LOCATION, LOCATION, LOCATION. Once you do open, your biggest hurdle will be letting people know you're there. Most small specialty stores don't have the cash to put an effective mass-media campaign into motion, and unless you can find a really on-target advertising niche (such as a hobbyist magazine or an industry journal that you know your customers read) small-scale advertising is often expensive and not terribly effective. "I sent out 2,000 postcards to a mailing list I had purchased, announcing that my store had opened and offering a first-purchase discount incentive," Stern recalls. "I got a 0% return. It was a big waste of precious startup dollars."
Instead of doing a lot of advertising, you'll probably rely on word-of-mouth, a growing mailing list, and walk-in traffic. This is why location is very important -- make sure your shop is easy to get to, has good signage, is visible from a busy street, has adequate parking, and, ideally, is in an area where there are plenty of people strolling by on their way to restaurants, theaters, and other shops. Build a mailing list by having regular drawings, contests, and special offers for your existing customers. Remember, it's their personal recommendation that will bring you the most new customers.
Finally, expect to put in a vast amount of time at the shop yourself, especially in the startup phase. The owner's personal relationship with key customers and continuing presence in the shop is very important. An owner who is not prepared to give a great deal of herself in terms of time, energy, and personal involvement is not likely to enjoy much success. Best of luck! Have a question about running your business? Ask our small-business experts. Send us an e-mail at firstname.lastname@example.org, or write to Smart Answers, BW Online, 6th Floor, 2 Penn Plaza, New York, NY 10121. Please include your real name and phone number in case we need more information; only your initials and city will be printed. Because of the volume of mail, we won't be able to respond to all questions personally.