Electrical retailers sell 'white' and 'brown' electrical goods, mainly to domestic customers. They might also offer extra services like installation and repairs. Our practical guide will help you start up and run your own electrical shop.
- Research your target market
- Selling on eBay and Amazon
- Decide what to sell
- Promote your shop
- Establish your customer profiles
- Price your products
- Buy an existing business
Research your target market
When you plan your electrical goods shop it's important to understand your market, and to make an assessment of the amount of existing competition. Doing some market research will help you with this.
You will need to check that there's enough demand for your proposed electricals shop in your area. Firstly, check out the competition. Count how many outlets already sell electrical goods in your area. Remember to include:
- large chain stores - particularly the specialist Currys/PC World
- department and variety stores such as Debenhams, Argos, Boots, Wilko and John Lewis
- 'pay-weekly' credit-based retailers like Brighthouse
- large format supermarket outlets that sell electrical goods - particularly large Tesco stores
- other independent electrical retailers and market stalls in the area
As well as your local competitors, you'll face very strong competition from e-commerce retailers. These retailers often advertise very low prices. Some trade on eBay and/or on Amazon Marketplace. Ao.com (previously Appliances Online) is a very large specialist online electrical retailer selling goods at highly competitive prices.
Once you've checked out the competition, think about how much demand there's likely to be. Find out as much as you can about the local population - are local people wealthy, young families or retired people, students and so on. Is the local population stable, increasing or falling? How far can you expect people to travel to your shop? Will you expect people to make a special journey, or do you intend to rely more on passing trade?
Generally, for a retail outlet such as an electrical shop, it is best to have as much passing trade as possible. If you are planning to set up in your local town or city then ideally you will want to locate your shop as close to the centre as possible. The cost of doing this may be prohibitive, in which case you might consider setting up in a suburban shopping precinct. These have the benefit of a fairly large number of customers visiting them each day as well as more affordable premises costs. Out of town retail parks may also be relatively inexpensive and offer plenty of space. They are often popular with the large chain stores though, so you could end up with tough competition on your doorstep. Alternatively, a market stall may be a cheaper way of securing a good location if you plan to stock smaller items.
Setting up in a large town or city will inevitably mean that you face stiff competition from established outlets. Competition may be less fierce in small towns and villages. Although the customer base will be smaller, you may find that without competitors you are able to sell a wide range of products to the local people.
Other things to consider when choosing your location include parking facilities (which are especially important if you intend to sell large items) and local crime rates - electrical goods are attractive to thieves and you don't want to have to cope with excessive levels of shoplifting, break-ins and theft.
Why will customers choose your shop
Make sure that enough customers will choose your shop rather than other existing outlets. Check out the competition to see:
- what type of goods they offer
- whether they sell a wide range of goods or specialise in some way
- whether they offer delivery and installation
- whether they offer repairs and servicing
- what prices they charge
- what their opening hours are
- what type of customer they attract
- whether the premises and fittings are modern and smart
- how helpful and knowledgeable their staff are
Your market research might indicate that there is a gap in the market that your shop can fill. Perhaps none of the shops in your area stock high quality audio separates, for example.
Bear in mind that most people buying household appliances will shop around and look online to get the lowest price. Some may visit your store to check out what they're looking for, then go online to buy it. Competing against large stores like Currys/PC World and major online retailers like Ao.com will be difficult as they buy in bulk and are able to offer very low prices. So even if you cannot identify a clear gap in the market, specialising may be the best way to persuade customers to choose your shop - especially if you stock items not generally available in the larger stores.
Find out what people want
Small independent electrical retailers face tough competition from large chain stores, online retailers and other non-specialist outlets. So it's very important that you find out what people want and whether there are particular goods or services you can offer which will attract customers to your shop. You could carry out some surveys of the people in your local area to find out:
- what type of goods they would like you to stock
- what opening hours would suit them best
- if there is a demand for a repair service
- if there is a demand for any other services - for example servicing and installation
- what they think of your proposals in general
- what, if anything, they don't like about the existing electrical goods shops in your area - for example lack of specialist items and advice, or an intimidating atmosphere
Research current trends, plus legal and tax issues
- Shopping in electrical shops
- Legal issues for electrical shops
- VAT rules concerning electrical shops
Selling on eBay and Amazon
Selling online can be an excellent way of reaching new customers and boosting your sales. But setting up your own ecommerce website can be expensive and you may not be sure at the beginning whether the value of the sales you'll make online will justify the set-up costs.
As an alternative, trading on eBay or Amazon lets you get a feel for selling online but with much lower start up costs. And you may decide to keep on selling through eBay and Amazon even when you have your own online shop.
You might already have your own personal eBay account that you use to buy items for yourself and to sell things that you don't need any more. But if you're trading as a business on eBay you're legally obliged to make it clear in your listings that you're a business seller. This means that you'll either need to register a new business account or upgrade your personal account to a business one. There's guidance in the eBay Seller Centre on the definition of 'trading' if you're not sure whether you need to register as a business seller.
Similarly, with Amazon you can use an existing account or create a new one when you register as a business seller.
If you're not already running a business and you intend to start selling things on eBay or Amazon - perhaps just in a small way to begin with - then you'll need to notify HM Revenue & Customs (HMRC) that you're trading. There's guidance on the Gov.uk website that gives an overview of what counts as trading and what counts as self employment. It also gives details of your tax and record keeping obligations.
Decide whether to have your own virtual 'shop'
Having your own virtual storefront will give your business a valuable online presence and will allow you to display all your products together in one place.
When you sign up to sell on eBay, you have the option of setting up an eBay Shop. This allows you to create your shop using an existing template or to customise it to your own design. You don't have to choose the eBay Shop option straight away - you may decide it's best to wait until your monthly sales build up to a certain level and then upgrade.
With Amazon, you'll automatically create your own storefront regardless of the package you choose. You won't be able to customise it very much but you will be able to add your name and logo and provide some information about your business.
How much does selling on Amazon and eBay cost?
Before you start selling on Amazon and eBay it's a good idea to find out how much you'll have to pay in fees. Depending on the items you sell and the method you choose for selling them, your total fees can be quite substantial. And while some of the fees you pay will be linked to the number of items you sell each month, others are likely to be fixed costs which you incur even if you don't sell anything.
Both eBay and Amazon give you the option of selling as a business seller without paying any fixed monthly fees, although it's usually more cost-effective to choose a subscription-based package unless you're only selling a small number of items each month.
The eBay website has a fee illustrator tool and a fee calculator that will help you compare the fees for different selling methods and get a good idea of how much your actual per-item selling fees are likely to be.
The Amazon website gives detailed fee guidance, including some examples of pricing for their subscription and non-subscription packages.
Managing your listings
Uploading your inventory to eBay or Amazon and managing your listings can be a time consuming task, particularly if you're planning to sell a large number of items.
Both eBay and Amazon offer useful listing tools, some of which are free and others that you'll have to pay for.
Promoting your items
Because there's such a huge number of items for sale on eBay and Amazon at any one time, it's very important that you do everything you can to stand out from the crowd.
Always make sure that your listings include accurate, spell-checked descriptions and that your photos and other images show the items that you're selling in the best possible light.
You might want to take it a step further and use the various marketing tools provided by eBay and Amazon such as search optimisation, cross-promotions and paid-for advertisements.
As an eBay or Amazon seller your online reputation is extremely important. All sellers have a feedback score based on actual customer feedback and this is the main measure that future customers will use to check that you are trustworthy and reliable.
So you'll want to keep your rating as high as possible by providing an excellent level of customer service and fast delivery at reasonable prices. Make sure you always respond promptly to customer queries, deal with returns efficiently and keep an eye on your stock levels to avoid your listings showing an item as being in stock when it has sold out.
Be aware that packing up orders and sending them out can be time consuming, but it's important to stay on top of the job to make sure that the right items get delivered in good time to the right people. Very many parcel delivery services now offer bulk shipping tools that integrate with your eBay or Amazon account and these can greatly simplify the process of arranging and tracking your deliveries.
If you're selling on Amazon you might also consider using the Fulfilment by Amazon service, where you send Amazon your inventory and they do all of the picking, packing and shipping as well as providing customer service.
The eBay and Amazon websites have a great deal of useful guidance to help you get started as a business seller and to expand your business as demand for your products grows. Both also have lively seller community forums where experienced sellers are often happy to answer questions.
Decide what to sell
Electrical goods are often referred to as 'brown goods' (audio equipment, TVs, home cinema equipment and so on), 'white goods' (ovens, refrigerators, washing machines and so on) or small domestic appliances (for example kettles, irons and hairdryers). Some shops concentrate on just one group of goods, while other shops stock all types. Bear in mind that the amount of room you have may restrict the range of goods you are able to stock - large domestic appliances take up a lot of space. If space is at a premium, you may decide to have a display range of larger items that your customers can choose from. You'd then order the goods from your suppliers and deliver them to your customers.
The range of goods that you sell will depend on the type of shop you intend to run. Trying to stock a wide range of goods to cater for everybody will put you in direct competition with large chain stores - particularly Currys/PC World. As they buy in bulk, it will be difficult to match their prices, so you might be better off specialising. Your research may have identified a niche in the market that your shop can fill. For example, you might decide to specialise in office equipment or car audio and alarms. Stocking brands that are difficult to obtain elsewhere (for example up-market audio equipment brands) could also attract customers to your shop.
You could also consider dealing in secondhand, reconditioned/refurbished or ex-rental items.
The range of goods you stock might include:
- audio equipment (including portable stereos, MP3 players and headphones)
- televisions and set-top boxes, sound bars, wireless speakers
- home cinema
- digital video recorders, camcorders, digital cameras and photo printers
- DVD players and recorders
- games consoles
- tablets and e-book readers
- microwave ovens, cookers, refrigerators and freezers
- washing machines, tumble dryers and dishwashers
- heaters, dehumidifiers and fans
- vacuum cleaners
Small domestic appliances
- kettles, toasters, food processors, coffee machines
- irons, hair dryers, shavers, electric toothbrushes
Office equipment, car accessories and other items
- telephones, mobile phones and answerphones
- car stereos and alarms
- computers, laptops, tablets, printers and software
- accessories including fuses, batteries, scart leads and so on
An increasing number of entertainment items and domestic appliances are now connected to the internet so that they can be voice or remotely controlled.
Although most of your income is likely to come from the sale of electrical goods, any additional service that is not available elsewhere will help to bring in customers and extra income. If you sell large household appliances and television equipment, think about offering a delivery, installation and set-up service - as well as old appliance removal and recycling. You might also consider offering repairs and servicing. If you are unable to provide repairs and servicing in-house, you could consider subcontracting the work out to a specialist. Customers may value advice on installing the latest ranges of smart devices such as internet-connected lighting and audio systems or kitchen appliances.
Brown goods are often purchased as gifts and consequently sales are usually highest during the weeks leading up to Christmas. If you sell these kinds of goods, make sure that you have enough stock to cope with demand at this time of the year. Sales of domestic appliances are likely to be less seasonal, although sales of most electrical goods tend to fall over the summer period as people spend their money on holidays instead.
An exception to this can be small items such as kettles, toasters, irons and so on. These are quite popular as wedding gifts and sales may increase a little during spring and summer when most weddings take place.
Sales of a few items are very seasonal - for example office fans during the summer, heaters and electric blankets during autumn and winter.
Promote your shop
One of the challenges that independent electrical specialists face when competing against big chains like Currys/PC World and well-known online retailers is the perception that they offer bad value, and that they don't stock the latest gadgets and equipment. It's very important to get the message across to potential customers that they'll get the best service and the best deals on the most up-to-the-minute goods by visiting your shop.
The right image
It is important that your shop projects the right image. Providing a helpful service is a vital part of creating a good image. Aim to offer a high quality, friendly and knowledgeable service, which will help to differentiate your shop from its competitors. Make sure that you and any sales staff are knowledgeable about items stocked and able to advise customers as to which is most suitable for them. Also make sure that:
- the outside appearance of the shop is smart
- the interior is clean, tidy and attractively fitted out
- the window displays are changed regularly to attract passing trade
- demonstration models are available for customers to inspect and try out
- signs are used to draw attention to new ranges or special offers
- staff are neatly dressed and behave in a friendly and helpful manner
Advertising your shop
You'll want to make sure that your potential customers know about you and the products and services you offer.
The window display and external signs can inform and attract passing trade but it may be beneficial to take out advertising to reach a wider audience. You could advertise your shop in the local press or on Yell.com. Your advertisements should emphasise any special services offered, brands stocked or other features that distinguish your shop from the competition.
If you specialise in radio equipment, audio separates or in-car audio equipment, you could try advertising in one of the specialist magazines dedicated to these subjects. You could also try advertising online to reach a wider market, especially if you intend to sell high quality or unusual goods which would not be widely available elsewhere. Consider using social media, forums and blogs to raise the profile of your business and keep in touch with customers. Having your own website can be a good advertisement for your business - and even an additional sales channel if it's ecommerce-enabled.
Establish your customer profiles
Your customer base will be influenced to a certain extent by the type of electrical goods you sell, but is likely to be mainly local people, with some passing trade (if your business is predominantly premises-based). Most of your customers will be shopping specifically for electrical goods, but some will just happen to be passing your shop - hence the importance of a good window display.
The extent to which your shop specialises may also affect your customer base. If you become known as a supplier of high quality or unusual items, you will attract customers from further afield. Of course if you decide to sell online from your own ecommerce website and/or through eBay or Amazon, your potential customer base will also be much wider.
When deciding what to sell it is worth bearing in mind that certain items are typically popular with younger buyers (for example video games and headphones), while domestic appliances are often required by first time house buyers for whom price will be all important. More expensive items are likely to bought by older, more affluent people looking to upgrade their sound system or television for example. So you could try to choose the range of goods you stock to match the type of people who live in your area. Your market research will have helped you to identify any gaps in the market and the type of customer you can target.
You could also check to see whether there are any hotels or nursing homes nearby that you could supply. They will occasionally need to purchase goods such as televisions, telephones or irons in large numbers.
Price your products
Getting the price right is very important. You must make sure that the difference between the cost price and the selling price is enough to cover all of your operating costs, including your own drawings.
Mainstream electrical products at the cheaper end of the market are usually very competitively priced. Customers often shop around and look online for the best prices, so you may have to charge in line with your competitors. Large stores such as Currys/PC World often advertise a range of popular products at very low prices and these tend to be used by the public, as well as by many retailers, as a benchmark.
If you're going to sell from a shop and online think about whether you will have a two-tier pricing policy or use the same prices both in your shop and on the website. If you need to sell at lower prices online - perhaps to compete with other online retailers' prices - then think about what you will do if people come into your shop and ask to buy something at your web price.
Consider the following points when setting your prices:
- what do your competitors charge for similar items?
- will you aim to compete on price? It will be very difficult to undercut large online retailers and the multiple chain stores that enjoy bulk discounts from their suppliers. If you are able to match their prices, you may achieve extra sales but will your business be able to survive on slender profit margins
- do you really need to discount? If your shop aims for the upper end of the market, you may not need to discount. People expect to pay high prices for quality items and you may be the only shop in the area selling a particular range of household appliances or brand of audio equipment
Special offers and discounts
Sales are traditionally held in January and these are an excellent opportunity to clear out old stock and slow moving items. Recent years have also seen pre-Christmas discounts on so-called 'black Friday' and 'cyber Monday'. Many electrical goods can become quickly outdated by new developments and even basic appliances like kettles and toasters are starting to be marketed as fashionable items. You need to try to avoid being left with old stock or you may find yourself with money tied up in goods that nobody wants. Discounting these items at any time of the year may be the only way of shifting them.
Regular discounting of items can be an effective way of moving stock, but if your periods of discounting are too frequent, you may find that customers simply wait for these rather than buying items at full price.
In addition to a January and possibly pre-Christmas sales, you might decide to try occasional special offers. For example, you might give your customers a discount if they buy several items at once. If you supply any business customers (such as hotels or nursing homes) you might offer them a discount on large orders. Many shops also give discounts to staff, regular customers, family and friends. Check out the local competition for ideas and keep a close eye on any special offers you do make to be sure that they are working for you. After all, these kinds of promotions might encourage extra sales, but they will also affect the amount of profit you make on each sale.
You might decide to offer a price-match promise to reassure your customers that they're always getting good value when they shop with you.
Buy an existing business
You might decide to buy an existing electrical retail business rather than start your own venture from scratch. Buying a going concern can mean that:
- the premises, business equipment and shop fittings are already in place
- there are established customers
- the business can generate income immediately
- suppliers have been identified and relationships established with them
- the business has a reputation and a track record, which can help if you are looking for finance
- staff are already in place
However, look critically at any business that you are interested in to make sure that the price you negotiate with the seller is a fair one. Try to establish why the business is for sale - for example, is the owner keen to retire or is there another personal reason for selling up. Be aware that, unfortunately, some independent electrical retailers are being driven out of business by very strong competition from shops like supermarkets and online discounters.
Your market research into the sector as a whole - and the locality in particular - will help you to establish whether or not the owner is selling because he or she can no longer generate enough income from the business. This may not necessarily deter you - many business people are confident that they can turn a failing business around. The important thing is to have established the current position so that the price you pay for the business is not too high.
Other matters to consider include:
- the state of the premises, fittings, equipment and so on. Will you have to spend money refurbishing or replacing assets
- the condition and value of any stock you are buying. Is the stock up to date, or are some items out of date or even obsolete? Check this over carefully before agreeing a price
- existing staff rights
- how to retain key personnel once you've taken over
- does the business owe money that you will be responsible for
- if you are paying for goodwill, to what extent does this depend on the skills and personality of the seller? Consider what goodwill would actually amount to in this trade - many of your sales are likely to be one-offs to customers who may not have any particular loyalty to the shop
Ask your accountant to look critically at the business accounts for the past three years and discuss with him or her the selling price in the light of what the accounts reveal. Make sure you budget for other professional fees such as legal fees and valuation and survey costs.