How to start a retail business in India?
16 August, 2024
Synopsis:
The Indian retail business sector is experiencing rapid growth, fuelled by the expansion of online services.
Comprehensive market research is the first step in starting a retail business in India.
Starting a retail business in India involves significant costs. Thus, securing adequate funding and planning your finances becomes imperative.
Starting a retail business in India can be a lucrative venture with significant growth potential. Retail businesses involve buying goods from manufacturers or wholesalers and selling them directly to consumers, with the retailer acting as the intermediary. Whether you opt for an online platform or a traditional brick-and-mortar store, there are key steps and considerations to ensure your success.
This guide will walk you through the steps of how to start a retail business in India.
Understanding the Indian retail landscape
The Indian retail business sector is experiencing rapid growth, fuelled by the expansion of online services like e-commerce and digital banking. These advancements have made it easier for entrepreneurs in both urban and rural areas to start a retail business in India. E-commerce giants have paved the way for simplified online business models. Launching a personal website has also become increasingly cost-effective. Additionally, obtaining Business Loans has become more affordable and accessible.
Conducting market research
The first step in starting a retail business is to conduct comprehensive market research. The retail sector is highly dynamic, with frequent changes driven by new product innovations, shifts in consumer behaviour, inflation, and demand and supply. Therefore, it is essential for a new Indian retail business to thoroughly research and understand these variables.
You can begin by identifying what your potential customers are seeking within your niche category. Compare these needs with what your competitors are currently offering to effectively position your products. This can help you identify gaps in the market and capitalise on opportunities.
Understanding your target market is crucial. Determine who your customers are, where they shop, and their purchasing power. This can guide you in pricing your products competitively and appropriately.
Consider the type of shopping experience your customers expect. Designing an immersive and pleasant user experience, whether for a physical store or an online platform, is crucial to attracting and retaining customers for the long haul.
Gaining clear insights into these aspects before starting a retail business can help you establish a suitable marketing strategy that resonates with your target customer base.
Business registration and licensing
Starting a retail business in India requires acquiring several licenses and registrations. Here’s a simplified guide to obtaining the necessary licenses and registrations for a retail business:
Business entity registration: You need to register your retail business with the Ministry of Corporate Affairs (MCA). A retail business in India can be registered as a sole proprietorship, Limited Liability Partnership (LLP), partnership, or company. You can visit the MCA website to download and complete the registration form for your specific type of business.
Trade license: An Indian retail business must obtain a trade license from the local municipal corporation or state government. There are different types of trade licenses, including shop, industrial, food establishment, and drug licenses, among others. For example, an Indian retail business dealing in food may require an industry-specific license, such as the Food Safety and Standards Authority of India (FSSAI).
Goods and Services Tax (GST) registration: If your retail business has a turnover exceeding ₹40 lakh (or ₹20 lakh in special states like Puducherry, Sikkim, Nagaland, Mizoram, Tripura, Meghalaya, Arunachal Pradesh, Manipur, and Uttarakhand), you must obtain GST registration. In the case of e-commerce operators, all businesses are required to register for GST, regardless of their turnover. You can register for GST at the official GST Portal - www.gst.gov.in.
Permanent Account Number (PAN): A PAN card is necessary for starting a retail business. It is essential for opening a bank account, filing an Income Tax Return (ITR), filing a GST return, etc. A retail business in India can apply for a PAN card online through the National Securities Depository Limited (NSDL) or UTI Infrastructure Technology and Services Limited (UTIITSL) websites by filling out Form 49A.
Tax Deduction and Collection Account Number (TAN): If your business deducts Tax Deduction at Source (TDS), you need a TAN. This number is required under Section 203A of the Income Tax Act, 1961. You can apply for TAN on the NSDL or UTIITSL websites.
Shop and Establishment Act license: An Indian retail business must be registered under the Shops and Establishments Act. This applies to all retail businesses in India employing full-time, part-time, and contract workers. Businesses can submit an application to the State Labor Department for registration, along with documents such as proof of address and identity, PAN card, and other details.
Professional tax registration: Obtaining a professional tax registration is essential within 30 days of starting retail business activities.
Certificate of Occupancy (CoO): The CoO can be obtained after an inspection of the property’s fire safety standards, plumping, and electrical systems. The certificate confirms that your business property complies with safety standards and is fit for occupancy.
Read also: How to do MSME Registration Online
Securing funding and financial planning
Starting a retail business in India involves significant costs, including inventory, equipment, staff salaries, and marketing. Securing adequate funding and planning your finances effectively is crucial for a successful launch. Here are some funding options to consider:
Micro, Small, and Medium Enterprises (MSME) Loans: MSME Loans are specifically designed to support new and growing businesses. These loans offer quick access to finance with minimal paperwork, allowing you to start your retail business with fewer hurdles. MSME loans typically feature competitive interest rates, which helps your business maintain profitability while repaying the loan. Additionally, the flexible repayment terms provided by MSME Loans make it easier to manage your finances and adjust payments according to your business's cash flow.
Self-financing through personal savings: Using personal savings to start your business is a practical option, particularly for smaller ventures that require relatively low capital. This eliminates interest payments and offers better control over your business. However, it may pose challenges if you plan to expand your business in the future. As your business grows, you will eventually require additional capital, and your savings may not suffice.
Also read: A Complete Guide on Business Loans for MSMEs
Setting up the retail store
Here are some steps for starting a retail business:
Find manufacturers: Identify affordable manufacturers or suppliers from whom you can purchase products in bulk. Look for quality products at competitive prices to keep costs under control.
Choose a location: For a brick-and-mortar store, selecting the right location is crucial. It is important to opt for a site that is popular and frequented by potential customers to maximise visibility and traffic. Consider the cost of renting or purchasing the property and factor this into your business plan.
Explore online options: If you are starting an e-commerce Indian retail business, you have two options - established online platforms or launching your website. Established e-commerce platforms can simplify the setup process and may offer built-in tools for managing your store. This can greatly reduce the need for hiring technical expertise, but it may come with monthly fees and commission of sales. On the other hand, setting up your own website can provide you with greater autonomy and control but may present technical challenges.
Purchase equipment: You must acquire the necessary equipment to operate your business effectively. This includes packaging machines, storage facilities, and any other tools required for day-to-day operations.
Hire staff: You need to recruit staff to manage various aspects of your retail store, including security, marketing, advertising, and customer support. You also need to train your staff to ensure your business runs smoothly and your target customers get the best experience.
Advertise: Developing a marketing strategy to promote your store and attract customers is essential. You can use a mix of advertising methods, including newspaper ads, online promotions, social media, and word-of-mouth, to increase brand awareness.
Also read: - 8 Great start-up business ideas you can consider in 2024
There are many advantages of starting a retail business today, with the industry poised for significant growth in the next few years. Advances in technology and streamlined financing processes have made it easier than ever to open a retail store. With the right planning and execution, you can capitalise on ample opportunities and achieve success in this thriving market.
Now that you know how to start a retail business do not hesitate to take the plunge. Explore HDFC Bank’s MSME Loans to kickstart your retail business in India.
Disclaimer: *Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.
