Ask These 8 Questions to Decide Whether It’s Time to Open a Second Retail Location

Hw to Know When to Open a Second Location

In 2017, we read a lot about big retail chains closing stores. But for small retailers, it may be a different story. A whopping 98% of all retail locations are small businesses, according to the National Retail Federation. If your store is thriving, could now be the time to expand into a second location?

Knowing When to Open a Second Location

In a shifting retail landscape, it’s vital to consider all the factors carefully before you open a second store. Here are some questions to ask yourself.

How strong are your sales? Don’t even think about expanding to another location unless your sales are growing consistently for an extended period. Otherwise, you could be basing your move on a fluke, such as one busy season or a particularly popular product line you just added.

Have you maxed out your current market? If you don’t feel there are any more potential customers in your area who aren’t already shopping with you, that could be a sign that it’s time to grow.

Do you have customers coming from far away? If a significant number of your customers are willing to drive long distances to your store, then a second store where they’re coming from could potentially be successful.

Is your store in a market area large enough to support a second store, without cannibalizing your first location? Opening your second store in an area where your initial store already has name recognition can boost your chances for success.

Can you afford a second location? It’s important to create a detailed business plan for your second location to make sure you aren’t stretching yourself too thin financially. Even though you’ve done this before, don’t assume everything will go exactly the same (or cost the same) as when you opened your first store.

Do you have time for a second location? Think back to when you opened your first retail store and how busy you were. Will you be able to stretch yourself between two stores, or do you have a capable second-in-command who can handle the original store while you focus on the new one? Keep in mind that once your second store is up and running, traveling between two locations may not be practical, so you will need to be comfortable delegating to a store manager for at least one location.

Speaking of delegating, do you have staff members who are willing to transfer to the new store? If not, do you feel confident that you can hire and train people to create the same customer experience as your first store?

How will the second store compare to the first? Every market is different, so don’t assume you can launch a carbon copy of your first store and succeed. You may need to adjust the marketing message, product mix, or service level to the new location’s target customers.

One way to test out a potential second location without a lot of risk is to try something temporary.

  • Pop-up shop: Pop-up shops are short-term retail experiences that typically run six weeks or so. You can look for a vacant storefront for your pop-up shop or see if you can hold your shop in a complementary retailer’s store. For instance, if your store sells handcrafted jewelry, you could find a women’s clothing boutique or other retailer targeting the same market in the new area you’re considering, and see if they’ll let you do a pop-up in their store.
  • Mall or shopping center kiosk: With the holiday shopping season approaching, this could be the perfect time to test the waters in a temporary kiosk. If the second location you’re looking at is in a mall or shopping center, see if they have kiosk options available.

Have you considered all these factors and still aren’t sure whether a second location is the right decision? If you’re not already doing so, expanding into e-commerce could be a lower-cost option that could capture an even bigger market share.

Photo via Shutterstock

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Rieva Lesonsky Rieva Lesonsky is a Columnist for Small Business Trends covering employment, retail trends and women in business. She is CEO of GrowBiz Media, a media company that helps entrepreneurs start and grow their businesses. Visit her blog, SmallBizDaily, to get the scoop on business trends and free TrendCast reports.

One Reaction
  1. You’ll know that it is time to open a new location if there is a new demand for your service. You’ll know it when your customers start asking for more.