Sports goods retailing is very competitive and independent outlets need to make sure they have something special to offer customers - like a repair or hire service. Our practical guide will help you start up and run your own sports shop.
- Research your target market
- Operating practices
- Selling on eBay and Amazon
- Establish your customer profiles
- Decide what to sell
- Price your products
- Seasonality
- Equipment hire
- Repairs
- Fairtrade
- Buy an existing business
Research your target market
Estimating demand
Unless you're anticipating that a large proportion of your sales will be made online or by mail order, you'll need to find out whether there is going to be enough local demand for your sports shop. Be aware that the sector is competitive and that the number of independent sports shops has fallen over the years.
If you're planning to operate as a 'pure' sports shop and sell only clothing and equipment designed to be used when participating in a particular sport then the level of demand for the products you sell will be directly influenced by local participation levels and when the season starts. Sport England's Active People Survey, which is carried out every year, includes detailed estimates of the level of participation in different sports at a local and national level. The results of the survey are available to download from the Sport England website. Sport Wales, Sport Scotland and Sport Northern Ireland also publish similar resources.
It may be that you're intending to sell sports leisurewear as well as clothing designed to be worn during participation. If that's the case, be aware that while demand for fashion clothing remains more or less consistent, at times when the economy is struggling people tend to trade down to cheaper items.
The Sport England report 'The economic value of sport in England' gives estimates of the amount spent on sports equipment, sport-specific and sports leisurewear. This is also available on the Sport England website.
Your competitors
Once you've made an estimate of the level of demand locally, it's important to try to find out how well this is met by existing businesses. The sports retailing market is very competitive and is served by a large number of businesses, including:
- the High Street chains, in particular Sports Direct and JD Sports. These focus mainly on sports leisurewear, with equipment sales typically in the minority
- the Decathlon and Go Outdoors chains. Both of these focus heavily on equipment sales, with Decathlon catering for over 70 different sports
- specialist chains, like Up and Running, which focus on one particular sport
- other independent specialists, who may specialise in a single sport or may cater for a broader range - perhaps ten main sports with some products stocked for a few others
Don't forget as well that online retailing is now an important feature of the sports retail sector - both for equipment sales as well as for clothing - so you need to be aware of how strong your online competition will be. In many areas of pure sports retailing there are dominant online retailers who offer a wide range of well regarded products at very keen prices.
Shop location
The location of your shop may depend to a large extent on the type of goods that you intend to stock. If you are planning to be a specialist retailer, focussing on a niche area of the market, you might be able to start up in an area that's away from the city centre, as your shop won't rely too much on passers-by and will instead have a large proportion of customers making pre-planned purchases. If you plan on stocking a large amount of sports leisurewear, you may have to take premises close to the main shopping areas so that you get enough custom.
Also check out local crime rates - you don't want to have to cope with excessive levels of shoplifting, break-ins and theft.
Why will customers choose your shop
You need to make sure that enough customers will choose your shop rather than any existing outlets. Check out the competition to see:
- what range of products they offer
- what services they offer
- what prices they charge
- what their opening hours are
- what type of customer they're attracting
- if the premises and fittings are modern and smart
- how knowledgeable and helpful their staff are
Your research might indicate that there is a gap in the market that you can exploit. For example, your 'unique selling point' might be that you are an ex-professional sports person and can offer specialist advice and services to your customers.
Checking out future developments
Make sure that there are no immediate plans to open a sports chain outlet in your proposed area, or to build new road systems which mean that local traffic will bypass your shop. Also look out for any proposals to impose parking restrictions nearby.
Find out what people want
It can be difficult for small, independent shops to survive in the face of tough competition from national chains and online retailers in the sports goods retailing sector. So it's important to make sure that there will be a market for the goods you're going to stock. You may want to consider carrying out some surveys of the people in your local area to find out:
- what sort of products they would want you to stock
- whether they would support services such as equipment repair or hire
- would there be demand for other services, such as purchasing tickets for sporting events through you
- what, if anything, don't they like about the existing sports shops in your area
Research current trends, plus legal and tax issues
- Shopping in sports shops
- Legal issues for sports shops
- VAT rules concerning sports shops
Operating practices
Quality standards
Shoppers have grown used to the high standards set by the large retail chains so it is important that your business:
- is clean, tidy and professionally fitted out (don't forget to look critically at the outside of the shop - smart paintwork, signage and an attractive window display are important)
- is well-stocked with the goods that are in demand from your target customers
- is staffed by knowledgeable and smart employees
- offers a high standard of customer service
Advertising your shop
Whatever goods you decide to sell and services you decide to offer, it's essential to make sure that your potential customers know about you and your product range.
Don't overlook the potential of your window display - a bright, regularly changed display of the most up to date equipment, clothing and footwear will help to attract passing trade.
You can also use your shop window to advertise any special offers or promotions you will make, or to highlight any new services or product ranges you introduce.
You could advertise your business in the local press, although it makes sense to monitor the effects of this type of advertising to see whether you are getting value for money. You may also consider sponsoring local sports persons or sporting events.
You could have a leaflet printed outlining some of the unique features of your business which you distribute to local residents and workplaces. Think about using social media like Facebook or Twitter to let existing and potential customers know about promotions and events.
Having your own website is an excellent way of telling customers where you are, what you sell and what your opening hours are. With ecommerce already an important feature of sports retailing, you may decide to design your website so that you can sell online. If you just want to dip your toe in the water, a cheaper alternative may be to sell online through a third party like eBay or Amazon.
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.
Getting started
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.
Your reputation
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.
More information
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.
Establish your customer profiles
Your market
Your typical customer will depend to a large extent on the type of sports goods shop that you run. He or she may be a competitive sportsperson, a keen amateur, a recreational sportsperson, a total beginner, someone looking for a present for somebody else or someone looking for sports fashion items - the mid and late 2010s saw a very strong trend for buying sporting clothes as leisure wear, referred to as 'athleisure' wear. You may also have some trade and wholesale customers, for example local sports clubs and schools.
You may decide to offer discounts to certain types of customer, for example university students. This could help to raise your shop's profile among a potentially large customer base, as well as helping to encourage customer loyalty. You might also consider giving discounts to members of sports clubs.
Decide what to sell
The range of products you sell will depend on what type of shop you intend to run. A specialist shop may cater for one or two different sports but stock everything that participants in those sports would need. On the other hand, if you intend to open a more general interest sports shop, you would probably stock a selection of items from several of the mainstream sports, as well as some sports fashion clothing and footwear. You might decide to offer Fairtrade sports balls and clothing. What you stock will also depend, to a certain extent, on how big your premises will be. If your premises are small, it may not be practical to stock a large range of, for example, golf equipment, as this may make the shop too crowded.
Most sports shops sell some or all of the following:
- sports clothing, swim wear and casual clothes
- footwear, including white trainers, running shoes, gym shoes and studded boots
- racquets, hockey sticks and various bats
- balls for various sports, in a wide range of prices
- protective clothing, such as pads, gloves and gum-shields
- athletics equipment and accessories, such as javelins and shots
- weight training, fitness and exercise machines, equipment and accessories
- golf clubs and golfing accessories
- snooker, pool and darts equipment
- accessories, such as equipment covers, holders and maintenance products
- energy foods and diet supplements
- magazines, specialist publications and DVDs
- shooting and archery equipment
- water sports equipment, skateboards, cycles and cycling accessories
- fishing rods and tackle
- ski and snowboarding equipment and clothing
- outdoor equipment and climbing accessories
If your shop is very small, you may consider offering an efficient ordering system for larger items - such as home gym equipment. This way, you wouldn't have to hold a large amount of stock, which would also help with your cash flow. However, there may be a danger that if you don't have something in stock, customers will simply go elsewhere - or order online - rather than wait for a delivery. Also, you may not be able to get good payment terms and discounts from suppliers if you order in this way.
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 of your product ranges is enough to cover all of your operating costs, including your own drawings. However, the sporting goods sector is very competitive, particularly if you offer general sports clothing and footwear, and you'll probably have to set your prices in line with those of any immediate competitors. If you intend to target a niche market that none of your competitors caters for then you might find that prices are a bit less sensitive.
Some suppliers recommend retail prices (RRPs) for their products. You might decide to stick closely to these, to use them only as a guideline or to ignore them altogether. Other suppliers offer no guidance on pricing, leaving it up to the retailer.
Also consider the following points when setting your prices:
- what do your competitors charge for similar items
- do you aim to win business away from your competitors with attractive pricing
- do you really need to discount. Perhaps you intend to stock top of the range items, for which people expect to pay a lot of money. You may be aiming to justify higher prices with an excellent level of service
- will you use 'key price points' (for example, £59 may seem more attractive than £60)
Special offers and discounts
You may consider running special offers throughout the year. These can result in bringing more customers through your door who may buy more than just the items that are advertised on special offer. But it's very important to monitor your takings during these times to make sure that you are getting more custom, rather than just giving your regular customers cheaper products.
Offering discounts on selected lines can also be a good way of shifting old stock. The sports goods retailing sector is quite vulnerable to changes in fashion, in both the clothing and equipment sides of the market. Offering generous discounts on items of stock from the previous year means that you can keep your stock up to date and not have too much money tied up in items that people don't really want.
Many shops also give discounts to staff, family and friends. 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. Brief your staff on what discounts are available so that they don't offer friends and relatives unauthorised discounts.
Seasonality
Your sales may vary at different times of the year, for example January and February may be quiet, while the spring and summer holiday periods are often busy times, as is the lead up to Christmas. Many sports shops report an increase in demand during August as parents make sure their children have everything they need before school starts in September. It is important that you make an allowance in your cash flow estimates for the increased amount of stock that you will need to buy for these periods.
If you offer equipment hire this may also be affected by the different seasons - for example the summer months will see greater demand for items such as bicycles, windsurfers and surf boards.
The different sporting seasons can also make a difference to the level of sales and the amount of stock needed throughout the year. If you feel that this may be the case with your shop you could use the information below to make the necessary adjustments to your cash flow projections.
Sporting seasons
- angling (freshwater); coarse - varies widely from area to area and is subject to review by the regional environmental regulators
- angling (sea) - various, depending on the type of fish caught
- association football - mid August to late May, depending on the league and varying from year to year (variations are usually by a few days only)
- athletics (outdoor); track and field - beginning of April to the end of September; cross country - beginning of October to the end of March; road running - all year round
- cricket - end of April to the end of September, with some slight variation from county to county
- rugby football (league) - February to late September
- rugby football (union) - late August to early May, with some slight variation throughout the country
Equipment hire
Your market research may have shown that there would be a demand for a sports equipment hire business in your area. Equipment that you could hire out to customers includes:
- water sports equipment, such as surfboards, canoes and kayaks, wetsuits and so on
- ski and snowboarding equipment
- bicycles - including helmets, panniers/carriers, locks, baby seats and buggy/trailer bikes
- golf clubs
- other outdoor pursuits equipment - for example fishing tackle
- fitness equipment such as rowing machines and treadmills
Whichever items you plan to hire out, you must make sure that they are safe to use. Don't forget to insure them against loss, damage or theft.
Demand for hire equipment depends largely on what type of facilities there are locally. It will also depend on the level of local competition in the hire market, as well as on the extent to which participants own their own equipment.
Most hire businesses structure their charges in a way that results in it being better value for the customer the longer the hire period is. For example, surfboard hire may be offered at £5.00 per hour or £20.00 for the whole day (figures included for illustrative purposes only). If you are going to provide an equipment hire service, think carefully about your pricing policy to ensure that all of your charges are attractive and that one set of charges does not make another look unreasonable.
Remember - customers do not treat hire equipment with a great deal of respect and it is likely that equipment will need frequent repairs. If you do not have the expertise to carry out the repairs then you'll need to incur the cost of having them done by a specialist.
Repairs
You may consider offering your customers a repair service. There are many benefits of offering this sort of service, such as:
- it encourages customer loyalty
- it brings people into the shop who may not otherwise have come in. Once inside the shop they may make impulse purchases as well as having the repair done
- it may encourage customers to purchase new items of equipment from you after their old ones get beyond repair
- it can provide useful extra income
You could carry out the repairs yourself if you have the right skills, or subcontract them to a specialist repairer. If you are planning on doing the repairs in-house, bear in mind that you will almost certainly have to spend some money fitting out a workshop. Also, you'll need to consider the time that the repairs will take. It may be practical for you to do them in quiet periods during the day or you may have to do them outside of normal opening hours. Alternatively, you could employ someone to cope with the repairs or to mind the shop while you do them - but this will eat into your profit.
Fairtrade
Recent years have seen an increase in consumer demand for ethical products that help producers and farmers in the developing world. You could meet this demand by stocking Fairtrade sports balls and Fairtrade sports clothing. This would show potential customers that your business is ethically aware and committed to fighting global poverty. Offering Fairtrade products can also be a good way to differentiate your business from its competitors.
What is Fairtrade
Fairtrade guarantees a fair deal for disadvantaged producers and farmers by making sure they receive a fair price for their work and goods. Fairtrade items are generally slightly more expensive than similar products - but more and more people are happy to pay a little extra to help producers become self-sufficient. All Fairtrade products are marked with the easy to recognise Fairtrade Mark.
How does it work
The Fairtrade system works by paying producers a set minimum price for their goods, giving them a living wage. On top of this, producers also get an extra sum of money to invest in their business or community. This is called the 'social premium'.
In return, Fairtrade producers must meet certain standards. These are set by Fairtrade International, which is the global umbrella organisation for Fairtrade. Producers must be certified by FLO-CERT before they can mark their products with the international Fairtrade Mark. You'll probably buy your Fairtrade goods either direct from manufacturers or importers or - more likely - from registered wholesalers and distributors in the UK. The Fairtrade Foundation website has a list of wholesalers throughout the UK that sell Fairtrade marked products to retailers.
Pricing
When you buy Fairtrade goods from a wholesaler or registered manufacturer, you can probably expect to pay a little more than you normally would for similar products. The slightly higher trade prices cover the set price and social premium that are paid to the farmer or producer, as well as supply chain costs and the cost of certification and product licensing.
Although trade prices for Fairtrade products are higher, you can probably charge your customers a little bit more for them. You may benefit from extra sales, too. The Fairtrade Foundation isn't involved in setting retail prices, so the mark-up you add is entirely up to you. While you'll want to cover your costs and retain a healthy profit margin bear in mind the purpose and aims of Fairtrade when you set your prices. The Fairtrade Foundation makes it clear that profit margins on Fairtrade items shouldn't be higher than on similar products.
Promoting Fairtrade goods
Offering Fairtrade products can be an attractive selling point for your business and can help to attract ethically aware customers. So it's important to make sure that potential customers know about the Fairtrade products you stock.
The Fairtrade Foundation is responsible for promoting Fairtrade in the UK and can provide useful materials and advice to help you to advertise your Fairtrade ranges. Any promotional materials that contain the Fairtrade Mark, like posters or leaflets, must be approved by the Foundation.
The Fairtrade Foundation organises a Fairtrade Fortnight each year to promote the Fairtrade system. This could be a good time for you to raise customer awareness about the Fairtrade products that you offer. For example, you could put up posters in your outlet promoting the benefits of Fairtrade and informing customers what Fairtrade products you stock.
Where to find out more
The Fairtrade Foundation is part of the international Fairtrade movement and oversees all aspects of Fairtrade in the UK - including retailing. For more information on Fairtrade, the range of products available and how you can get involved visit the Fairtrade Foundation website.
Buy an existing business
You might decide to buy an existing sports shop rather than start your own venture from scratch. Buying a going concern can mean that:
- the premises, fixtures and 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 track record which can help if you are looking for finance
- staff are already in place
- a business website, possibly ecommerce enabled, has already been set up
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?
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, equipment and so on. Will you have to spend money refurbishing or replacing assets
- the condition of any stock you are buying. Check this over carefully before agreeing a price - sports clothing items may become unfashionable and new technology may mean equipment has become obsolete. Don't forget that products may become damaged or soiled in storage
- 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 - for example if the previous owner was a retired sports professional, footfall may decline once they're no longer running the business
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.