Go for the niches instead of taking on big chains

Friday 1st September 2000

Retailing is among the biggest outlets for individuals' desire to operate their own business, although there are many failures, perhaps partly because there are too many operators.

Retail Merchants Association (RMA) government relations consultant Barry Hellberg told NBR Personal Investor the retail industry had annual sales of $41 billion and employed 300,000 people in about 30,000 shops. The $41 billion included motor vehicle sales and, if they were removed from the statistics, the remaining retail turnover was $25-30 billion a year.

The RMA's membership included the big food and general merchandise chains and department stores but also had thousands of individuals operating under their own identity. Mr Hellberg said the association provided assistance to retailers apart from representing them in dealing with the government and other sundry agencies.

One of its regional managers was an ex-retailer who was available to go into retail stores throughout the country and advise the owner-operators about operating systems, stock mix and similar matters. Mr Hellberg said he was a "practical fellow for practical problems."

The association also runs roadshows for owner-operators and will conduct four this year, with an emphasis on the practical side of retailing. There was also a retail industry-training organisation which was another support service.

Mr Hellberg said the association's large membership allowed it to negotiate special arrangements with suppliers of services, such as telecommunications, credit cards, electricity, insurance and travel discounts.

Individual owner-operators are advised to concentrate on niche marketing rather than taking on the big chains. Association chief executive John Albertson said the operator had to find out what the customers wanted.

"That is what makes your business."

Messrs Albertson and Hellberg said the presence of a big chain store in a town could assist small retailers' businesses. They said, for example, people in Feilding were delighted to see The Warehouse Group open a store. The locals stayed in the town to shop rather than going outside to shop (presumably to Palmerston North) and that brought more business to the town's other retailers.

Some owner-operator retailers enter the industry to sell a product or products they have developed. An example can be seen in the many fashion boutiques and craft shops that seem to come and go like the leaves on the trees.

They often have an excellent product but can face difficulties in running the business side of the operation as opposed to the creative side. Even if they engage competent accountants and other professionals they still have to apply themselves to business as well as creation and often have to deal with compliance matters (see previous page).

There is also a group of people in all industries who set up an owner-operator business and make a fundamental mistake for which the penalty is going broke. They confuse what goes into the till (gross revenue before expenses and part of cash flow) with profit and take too much money out of the till as drawings. They may also use stock for personal consumption. There is no hope for them and they should stay in, or go back to, employment. At least they will labour fewer hours than the self-employed.

TABLE I
Time and cost of completing returns

Type of return	Time taken	Returns a year	Hourly cost
GST	0.5-2 hrs	12	$20-50
PAYE	0.5-2 hrs	24	$20-40
ACC	2-8 hrs (1 day)	1	$20-60
FBT	0.5-3 hrs	4	$20-80
Company tax	0.4-40 hrs	1	$20-80
Statistics NZ	0.25-3 hrs	17-66	$15-40

TABLE II
Statutes and regulations affecting retailers and wholesalers

Note: This list was compiled in 1996 and several statutes may have been amended since then.

Relating to commerce

Bills of Exchange Act and Cheques Act
Chattels Transfer Act
Commerce Act
Consumer Guarantees Act
Copyright Act
Door to Door Sales Act
Fair Trading Act
Pedal Bicycles Regulations
Children's Night Clothes Regulations
Children's Toys Regulations
Hire Purchase Act
Layby Sales Act
Mercantile Law Act
Sales of Goods Act
Fibre Content Labelling Regulations
Care Labelling Regulations
Country of Origin (Clothing and Footwear) Labelling Regulations

Relating to operating a business

Companies Act
Goods and Services Tax Act
Financial Reporting Act
Partnership Act
Relating to Contracts
Contracts Enforcement Act
Contractual Mistakes Act
Credit Contracts Act
Minor Contracts Act
Contracts Privacy Act
Contractual Remedies Act
Frustrated Contracts Act

Relating to employment

Employment Contracts Act (now Employment Relations Act)
Health and Safety in Employment Act
Holidays Act
Parental Leave and Employment Protection Act
Miscellaneous
Crimes Act
New Zealand Bill of Rights Act
Resource Management Act
Human Rights Act
Privacy Act

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