How to start a retail business: Open your own shop in Germany

Retail is changing: Future prospects

Retailers in Germany and beyond are the major intersection between consumers and retail businesses. With around three million employees, the retail trade is one of the branches of the German economy with the highest employment. The branch industry report for 2016 of the German Retail Association shows that 66% of employees are full-time employees.

At the same time, the retail trade is a growing industry. According to a joint survey by Statista, the German Federal Statistical Office, Eurostat, IMF and the European Commission, the forecast development of turnover in Germany up to 2020 shows a positive trend. While annual sales in 2016 were still at 570 billion euros, projections predict sales growth of just under 29 billion euros by 2020.

Opportunities and risks of e-commerce

Disturbing news for retailers often concerns the same topic. Namely, the death of shops in city centres is caused by the changing behaviour of end consumers. Don’t just plan until the end of the first business year, but also think about the future of retail. When you open your own store, you should realistically consider the added value you can offer your customers as compared to online retailers that are available 24 hours a day.

The revenues of small online shops and mail-order market leaders will continue to grow. Some retail sectors are already more digitised than others. While Germans still rarely order groceries online, ordering books, electronics and textiles has already become part of everyday life for many.

So think about what your business model could look like in five or ten years. If you want to integrate a web shop into your business right from the start, there are many opportunities. Your willingness to invest in know-how and new technologies will set you on the right course even before you open your own store.

Qualifications and requirements for your own shop

As a rule, retailers don’t need any special professional qualifications in order to realise the dream of their own shop. Exceptions are, among others, retailers from trades such as butchers or florists, and founders whose industry is subject to licensing. This applies, for example, to opticians or pharmacists. Other commercial goods for which retailers require a separate business licence are weapons, over-the-counter medicines and certain animal species.

Planning for your business in the retail sector

A commercial apprenticeship or similar qualifications is always an advantage when starting out. Before you open a business, you should constantly educate yourself. Regardless of your previous knowledge and strengths, additional entrepreneurial knowledge is important. At the latest when you draft your business plan, the necessary know-how will help you to set the first course in a well-informed and profitable way.

The easiest way to answer questions about financing is to successfully develop your business idea and obtain a comprehensive overview of your chosen industry with a market and competition analysis. Sustainable decisions are best made with expert advice.

Expand knowledge, build on strengths

Do not underestimate your personal challenges. Further training is a must, no matter which industry you want to gain a foothold in. An example: The topic of marketing plays a greater role than ever for the retail trade. Strong competition from e-commerce is weighing on local retailers.

If you want to become and remain competitive, there’s no way around a sophisticated advertising strategy for your target group. In concrete terms, this means that you must plan an advertising budget, choose the right media for your marketing and remain consistently active there.

As a retailer, you’re not automatically a lone wolf. You don’t have to be able to do it all! Put your team together so that different talents come together. If, for example, you are more interested in sales, you should focus on the accounting activities and creative accents for advertising in your personnel search.

The legal framework for retail trade

Regardless of the nature of your business, you must adhere to the framework prescribed by law. Find out in detail what requirements apply to your business before you open. A subsequent change can lead to delays in your opening and additional costs. For you, the most important advantages are:

Retail trade decree: Most federal states in Germany have laid down guidelines for retail companies at the state level in retail trade decrees. Be sure to familiarise yourself with the relevant guidelines before opening your business.

Competition law: In Germany, the law on retail sales is regulated inter alia by the German Unfair Competition Act (Gesetz gegen den unlauteren Wettbewerb – UWG). This includes, for example, specifications for special offers, opening offers, factory sales, warehouse sales and special events such as open days or Sunday openings. Many Chambers of Industry and Commerce (IHKs) offer information events or contacts on the subject of law and taxes specifically for retailers.

Hygiene and food safety: If you are opening a shop that has food in its product range, you must familiarise yourself with food hygiene regulations. Special regulations also apply to the sale of unpackaged goods.

Construction specifications: In Germany, the building supervisory authority often inspects the premises of new shops prior to opening. It checks whether the locality is suitable for the specific purpose and whether all construction requirements are met. To prevent subsequent, costly conversions, you should consult your local building authority before signing a purchase or lease agreement.

City planning requirements: Many German cities and municipalities have very individual requirements for the retail trade located in their administrative area. So-called retail trade concepts are based on building law and spatial planning law. The regulations contained can concern the distance between several similar shops, the preservation of the cityscape, noise protection, the location and the product offering.

Customer toilets: Many retailers are obliged to install sanitary facilities.

Price declaration: The Price Indication Ordinance (Preisangabenverordnung) regulates how you must show the prices of the merchandise you offer. Prices must be visible and valid for the consumer.

Founder Checklist: What steps must be taken before opening your business?

You’re convinced of your business idea and want to open your own shop? What are the decisions that still need to be made? Answer the following questions and you will take a big step towards achieving your goal:

• Identify information sources: Which questions are still unanswered and where can you find the relevant information that you need?
• Describe your motivations: What goals do you have personally and as an entrepreneur? What drives you?
• Question the concept: Is your business idea viable and up-to-date? Is your business plan realistic? Ask friends and acquaintances for an honest opinion.
• Choose the right name: Does your idea have a name that sticks? What positive associations do you want to awaken?
• Evaluate competencies: Have you sufficiently prepared your professional experience and technical knowledge for setting up a business in the retail trade? If not, what training opportunities are necessary?
• Reflect on your personality: Can you deal with setbacks and financial self-responsibility? Do you see yourself in the role of an employer and possibly a trainer?
• Search for help: Who can help you with capital, connections and know-how? Is there a founding team, cooperation partners or investors?
• Check finances: What about your actual capitalisation? What equity and borrowed funds are available?
• Explore creditworthiness: Is your business idea attractive for private and/or state lenders? Are you eligible for a loan, grant or credit?
• Use consultants: Do you need additional, independent help from founding experts, a lawyer or tax consultant?
• Determine official requirements: Which formalities have to be clarified with which authorities?
• Analyse the market: What does the market look like and how do you want to position yourself with your business concept? Do you need a professional market analysis for your desired location?
• Describe the target group: Who are your customers and what are the benefits of your goods? How can you reach your target group?
• Find the ideal location: Which locations are economically favourable and affordable? What are the advantages and disadvantages of buying or renting a property?
• Plan your time: How long will your start-up phase probably last before you can open your business? Which factors can you influence?
• Calculate costs: Which prices, turnovers, profits do you strive for? Which facts are you basing your calculation on?
• Write a business plan: Combine all considerations, information and calculations in an individual business plan.
• Keep an eye on legal matters: Which laws apply to your shop? Are you familiar with the requirements of tax law, insurance law and accounting?
• Establish the best legal form: Which legal form is suitable for your business? Are you familiar with the particularities of the chosen legal form?
• Planning personnel: How many employees do you need to open and close your store? How do you find good applicants?
• Networking: Which network of people could benefit you? How do you make contact with them?
• Organise procurement: Where will you procure all your business’s required goods and services from? What planning does the supply chain need?
• Create organisational structures: Who will look after the different areas of your business, especially the administrative side of things? What IT do you need for your business?
• Plan your personal life: What time is left for leisure and family? Are the two asset areas sufficiently protected by insurance and, if applicable, a limitation of liability?

The answer to each question depends on your store. Even if you cannot answer all the questions in detail or if individual questions are not relevant, you should at least have reviewed all the topics.

Tip: Add your own questions and answer honestly. The more realistic your assessment of your situation, the less room for surprises during and after the start-up phase. You minimise risks if you learn to assess your own strengths just as well as your deficits. You can acquire missing knowledge, obtain necessary information and find support. At the same time, you can build on your strengths by continuing to work on them.

Industry articles for the retail trade from A-Z

Every retail start-up has its own special features. Already know how you want to specialise in retail?

Here you can find all our guidebooks for retail enterprise (most are in German):

• Antiques and art
• Bookselling
• Boutique
• Car dealership
• Coffee Roaster
• Convenience store
• Cornershop
• Decoration shop
• E-Cigarettes shop (in English)
• Florist
• Furniture shop
• Grocery store
• Ice cream parlour
• Jeweller
• Mobile phone shop
• Organic grocery shop
• Second-hand shop
• Shisha bar (in English)
• Sports business (in English)
• Taxi company (in English)
• Wine trading

Alternative franchise: Retail within a system

For many founders, the path to self-employment with a partner is conceivable. The franchise sector counts around 8,000 new start-ups every year. The existing systems in Germany and Europe are diverse. Currently, there are about 300 franchise concepts just for the retail trade in Germany.