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Go for the niches instead of taking on big chains

Friday 1st September 2000

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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 returnTime takenReturns a yearHourly cost
GST0.5-2 hrs12$20-50
PAYE0.5-2 hrs24$20-40
ACC2-8 hrs (1 day)1$20-60
FBT0.5-3 hrs4$20-80
Company tax0.4-40 hrs1$20-80
Statistics NZ0.25-3 hrs17-66$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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