- Although retail stores are looking for tenants, sometimes a small business cannot afford to rent a brick-and-mortar location.
- There are popular alternatives to traditional retail stores that provide a physical presence for a small business owner’s product or service.
- Financing a retail startup is difficult, but you have several options.
- This article is for small business owners who cannot afford to rent a brick-and-mortar space.
You created a great product or service and have built your home business into something bigger than you ever envisioned. You discover that retail stores are available, but the cost to rent those spaces exceeds your budget. Still, your business is becoming too big for your home, and you simply need more space. What’s the next step?
Traditional commercial storefronts are not for every small business owner. Most retail spaces cost a few hundred thousand dollars to rent for a year and require significant capital, investment and time for many small business owners who are looking to expand.
However, brick-and-mortar stores aren’t the only option. There are plenty of scaled-down possibilities that require less upfront investment and are more budget-friendly for your small business. [Related article: 7 Smart Budgeting Tips for Small Business Owners]
8 popular alternatives to brick-and-mortar retail stores
These eight popular ways provide small business owners different opportunities to establish a localized physical presence to sell their product or service. No alternative is better than another, but all are more cost-effective than a traditional brick-and-mortar retail store.
- Farmers markets
- Food trucks
- Mobile retail units
- Pop-up shops
- Street fairs
Each option has its own factors for you to think about before selecting the right solution for your business.
Don’t want a full retail store but still want your own space in a high-traffic area? A kiosk is a perfect opportunity for retailers with a small amount of inventory. These small retail stands got their start several decades ago as a short-term option for seasonal retailers. Today, there are thousands of kiosks in malls, transportation hubs and event venues nationwide, selling everything from jewelry to skincare products.
There are many advantages to opening a kiosk, especially for new business owners. Leases on kiosks are typically “all in,” meaning any extra charges associated with the location are included in the minimum rent. The smaller footprint and square footage also means a lower overall rent with less overhead and fewer operational expenses for the kiosk operator.
According to Entrepreneur.com, the upfront investment for a kiosk can range from $2,000 to $10,000, and it doesn’t necessarily require a long-term contract. License agreements can be renewed month to month in many cases, unlike traditional commercial spaces, which require a minimum two- or three-year lease.
In just about every state, the organizers of farmer’s markets, craft fairs, festivals and other local events look for vendors to set up tables and sell their goods to attendees. While spring and summer are the most popular seasons for these types of events, they’re often held year-round, making them a great opportunity for entrepreneurs with a side retail business.
Nicole Pomije, founder and creator of The Cookie Cups, launched her business at farmer’s markets in her Twin Cities area. Now she owns two retail bakeries. She said pricing and location played a big part in her decision to sign up for farmer’s markets, and she advised other entrepreneurs – especially food retailers – to research deadlines, rules, requirements and pricing if they want to find a local sales venue that’s right for them.
“From my experience, working at the farmer’s market will expose your brand to a very loyal customer base who wants to come back each week for new flavors,” Pomije said.
Booth fees vary by event type and location, but you will likely end up paying a weekly or seasonal fee if you choose to sell at a farmer’s market. Additionally, you will need to consider costs such as licenses and permits, marketing and setup (tables, chairs, signs, etc.). If you want to keep your business going outside of local events, you may want to set up an online store and advertise it at your booth (see “e-commerce” below).
Tip: As more people go contactless, it is important to provide multiple payment options for your customers. Couple your smartphone or tablet with a credit card reader add-on to accept credit card payments via your mobile device.
Brick-and-mortar restaurants are one of the riskiest and most expensive ventures an entrepreneur can pursue. Food trucks have become a popular, affordable alternative for would-be restaurateurs who want to turn their culinary skills into a business.
Josh Tang, founder of the mobile cuisine consulting firm Mobi Munch, said that many factors have contributed to the rising popularity of food trucks, including increased culinary talent and more demand for specialty selections like vegan and gluten-free foods. Without the added expenses of building or renting space for a restaurant and staffing a full kitchen and dining room, Tang said that food truck operators are able to quickly open without making a large investment.
“Food trucks are able to offer more variety, innovation and convenience at a better price point,” he added.
Food trucks can be rented or purchased, he said, with the price tag running from $40,000 for a used truck to $130,000 for a new one, depending on the type of kitchen equipment you want in it.
Statistics also show that food truck owners have a much better chance of surviving in the competitive culinary industry: Failure rates are between 60% and 90% for new restaurants, but for food trucks, it’s just 10% to 20%, Tang said.
Mobile retail units
On-the-go businesses aren’t just limited to the food industry: Repurposed trailers, recreational vehicles and trucks are quickly becoming a cost-effective way to create a traveling retail store. Shops like New York City’s Nomad Truck and Nashville, Tennessee’s Third Man Rolling Record Store have found success with this model, moving to different locations and keeping customers updated on their whereabouts via social media.
Not sure where to begin the hunt for your perfect retail truck? ExTreme ReTrailers specializes in turning 7-by-14 trailers into state-of-the-art, fully functional retail businesses – complete with exterior and interior branding, shelving and other interior fixtures, wireless internet access, and heating and air conditioning.
“We have made them fully functioning retail outlets,” said Julia Hutton, CEO of ExTreme ReTrailers. “It is just a little store on wheels.”
Operating a business from a mobile unit offers the freedom to continually set up shop in new and lucrative spots. The main advantages are that you are not stuck in a lease and you’re always able to position your store in a good location, Hutton said.
An example of a successful mobile retail truck is The Boutique Truck, a Columbus, Ohio, shop run by owner Catherine Shadeed. In 2013, Shadeed saw the concept on the West Coast and decided to start her own mobile clothing boutique in the Midwest. Traveling shops like Shadeed’s slice entrepreneurs’ expenses and offer the ability to not only pack up and move to a location whenever it’s necessary to jump-start sales or renew interest in a different area, but also to provide a location that can supplement online sales, which is currently the case.
Selling a product you can package and ship anywhere? E-commerce is an easy and inexpensive way to get your business off the ground. Without any of the overhead expenses needed to run a full brick-and-mortar location, you can start selling your goods online almost instantly: All you’ll need is a well-designed website with a shopping cart feature.
Unlike regular retail locations, where a variety of merchandise is typically needed, online retail operations have the advantage of being able to focus solely on one area.
“You can target a much more specific niche than you ever could with a brick-and-mortar store,” said e-commerce consultant Mark Mathis. “The more specific you can get, the better.”
Though there are many advantages to e-commerce, there are a few challenges e-tailers in particular face, including shipping costs, competition with giants like Amazon and return policies. For more information, see our article on how to overcome e-commerce challenges.
Pop-up shops are most common during big holidays like Halloween and Christmas, but opening a store temporarily is an option small business owners can take advantage of at any time. Christina Norsig, founder and CEO of temporary real estate exchange website PopUpInsider, said that pop-up shops provide retailers with an effective way to quickly jump-start their sales, marketing and branding efforts.
Norsig defines pop-ups as temporary tenants taking empty retail or commercial real estate, outfitting it to suit their business needs, and then operating the space on a short-term basis.
Norsig, who opened eight pop-up shops of her own throughout New York City, said that a great advantage is the ability to move the businesses around and open in different neighborhoods, exposing the merchandise to a wider range of customers. Pop-ups also are a great option for online businesses looking to test their products in actual brick-and-mortar locations, Norsig said.
In New York City, the cost of opening a pop-up shop varies greatly. Norsig said that she has seen some stores rent for $15,000 a month, while others go for $25,000 a week, depending on the location and square footage. She advised business owners who take the pop-up route to approach it just as they would if opening a full retail location.
“Just because it is temporary doesn’t mean it shouldn’t be professional,” Norsig said.
FYI: If your business is seasonal, you might have to pay more in credit card processing fees. Asking your merchant provider the right questions can drastically reduce those fees. Learn more in our credit card processing guide for seasonal businesses.
If you want to get your products into a retail store but don’t mind someone else doing the selling, one option is to become a wholesaler. Wholesale businesses provide inventory for retail operations, from independent boutiques to large department stores. As a wholesaler, you could produce large quantities of your products and sell them to other retailers, typically through an online platform.
Etsy is a strong supporter of wholesale entrepreneurs and sponsors several programs to help small business owners get the exposure they need to enter lucrative business partnerships. For example, there is Etsy Market, a series of virtual shopping events, with some hosted by Etsy and others run by its sellers. There are also some great alternatives to Etsy.
Many neighborhood groups are providing opportunities to hyperlocal small business owners to sell their products or services at open-air street fairs. These are generally organized by local businesses or mutual-aid groups to provide a pedestrian-only space for multiple vendors to attract potential customers within a specified period of time. Street fairs happen infrequently, and you’ll have to do your research to find them. There is also the possibility of direct competition with other vendors in the same industry. However, street fairs are a great solution with minimal setup cost and the ideal opportunity to sell to local customers.
Financing your retail startup
Even on a budget, financing a retail startup can be difficult, especially when you don’t know where to begin. Don’t worry, though. There are many ways to secure capital for your startup. For those with an understanding of basic loan concepts, check out our best picks for small business loans. You also have several other options to obtain a small business loan.
- Friends and family: If you have a product or service, chances are that your family and friends have already purchased or tried it. Not only do they believe in what you’re doing, but their investment will generate less interest than a small business loan.
- SBA loans: Small Business Administration loans are guaranteed by the federal government. The SBA backs the small business loans issued by approved lenders, guaranteeing up to 85% of the loan value. This reduces the risk to the lender if the borrower defaults, which is why they are popular with lenders. [Follow our guide to getting an SBA loan.]
- Angel investors or seed equity: Angel investors finance startups usually in exchange for a percentage of ownership in the new company. Angel investors are a better fit for slow-growth companies because they have different return-on-investment requirements compared to other private funding alternatives like venture capitalists.
- Term loans or lines of credit: A term loan is a loan where the borrower pays a fixed amount each month to the lender, which can be a bank, a credit union or an online lender. A line of credit is where you draw the money from the lender on an as-needed basis. Both are popular with small business owners. Credit score, years in business and sales revenue are some of the major factors that determine the amount you can borrow and the interest rate you can borrow it at.
- Crowdfunding: Crowdfunding used to be the least traditional way to raise money, but with the popularity of social media and crowdfunding websites that enable entrepreneurs to raise money for their ideas, it is now common. Platforms like Kickstarter, Patreon, GoFundMe and WeFunder bring investors and entrepreneurs together. The companies asking for money usually offer rewards in exchange for contributions, which provides a unique opportunity to sell to the potential investor or main consumer of your product.
Key takeaway: You have various options to secure financing for retailing on a budget, including government-backed loans and crowdfunding platforms.
Start small and grow from there
If you are looking for a storefront but don’t have the capital to rent a traditional space, there are plenty of options to establish a physical presence for your product or service. To gauge interest, start small at a farmer’s market or a street fair. As you expand your customer base, you can start looking at financing options for bigger alternatives, including crowdfunding from your customer base or getting an SBA-backed loan to expand your business into a physical space.
Tejas Vemparala contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.