How To Start a Merchandise Business: A Step-by-Step Guide

Are you tired of the 9-to-5 grind and looking to strike out on your own? You’re not alone.

A recent survey found that 43% of Americans planned to start a business in 2023. And that’s not all! More than half of all startup entrepreneurs (55%) will quit their jobs within the next year.

An ever-growing number of people are ditching the corporate ladder and putting their energy into building their own businesses from scratch—and for good reason.

Worldwide, retail business sales are expected to grow another 5% and surpass $27.3 trillion in 2023. In light of this, a merchandise business appears to be a promising option for budding entrepreneurs.

But what is a merchandise business?

Merchandising companies focus on the marketing and sale of tangible products. A merchandise business operates online or in a physical retail store and buys finished products to sell to customers for a profit.

The term merchandise is synonymous with goods and includes personal and commercial products or commodities that can be sold to customers or other businesses.

This article discusses the process of setting up a merchandise business step by step, covering how to:

• 1. Find your niche
• 2. Create a business plan
• 3. Decide on a brand name
• 4. Design a logo
• 5. Establish a budget
• 6. Obtain licenses and permits
• 7. Find suppliers
• 8. Partner with a delivery service
• 9. Market your business

1. Find your niche

Merchandise businesses operate in a crowded, sometimes saturated, marketplace.

Every product category imaginable will have hundreds or even thousands of e-commerce stores jockeying for a piece of the pie, be it on the high street or via e-commerce platforms like Amazon, eBay, Shopify, or Etsy.

Standing out in this crowd is not an easy job, especially for a new player.

Finding a niche is the smartest way to get past the online shopping competition.

A niche is a hyper-specialized segment of a broader market category that caters to unique needs and preferences. One way to think about a niche is as an opportunity in the market that either nobody or very few businesses are servicing.

You can define a niche business model by price (high, moderate, low), demographics (gender, age, level of education), quality (premium, handmade), or geography (country, region, neighborhood).

Targeting a niche market offers business owners several advantages:

• Minimized competition. By definition, a niche startup business has less competition, giving you an easy opportunity to differentiate yourself from existing big players.
• Dedicated customers. Focusing on a narrow target audience allows niche small businesses to concentrate on customer satisfaction and establish long-term relationships.
• High profitability. Niche products usually command higher rates. The demand-supply dynamics of a niche market can be highly lucrative.

Finding a niche will require in-depth market research and extensive reading of customer comments.

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2. Create a business plan

An effective business plan is the first step toward building a successful business.

It addresses a business's target market, business structure, and objectives, as well as how it intends to achieve them.

A business plan usually starts with an executive summary that identifies your management team. It also outlines the products you’ll offer and your marketing strategy, analyzes your market segment or industry and provides a comprehensive risk assessment.

The rest of your plan should include a comprehensive financial outlook for the business over two to five years. Details like cash flow, profit projections, and break-even analyses are vital if you want to rope in investors.

First-time entrepreneurs might also want to include personal financial information like tax returns and credit history.

The main objective of a business plan is to establish the business’s financial viability. It’s also important from several other perspectives, including:

• Lender evaluation. Potential investors would like to know you have set realistic targets and have the skills and foresight to run your business successfully.
• Internal guidance. A sound business plan will guide you through the various stages and milestones involved in starting and growing your business.
• Supplier interest. Merchandising depends on having solid suppliers. Your business plan might influence whether they choose to engage with you.

3. Decide on a brand name

A brand name captures your business’s qualities and values in one or two words. It can be the same as or different from your business name.

The ideal brand name should immediately connect with your target audience and be easy to pronounce, spell, and remember.

Brand names have two primary objectives:

• Differentiating your business from competitors
• Signaling what your business is about and what it stands for

A strong brand name is among your business’s most valuable assets, especially when it comes to brand recognition. If you’re planning to sell online, you’re better off spending a lot of time creating the right one.

The first step is deciding what type of brand name best suits your business. Types of brand names include:

• Real words (Oracle, Zenith, Apollo)
• Made-up words (Zillow, Pixar, Zumba)
• Creative spellings (Lyft, Publix, Patreon)
• Compound words (Facebook, Snapchat, PayPal)
• Blends (Wikipedia, Sharpcast, Instagram)
• Phrases (Stumbleupon, SimplyHired)
• Wordplay (Sole Mates, EyeQ)

The style of brand name you choose depends on your product and target audience.

Create at least 5 to 10 potential brand names for a focus group to review.

Finally, trademark your chosen brand name so nobody can steal it.

4. Design a logo

A logo visually conveys what a brand name does in words. Like a brand name, a logo reflects a brand’s personality and tells customers what to expect.

A good logo makes a strong first impression with customers and creates a brand identity.

Whether you do it yourself or hire a professional, designing the right logo involves a serious creative process.

Start by deciding on the kind of logo you want. There are several:

• Word mark. This is a letters-only logo with nothing more than the brand name. It doesn’t have graphics or symbols.
• Brand mark. This refers to a standalone graphic symbol. Examples are the Nike swoosh and Adidas’s three stripes.
• Combination. This is a more traditional type of logo that includes both a symbol and a wordmark (e.g., e-commerce giant Amazon’s famous arrow logo).
• Abstract. These logos are unique, often have geometric designs, and do not represent any known object or form. Examples are the Mastercard and Airbnb logos.
• Letter mark. This is a typographic logo sometimes referred to as a monogram. Examples include the Warner Bros.’ WB, and the Hewlett-Packard HP logos.
• Mascot. A mascot can make for a fun logo as long as it aligns with your brand personality. Examples are the KFC and Pringles logos.

5. Establish a budget

A key element in planning a new business is establishing a budget.

Broadly speaking, a budget lays out the startup costs, projected expenses, and income for a given period. As a business owner, your budget will help ensure you have the resources to reach set goals without overspending.

Budgeting for a merchandise business must be separated by activity. For instance, you’ll need a cash budget, a sales budget, an operating budget, and so on.

Having a budget allows you to:

• Allocate resources efficiently across departments and remain operational through tough times.
• Manage cash flow so you can make informed business decisions about investing and working capital management.
• Keep an eye on business objectives, guide your action plan, and ensure you’re on track to meet long-term profit margin goals.
• Conduct regular performance evaluations to ensure your business’s efficiency and profitability.
• Manage small business debt efficiently by setting targets and adjusting budgetary allocations accordingly.
• Prepare for emergencies brought about by external factors like economic conditions, political turmoil, or other macroeconomic influences.

Your budget should be dynamic and flexible enough to turn a profit despite unexpected challenges.

6. Obtain licenses and permits

Many new businesses, including online businesses, need licenses and permits to operate in compliance with local, state, and federal guidelines.

You’ll need to ensure you meet all requirements to apply for and obtain these licenses and permits.

These documents can vary wildly based on which state, city, or industry your business falls under, so it’s hard to be precise about what you’ll need unless you consult an attorney.

Depending on the nature and location of your business, you’re liable to need some or all of the licenses and permits listed below:

• Business operating license. This license is issued separately or together by state and city administrations.
• DBA license. A “doing business as” (DBA) license is designed to avoid trademark infringement and other issues.
• Planning and zoning permits. Local municipalities issue these permits to ensure your business will not disrupt the community.
• Fire department permits. Local fire departments issue these permits based on one or recurring inspections at your in-store location.
• Health license and permits. Subject to local regulations, your business may need to be verified for health code compliance.
• Environmental license. This license protects air and water quality and may apply to specific locations and industries.
• Tax regulations. This includes a Federal Tax Identification Number (FEIN) and other requirements.‍

7. Find suppliers

Locating and engaging with the right suppliers is key to operating a successful merchandise business.

However, doing that is not as straightforward as it may sound; finding a supplier can be difficult if you’re unclear about what you want.

Suppliers can be one of three different types:

• Manufacturers can produce your product and sell it to you directly.
• Wholesalers and distributors can purchase high-quality goods produced by a manufacturer.
• Dropshippers stock and fulfill orders of existing products on an e-commerce platform.

Once you have that sorted out, you need to know what to look for in a supplier.

A good supplier will have:

• A proven track record in reliability
• The ability to produce or deliver quality products that represent value for money
• ISO standard or other relevant certification
• No issues working with your supply chain model
• Negotiable payment terms that are mutually acceptable

Resources like online domestic and international supplier directories can help your search.

Work out an evaluation standard to assess proposals from potential suppliers and only pick those that fit your requirements.

8. Partner with a delivery service

Here’s an important statistic to keep in mind while partnering with a delivery service provider: A staggering 84% of U.S. consumers say they’re unlikely to return to a brand after just one bad delivery experience.

Having the right delivery service is vital if you have a physical or online store because a huge chunk of your orders will likely come from online shoppers.

Expectations from potential customers about the time and costs involved with deliveries rise constantly. The right delivery or dropshipping service can help boost sales and ensure profitability.

Remember, cheap is not always good. Here’s what to focus on when deciding on a delivery service:

• Delivery time. Customers are willing to pay more for faster deliveries. Ideally, partner with a service that can offer next-day delivery across the country—even if it’s for a premium.
• Delivery range. A local delivery service is good enough if you only sell in a particular region. Selling over long distances or overseas will require a delivery partner of international repute.
• Tracking. This is vital to customer satisfaction. Choose a delivery partner with a solid tracking reputation.
• Delivery cost. Your ideal delivery partner will offer prices that make sense to both you and your customers. Innovative packaging can further cut down on delivery costs.

9. Market your business

Marketing is the final (and arguably the most crucial) step for your merchandise business.

Driving customer traffic and closing sales requires a marketing strategy that fits your business size and objectives.

Here are a few things you can do to introduce your products to your target audience.

• Meet your customers on their turf. A terrific marketing campaign isn’t enough; you must play your game on the channels and platforms your target audience populates. Use a combination of marketing techniques, including digital, word-of-mouth, and store-front messaging. If you’re struggling with this, consider hiring a growth marketer through Upwork.
• Leverage social media marketing. Facebook, Instagram, and Pinterest are just a few social media platforms you need to use to attract new customers. Use these platforms to improve brand visibility and gain exposure to your target audience.
• Develop partnerships. Buddying up with a local business or charity may be just the right way to get your new brand in front of people. Partner with online retailers, neighborhood stores, or shops with the same clientele as yours. ‍
• Combine multiple tools. Use a combination of the best marketing tools at your disposal. Test everything—search engine marketing, email marketing, SMS and video marketing, and affiliate marketing—to find out what works best for you.

Solid companies are built on solid plans

Starting a merchandising business requires that you wear many different hats. And getting every piece of the puzzle right can be challenging.

This is why you should consider partnering with experienced professionals who can help you start a successful business—whether coming up with a brand name, designing a logo, or drafting your business plan.

At Upwork, we have thousands of professionals and agencies to help you along the way. Sign up today!