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How to Open a Second Retail Outlet and When to Do It

In May 2015, the world’s largest furniture retailer – IKEA – announced that it was opening a second outlet in Queensland in the north Brisbane suburb of North Lakes. The 29,000sqm furniture and homeware store will complement the existing outlet 60km to the south, on the other side of the Brisbane CBD in the City of Logan.

The move is surprising not because it’s happening, but because it has taken so long. Other hardware and homeware stores already exist in Brisbane’s north, and it seemed a no-brainer that IKEA should set up shop and take advantage of the housing boom in the city’s north. But as early as 2008, it was reported the retail giant’s net profits were falling because it was spending everything it made on setting up costly superstores around the country.

It shows how cautious businesses have to be when opening a new outlet, and how even IKEA has the same problems when it comes to expanding –  it’s all about when to spend your profit on expansion and when to sit tight.

How do I know when it’s time to expand?

Sometimes it seems the signs are obvious – customers not being able to fit inside the shop, orders that can’t be filled for weeks, meeting your annual profit target after three months. These are signs that you have struck gold and it’s tempting to open a new outlet.

But beware – it could be that the reason you are doing so well is that you have stumbled across the perfect location. The residents in that area want your product, the sales staff you recruited from that area have really understood your business and are a great asset, the rent is low in that area.

If you are doing well, make sure that it’s not just the location that is working for you. If it is, and you open a second outlet somewhere else, it could flop. When making the decision, look at the community, the foot traffic, the kind of person that lives in the new area. Look for similarities to your existing location – local councils may have data on income and median house prices that can help you make your decision.

Opening a second outlet versus improving the website

If you’re not sure whether a second outlet is going to work for you, try increasing the capacity of your website – or if you don’t have a website, get one! This is a less risky enterprise for expansion since the capital outlay is far less, plus you have no running costs or staff to recruit. Also, tech solutions to business needs have grown exponentially thanks to the increase in internet speeds. You can even put your office into the cloud by using online faxing, where the traditional fax machine is replaced by a virtual fax number that uses your email client to interact with traditional fax machines. A service like eFax can supply online storage as well as online fax.

There’s limitless storage for your data in the cloud, which means if you do decide to open a new outlet, you won’t have to transfer all your account data to computers at the new site. The information will be accessible in the cloud no matter which outlet you log in from.

In addition to doing your own research and trusting your instincts, if you are a member of the local chamber of commerce or business network you may find out information that assists you in making a choice. Keeping your ear close to the ground when it comes to local developments for example means you are in a better position to choose the right location if you do decide expansion is the next step.

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