What is a good profit margin for a sports shop? Do you want to know how much money sports store make yearly? If YES, here are 8 factors that determine the income & profit margin for retail sports shops. As expected, whenever any entrepreneur wants to start a new business, one of the first questions that they usually ask is how profitable the business is or how much they are likely to make on the average from the business.
This narrative also applies to entrepreneurs who are looking towards starting a retail sports shop business. They would want to know how much they are likely going to make monthly and annually from their shop and off course, the profit margin they should be expecting from the investment.
The truth is that there is no one mold-fits-all when it comes to how much a retail sports shop is expected to make. There are some factors that we are going to look into before giving an estimate of how much an average retail sports shop makes yearly and these factors are;
8 Factors That Determine How Much Money Retail Sports Shops Make
Table of Content
- 1. The Size of the Retail Sports Shop
- 2. The Location of the Retail Sports Shop
- 3. The Brands of Sports Wares and Supplies Retailed in the Shop
- 4. Other Related Products and Services Offered by the Retail Sports Shop
- 5. The Management Style of the Retail Sports Shop
- 6. The Business Model of the Retail Sports shop
- 7. The Advertising and Marketing Strategies Adopted by the Retail Sports Shop
- 8. The Number of Years the Business is in Existence
- Estimated Profit Margin for a Retail Sports Shop
1. The Size of the Retail Sports Shop
One cannot conveniently state the amount a retail sports shop is expected to make yearly if you do not know the size of the shop. As a matter of fact, the amount a small retail sports shop is expected to make annually will be far different from the amount a standard retail sports shop franchise with several outlets will make annually even if they operate in same location.
Of course, the amount invested in a small road side retail sports shop is different from the amount invested in a large and organized retail sports shop hence the amount they will both make will be far different. One the average, the approximate cost of starting a retail sports shop could cost anywhere between $5,000 and $500,000 depending on what you want to achieve.
2. The Location of the Retail Sports Shop
When it comes to setting up a new business, location plays a major role which is why feasibility studies and market survey are essential before settling for a location.
Usually, if your retail sports shop is located in an area with good human and vehicular traffic, loads of sports enthusiasts and fans and you stock your shop with different types of sports wares and supplies from different brands, you may not have to struggle to get people to visit your shop and make purchase.
So, if you want to make it big with your retail sports shop business, then you must be ready to rent a store in a high traffic area, a location with the right demography of people with the purchasing power to buy from you.
3. The Brands of Sports Wares and Supplies Retailed in the Shop
Another important factor that will determine how much a retail sports shop is expected to make yearly is the brand of sport wares and supplies that are retailed in the shop. Sportswear or activewear is clothing worn for sport or physical exercise.
Typical sport-specific garments include tracksuits, shorts, T-shirts and polo shirts. Specialized garments include swimsuits (for swimming), wet suits (for diving or surfing), ski suits (for skiing) and leotards (for gymnastics).
Sports footwear include trainers, football boots, riding boots, and ice skates. Sportswear also includes bikini and some crop tops and undergarments, such as the jockstrap and sports bra. Sportswear is also at times worn as casual fashion clothing. Please note that brands like Nike, Puma, Adidas, and Reebok amongst other, are in high demand and the profits margin is usually hire from this brand.
Aside from retailing a wide range of sports ware, you can retail other complimentary products such as sports equipment. The equipment ranges from balls, to nets, flying discs, goal post, thread mills, sporting bicycles, bats, batons, wicket and bases and to protective gear like helmets et al. Also, if you offer additional services such as sports nutrition consulting it will help you earn more that an average sports shop that retails limited sports supplies.
5. The Management Style of the Retail Sports Shop
Another key factor that will determine the amount a retail sports shop is expected to make yearly is the management style of the shop. Trust me, the results you will get when you have a good manager will be far greater than what an average or bad manager will get, even if you give the managers same conditions to work and same products to retail.
6. The Business Model of the Retail Sports shop
There are different business models that a retail sports shop can adopt and these models offer different results. For example, the amount a retail sports shop that also runs an online store makes yearly will be different from the amount a strictly brick and mortar retail sports shop will make. The amount a retail sports shop that also sells franchise will make yearly will be different from the amount a strictly one location walk-in sports shop will make.
7. The Advertising and Marketing Strategies Adopted by the Retail Sports Shop
Another key factor that will determine the amount a retail sports shop can make yearly is the advertising and marketing strategies adopted by the shop. Trust me, there are several advertising and marketing strategies that can help a business increase their earnings, but you may be expected to spend more.
But the results you will make will far outweigh the amount you spent on advertising and marketing. Of course, you don’t expect a retail sports shop that is engaging in aggressive advertising and marketing to make same amount yearly with a retail sports shop that is passive with its advertising and marketing.
8. The Number of Years the Business is in Existence
In business, the number of years you are in existence will go a long way to determine the amount you will make especially if the business is properly managed. This is so because you would have over the years win loyal customers.
For example, in your first fiscal year (FY1) you might make a hundred thousand dollars ($120,000), in your second fiscal year (FY2) you might make two hundred thousand dollars ($200,000) and in your third fiscal year (FY3) you might make two hundred and fifty thousand dollars ($550,000). Interestingly, most businesses including retail sports shops usually breakeven from the third year of operation.
In conclusion, the amount a retail sports shop will make yearly is dependent on all of the factors listed above. Usually, a small-scale but standard retail sports shop that is located in a high human and vehicular traffic location in a cosmopolitan city with loads of sports enthusiasts will make on the average between $120,000 to $550,000 annually all things being equal.
Estimated Profit Margin for a Retail Sports Shop
The retailowner.com tracks the benchmarks for various USA retail businesses including retail sports shops and they have come up with benchmark gross profits around 20 percent and net profit around 2 percent for convenience stores.
To show the range of gross profit margins for a retail sports shop that deals directly with major supplies, you will notice that they operate with a gross profit margin of around 25 percent, while a standard and franchise retail sports shop can operate at a gross profit margin level of around 50 percent depending on the demand for the goods they are retailing per – time.
In conclusion, the mark-up for products retailed by a retail sports shop might not be the same and may be driven by other factors.