I am currently teaching a college course on Small Business Operations. As part of the course, each student is developing a business plan for a small business that they might like to start at some point. For the last several classes, we have been working on Market Research, with each student responsible for doing research for their particular business. Working on this exercise with my class reminded me that it is not necessary to spend a lot of money to do market research, in particular if you are going to start a local retail business.
There are a lot of questions that you can ask when conducting market research, but to simplify things for a small business, there are three subjects to focus on:
And since we are focusing on a small retail business, these three subjects are studied in the context of a particular geography.
To start with, the students went to tools like Google and Yahoo, to get an idea of their chosen industry in a particular area. In addition, they are using the public library system to access online tools such as LexisNexis Corporate Affiliations and Reference USA without cost. The students also took advantage of such sites as the NAICS Association to further research businesses in their chosen locations.
Once the students have gotten a view of their industry and located competitors, they began doing the best type of research, using their cars or legs as primary research tools. As they walked and drove around their market and viewed or visited potential competitors, they asked question such as:
- How many of your competitors are in a particular area?
- How often does a typical customer use this type of business?
- How far is the typical customer willing to walk (drive) to get there?
- What is the typical customer going to buy?
- How much will the average customer spend?
- How do the competitors differ from each other?
One of the students in the class, who is working on a business plan for a retail clothing store, was quite perceptive in the differences between clothing stores in the chosen area. The new store would be competing with stores that sold three classes of goods: larger stores with a wide variety of clothing, smaller stores with exclusive lines and high prices and similarly sized small stores carrying less expensive “imitation” brands.
The student also noted how some varied in their presentation, some with narrow aisles and crowded displays, others were more wide-open. This student even studied how music and other factors were used to create an attractive “hip” atmosphere.
Another student in the class whose project is a tea room chose an area that has a mixed community, but close to two university campuses. There are a number of chain coffee shops in the area, and one independent coffee house, but none specializing in tea. This student has noticed that the neighborhood has a certain ambiance and would like to open a tea shop that encourages people to see drinking high quality teas from around the world as being part of their lifestyle.
A third student in the class is thinking of offering a service to people in her neighborhood. She is researching her idea using the same online tools as the other students, but is also passing out questionnaires and interviewing potential customers in person.
As you can see, some fundamental online tools and simply walking or driving around the market area are effective tools for developing a picture of a local market, one that students are using with much energy and enthusiasm. Come to think of it, you don’t need to be a student to take advantage of these tools yourself, entrepreneur!