5 Lessons I Learned Running a Small Retail Business in NYC (And How They Can Help Your Retail Store Thrive)
Before we started Signs and Mirrors where we make beautiful mirrored and stainless steel sidewalk signs, Jamie and I operated a physical retail business in Chelsea on 29th and 7th Ave.
When we opened New York's first self-portrait studio, FotoLab, we had never operated a physical retail business before. I came from a background in finance and technology startups, while Jamie was a consultant and lawyer.
Despite this, we grew FotoLab into a profitable, self-sustaining business with two locations by year two and more to come. I wanted to share five key lessons for running a physical retail business that could be helpful for opening a Pilates/Yoga studio, coffee shop, restaurant, or other ventures.
Top 5 Lessons For Running a Physical Retail Business
1. Location is (Almost) Everything
When I say location is everything, I don't mean you need prime real estate on Fifth Avenue. It depends on your business and goals. Different businesses have different needs. A Boba tea shop, for example, requires high foot traffic but minimal square footage since most sales are takeout. A photography equipment store like B&H needs a large space to showcase products but doesn't necessarily need a high-traffic area. If these businesses swapped locations, it would be disastrous!
The key is to only pay for what you need. Does the extra rent lead to higher revenue? For FotoLab, we are appointment-only, with all customers pre-booking sessions online. So, we had to weigh the high cost of ground-floor retail against the lower cost of upper floors.
As this was our first business, we chose the latter to save on rent, which worked well. We knew our concept was new to NYC, and walk-ins would be minimal; we expected to acquire most customers online and through word of mouth. As we've grown, we're now considering ground-floor spaces as demand and awareness increase.
Our Houston location, however, is prime ground-floor retail. We believed that the demand for FotoLab in Houston would be just as high as in NYC. Thankfully, the real estate is more affordable in Houston, which gave us the confidence to set up shop at the Post HTX, one of Houston's busiest downtown spots.
Whether you're on the ground floor or the 9th floor, an eye-catching sidewalk sign is essential for attracting customers. At Signs and Mirrors, the first sign we designed was a unique mirrored A-frame Sandwich Board Sidewalk Sign. Since FotoLab is a photography studio, we wanted to engage customers by reflecting their own image, inspiring them to take photos and come visit us at FotoLab. Nowadays, we often get more pictures of our mirrored sandwich board than we do inside of our studio!
Credit: FotoLab Houston
2. The Power of Samples
Attracting customers is hard. Sampling is an effective, low-risk way for them to experience your product or service. If you sell great coffee or pastries, offer samples outside your store. If you sell t-shirts, let customers try them on. This isn’t just for smaller brands; even big brands with hundreds of millions in revenue still do this. In Paris, Aesop had bottles of lotion mounted outside their store for anyone to try!
Now, I understand that not every product or service is easy to sample. How does one sample a barbershop, Pilates class, or massage parlor? Well, not every sample needs to be free. Many services offer introductory pricing or discounted first classes to get customers in the door, which is totally fine.
At FotoLab, we also faced the challenge of "difficult to sample." However, we made it work in our Houston studio by offering customers three free self-portrait shots. Once potential customers take that first photo and see the beautiful result, they are always shocked by how good they look. We often see conversion rates of over 50%, and sampled customers now account for over 20% of our paid customer base. We believe we have an awesome service; customers just need to try it!
3. Master the Upsell
Do you know why Pinkberry always asks if you want extra toppings for just $1.00 more, or why Chipotle asks if you'd like chips and a drink? This is the art of the upsell. Customers who've already decided to buy are more likely to spend a little more.
However, upselling must be done carefully to avoid overwhelming customers. It's about offering additional value, not pushing unnecessary items. For example, my barber recommends a favorite shampoo that I buy because I trust him and need good shampoo. Jamie buys class pack deals at Barry’s to save money, which benefits both her and the business.
At FotoLab, customers come in to take awesome photos of themselves and loved ones. Naturally they want picture frames and gift cards for friends and family. But we didn't offer any of those items until 18 months after opening. Add-ons to our self-portrait studio now account for a significant portion of our revenue and also enhance our customer experience.
4. The Main Thing is the Main Thing
While this may slightly contradict the previous point, your main thing is your main thing. If your primary business isn't working, ancillary products won't save it. If they do, then that ancillary product should become the main thing.
If your main business is selling coffee, make sure your coffee is great and better than your competitors'. Pastries, gift cards, loyalty points, mobile apps, corporate catering, and the thousand other things you can do with a business won't work unless your main business already works.
At FotoLab, we struggled in the beginning. No one knew who we were or understood the concept. Half the initial customers were surprised they were taking the pictures themselves. During those early days, I had my fair share of wild ideas to "improve" the business. One idea was turning our studio into a podcast recording studio—we already had the camera and lights, why not just buy microphones and record podcast episodes? After all, podcasts are a hot, growing, and massive market.
However, was I exploring other ideas because I truly believed we should pivot to a podcast recording studio, or was I just navigating the initial hurdles of starting a small business from scratch? The basics of being patient, staying focused, and improving the main thing can be really hard. We still strongly believed that we offered a superior experience at FotoLab and focused on creating an exceptional customer experience. Slowly but surely, word of mouth started to kick in, and brand awareness increased, helping us grow organically and profitably.
5. Learn to Let Go
As a first-time physical retail business owner, you are obsessed with your business. You are constantly thinking of different ways to improve customer experience, optimize workflows, and market the business. However, you have to keep in mind that your goal is to run a business, not let it run you.
The easiest way to think about this is: if I were to step away from the business, would the business still survive? Unfortunately, the answer for a lot of small businesses in America would be no. As business owners, we tend to work overtime, tend to every customer request, and over-accommodate. But at the end of the day, you need to set boundaries and hire and train employees who can run the business "almost" as well as you can.
In the early months, I spent every day at FotoLab, seven days a week. We weren't profitable, and I wanted to learn the ins and outs of the business. However, when we became profitable, I still had a hard time delegating. What if they don't do as good of a job as me? How will they know how to adjust the camera settings depending on the time of day? Will they scrub the floors as well as I have?
These are natural questions for business owners and valid concerns. But you need to put systems and processes in place so that you can take a person off the street, train them, and have them operate the business by following your systems and processes. Creating these systems and processes is called working on the business, not in the business. However, you can't work on the business without first working in the business and fully understanding how everything works.
These days, I don't need to go into FotoLab anymore. We worked hard to make the entire customer experience and workflow as consistent as possible, documented it in manuals, and trained our employees well. This has allowed us to open our second location and develop new product lines for FotoLab.
Parting Thoughts
Operating a small physical retail business can be intimidating. Signing up for a 5 to 10 year lease is NOT for the faint of heart. Renovations and upfront costs can be a lot. However, I hope these five lessons were helpful in thinking through how to open and run a physical retail business.
I'm sure I'll have additional lessons to share on my journey starting Signs and Mirrors with my fiancé. We make and sell beautiful mirrored and stainless steel A-frames, sidewalk signs, sandwich boards for retail businesses. If we can help with making your business stand out or if you have questions about running your retail business, please feel free to reach out to founders (at) signsandmirrors.com.
