I currently own a gift shop and hope that you will indeed take a lot of time to consider what you are getting into. Both previous responses have a lot of excellent information with regard to starting up a retail operation, so please pay attention to them.

As someone who has owned a shop for the past few years, I can also add that you must be very sure of your market and your location. Foot traffic is AMAZINGLY important. If your location is in the middle of nowhere, where will your customers come from? Consider that especially right now, gifts are luxuries and people are less inclined to purchase these extras, so you may need to be a bit more diverse than just offering gifts. Getting set up as close to a larger anchor (especially a popular local grocer or restaurant) is key to your success.

Another note: Landlords of commercial locations are losing tenants quickly. Be sure to be very aware of what is going on around the location-Is some other place becoming more popular? What is it going to be like in 1 year, 3 years, 5 years or more? If the location you are considering is not holding any long-term tenants, you won't get much following there. Go somewhere where the majority of small businesses have been there for more than 3 years, where the turnover is minimum and where the landlord is willing and able to work with you to make sure your business succeeds. Sometimes that means that you negotiate a few months of free rent; maybe you get them to put in new carpet and paint and do the build-out (adding walls, storage rooms and what have you) on their dime. Also, look at the community you are considering. Who lives there? Young families? Blue collar workers? Mature, fixed incomes? Yuppies? Where is their money going right now?

Be prepared to figure out ways to purchase product at LESS than wholesale. It's really not enough in this current environment to pay even 50% at cost-we must be very active and vocal with our vendors that their minimums are too high and their MSRP's are out of line with what the market will bear today.

Consider that the products you carry today will be products you may be stuck with tomorrow, and you will have to sell them at, or even below, your cost. Be sure to BUDGET STRINGENTLY, and stay within that budget. Be sure to account for shipping costs when you are figuring your gross profit margins and determining if products are worth continuing.

Be sure to ask your vendors about their returns policy! If product comes to you and it's broken or won't sell through, are they going to accept the return, give you credit for new merchandise or what? They NEED your business too because we retailers are becoming aggressively frugal. If our customers at the retail level aren't purchasing, we don't have a profit. If we don't have profit, we don't pay ourselves or our bills.

I'm sure there is more that I've missed, but I wish you good luck. :)

Connie and David Spicer, Artists/Entrepreneurs