Barriers to Starting a New Business

With rising unemployment, many people are looking to start their own businesses. Unfortunately, to do this you need a place to sell your goods.

Often a new entrepreneur with limited capital can only operate a small business, often unable to invest in enough stock to fill a shop. Also, despite many empty shops, landlords are unwilling to offer discounted rents to new businesses. Giving new businesses just two options, sell door to door or open up a street stall.

Having to carry you stock from door to door is hard work. If your lucky enough to have a car, you can store your stock there, so you only need to carry samples. However, with limited capital a car is often beyond your reach.

So the most feasible option is to set up a street stall. Unfortunately, this is usually illegal without a licence. This licence gives you a spot at an official street market. Often these licences are fully booked so you have to go on a waiting list and demand pushes up the fee.

While the principle of these regulations is valid. It protects consumers by enabling them to find you if they have a problem with your goods. And it avoids stall holders fighting over locations. Of course it also generates revenue for the government.

The downside of this regulation is that acts as a barrier to entry. If a person wants to start a business, they need a sizeable amount of capital. If you visit a developing country, street vendors are much more common. Providing cheap goods to consumers. As their business grows they can save up the capital to open a shop.

If you are selling low value items, their is no need to have strong consumer protection. The effort to return the good is far greater than the price paid. In effect having a market stall simply becomes a badge of quality so a higher price can be charged. If a vendor is harassing the public, you can arrest them for public nuisance. So there is no need for such strict regulation of street vendors.