There are two types of successful vendor owners (and many types of unsuccessful ones), here are their descriptions:

Type A: The aggressive, get-rich-quick, make-money personality. He'll recall all over hell's half acre for something he's searching for (wands, reagents, armor, whatever). He stocks his vendor at least two or three times per day to make sure nothing gets bought out for long. His prices are generally aggressive, perhaps even in a price war with other local vendor owners. If he marks runes, he probably has extras of each one sitting in his bank ready to go on to the vendor so he doesn't have to immediately go out and mark some once a few are bought.

Type B: The laid-back, dungeon-delving character who gets a lot of loot and gets tired of running around town selling stuff at absurdly low prices to armorers, weaponsmiths and the like. Instead, he can do better selling directly to YOU, John Q Public, and it might make him the extra change to pay for that new set of gold plate he's been eyeing. He probably went by his vendor three or four times per day during the first week, now he just moseys by every day or two, draining off the gold collected and adding the latest loot he's grabbed from the dungeons.

Location,
Location, and
Location

What makes a good location? Foot traffic. Period. This means near a chokepoint pass somewhere (look west of Britain at the pass there, whatever shard you play on), just outside of a town on a major road, etc. Poor places tend to be are moongates (few advanced players use them, preferring gating or recall, and its advanced players who spend the dough), wilderness areas and areas with large numbers of competitors bunched up. If you can see three or more other vendors on your screen when you place your vendor, something should cause you to think twice about spending your time, money and effort competing with them. On the other hand, if your vendor will complement the others in that location by offering a different type of item, then you might be able to take advantage of the "mini-mall" effect and increase the business of all the vendors at that location.

Alternative solutions:

If you're well heeled you might be able to purchase a well-placed vendor (in reality, purchase the right to add your own vendor to someone's location and have the original owner let his lapse).

If you're part of a good-sized guild you might have enough of a treasury to purchase one of the larger or better-placed stores around with some effort and dickering.

The 8 commandments for success:

1 - Thou shalt hide: You will probably find much benefit in learning the Hide skill. It's nice to be able to hide next to your vendor and stock him without concern of thieves nearby. Note that all building porches give enhanced chances to hide, so if you're placing a vendor at a building have him next to or on the porch so you can hide there and add or delete items from him without being mugged. Note that currently if you are hidden and say anything that can be seen, anyone around you can double click on your text, open up your paperdoll and start snooping into your pack -- so hide and shut up.

2- Thou shalt know thy competition: At least once a week, discreetly walk around (perhaps with another character with no obvious relation to your vendor owner character) and check out the inventory on every vendor within 2-3 screens of yours. You'll quickly start noticing which have Type A and Type B owners, and you'll see a good number of them which obviously lose money or barely break even. If you notice that something isn't being carried by anyone else, or is being incredibly marked up, you might consider adding that to your own stock.

3 - Thou shalt know thy neighbors: (this is not related to the previous suggestion). If you see others stocking their vendors, introduce yourself. Other owners can give you much information on local thief activity, who's screwing whom over and might also be willing to avoid getting into a costly price war with you if you know them.

4 - Thou shalt keep thy store stocked: The simple rule is never run out of whatever it is you stock. If you sell reagents, make sure you not only have bunches on your vendor but extras in your bank so you can replenish your stock quickly and extra cash around to purchase more when you are running low. Break this commandment and people will stop coming by your store because they can't be sure you'll have the stuff they're looking for and its a certainty that someone within a few screens of you WILL have whatever that is in stock.

5 - Thou shalt kill thieves: Thieves will pester your customers, inside or outside the guard zones. If you are outside, make it a practice to kill them or at least run them off with their backsides blazing.

6 - Thou shalt monitor what sells and what doesn't: Put a variety of things on your vendor when you start (see commandment #2) and see what sells during your first week. Expensive stuff that doesn't sell isn't worth keeping on your vendor. If you can, talk to your customers and ask them what else they want to purchase when they come to your store.

7 - Thou shalt not blocketh pathways: Few things are more insulting than seeing a row of houses flanking a street with vendors filling the road, making you dash hither and yon to avoid them. Trust me, if you have a good vendor he can be hidden BEHIND a house and you'll sell well. Keep them out of the way to keep traffic flow up (and work with your neighbors on this as well) since that is the life-blood of your shop.

8 - Thou shalt not covet thy neighbor's vendor: Your neighbor might have a killer organization for his merchandise that really lights your fire. Resist the urge to copy him, instead find a way that is similar but shows off your merchandise to the best effect.

A Final Note from Zamboni

I was just about ready to quit UO before I met Marlene. I can honestly say that she changed my UO life. I have met innumerable characters and had great role-playing experiences. I have even made treaties with a number of PKs, who no longer hunt at my tent (and some of whom, by the way, are regular customers).

So get out there, start a vendor, make some money and have some fun!