ON THIS PAGE
- How to Start a Clothing Store
- 15 Steps To Start a Clothing Store Business
- How Big is the Clothing Store Industry?
- What are the Key Segments of the Clothing Store Industry?
- What External factors affect the Clothing Store Industry?
- Who are the Key Competitors in the Clothing Store Industry?
- What are the Key Customer Segments in the Clothing Store Industry?
- What are the Key Costs in the Clothing Store Industry?
- What are the Typical Startup Costs for a new Clothing Store?
- Helpful Videos
- Additional resources in the Clothing Store Industry
How to Start a Clothing Store
If you’re looking to start a Clothing Store, you’ve come to the right place. Since we’re going to show you exactly how to do it.
We’ll start with key Clothing Store industry fundamentals like how big the market is, what the key segments are, and how revenues and profits are generated.
Then we’ll discuss keys to not only starting a Clothing Store, but succeeding in it!
Importantly, a critical step in starting a clothing store is to complete your business plan. To help you out, you should download Growthink’s Ultimate Clothing Store Business Plan Template here.
15 Steps To Start a Clothing Store Business:
Starting a clothing store can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful clothing store business.
1. Choose the Name for Your Clothing Store Business
The first step to starting a clothing store business is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your clothing store business:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce, and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your clothing store business.
2. Determine the Type of Clothing Store Business You Will Launch
When launching a clothing store business, it’s essential to determine the specific type or niche you’ll focus on.
Here are some common types of clothing store businesses you can consider:
- Boutique Clothing Store: A boutique typically offers unique, high-quality clothing and accessories. You can specialize in a particular style, such as bohemian, vintage, or contemporary fashion.
- Fashion Retail Store: This type of store carries a wide range of clothing styles, catering to a broad customer base. It may include clothing for men, women, and children.
- Men’s Clothing Store: Focusing exclusively on men’s fashion, you can offer suits, casual wear, sportswear, and accessories.
- Women’s Clothing Store: Specialize in women’s fashion, offering dresses, tops, skirts, and a variety of clothing and accessory options.
- Children’s Clothing Store: Cater to parents and families by selling children’s clothing, from infants to teenagers.
- Maternity Clothing Store: Serve expectant mothers by offering a range of maternity wear, including comfortable and stylish options.
- Plus-Size Clothing Store: Focus on plus-size fashion, providing a diverse selection of clothing options for individuals with different body types.
3. Develop Your Clothing Store Business Plan
One of the most important steps in starting a clothing store business is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary: This section should summarize your entire business plan so readers can quickly understand the key details of your clothing store business.
- Company Overview: This section tells the reader about the history of your clothing store business and what type of clothing store business you operate. For example, are you a boutique clothing store, men’s clothing store, or fashion retail store business.
- Industry Analysis: Here you will document key information about the clothing store industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis: In this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing products like the ones you will offer?
- Competitive Analysis: Here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer.
- Prices: Document the prices of your products/services.
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your clothing store business? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization, and/or social media marketing.
- What startup costs will you incur?
- How will your clothing store business make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
You can download our clothing store business plan PDF template here. This is a business plan template you can use in PDF format.
4. Choose the Legal Structure for Your Clothing Store Business
Next you need to choose a legal structure for your clothing store business and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the clothing store business and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a clothing store business together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a clothing store business include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a clothing store business is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your clothing store business, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
5. Secure Startup Funding for Your Clothing Store Business (If Needed)
In developing your clothing store business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a clothing store business to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a clothing store business that they believe has high potential for growth.
6. Secure a Location for Your Business
Finding the right space for your clothing store is a critical decision that can significantly impact your business’s success.
Here are factors to consider when choosing a location:
- Demographics: Understand the demographics of the area, including age, income levels, and fashion preferences of the local population. Choose a location that matches your target customer base.
- Foot Traffic: High foot traffic areas, such as downtown districts, shopping centers, and malls, can attract more potential customers to your store.
- Competitor Analysis: Research nearby clothing stores and competitors. Consider whether there’s room for your store in the market, or if you can offer a unique value proposition.
- Accessibility: Ensure that your location is easily accessible by car, public transportation, and foot traffic. Ample parking or proximity to public transit can make a significant difference.
- Visibility: A visible storefront with large windows can attract passersby and showcase your merchandise. Good signage is essential for drawing attention.
- Cost and Budget: Consider your budget for rent and overhead costs. Balance your desired location with the cost of rent to ensure profitability.
- Local Regulations: Be aware of zoning regulations, building codes, and licensing requirements in the area. Ensure that your business can operate legally in the chosen location.
- Safety: Choose a safe and well-lit area to enhance the security of your store and the safety of your customers.
7. Register Your Clothing Store Business with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
8. Open a Business Bank Account
It is important to establish a bank account in your clothing store business’ name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use.
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address).
- Complete the bank’s application form and provide all relevant information.
- Meet with a banker to discuss your business needs and establish a relationship with them.
9. Get a Business Credit Card
You should get a business credit card for your clothing store business to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
10. Get the Required Business Licenses and Permits
Starting a clothing store business requires various licenses and permits to operate legally and comply with local, state, and federal regulations. The specific requirements can vary depending on your location and the nature of your business.
Here are common licenses and permits typically required for a clothing store:
- Business License: Obtain a general business license or an occupational license from your local city or county government.
- Sales Tax Permit: Register for a sales tax permit with your state’s tax authority to collect and remit sales tax on clothing sales.
- EIN (Employer Identification Number): If you plan to hire employees or operate as a corporation or partnership, obtain an EIN from the IRS for tax reporting purposes.
- Trade Name Registration: If you plan to operate under a different name (DBA – Doing Business As), you may need to register your trade name with your state or local government.
- Home Occupation Permit: If you plan to run your clothing store from home, check if you need a home occupation permit or zoning clearance.
- Building and Zoning Permits: Ensure your store complies with local building and zoning regulations. Depending on the location, you may need permits for signage, renovations, or changes to the building’s layout.
- Fire Department Permit: Some municipalities require fire department permits to ensure the safety of your store, especially if it is in a commercial building.
- Health and Safety Permits: If you sell clothing items that require safety compliance (e.g., children’s clothing or clothing with flammable materials), you may need safety permits.
Depending on the type of clothing store business you launch, you will have to obtain the necessary state, county and/or city licenses.
11. Get Business Insurance for Your Clothing Store Business
Operating a clothing store business comes with inherent risks, such as theft, property damage, liability claims, and unexpected events. Having the right insurance coverage is crucial to protect your business and assets.
Here are the types of insurance you should consider for your clothing store:
- Commercial Property Insurance: This insurance covers damage to your store’s physical assets, including the building (if you own it) and the contents (inventory, fixtures, equipment). It protects against perils such as fire, vandalism, theft, and natural disasters.
- General Liability Insurance: General liability insurance provides coverage for third-party bodily injury and property damage claims that may occur on your store’s premises. It’s essential for accidents like slips and falls or injuries caused by a product you sell.
- Product Liability Insurance: If a product you sell causes harm to a customer (e.g., allergic reaction, injury due to a faulty item), product liability insurance covers legal expenses and potential settlements.
- Business Interruption Insurance: Business interruption insurance helps replace lost income and covers ongoing expenses if your store is forced to close due to a covered event, such as fire or a natural disaster.
- Cyber Liability Insurance: If you collect customer data, such as payment information, online or have an e-commerce store, cyber liability insurance can protect against data breaches, cyberattacks, and associated costs.
- Worker’s Compensation Insurance: If you have employees, worker’s compensation insurance is typically required by law. It covers medical expenses and lost wages for employees injured on the job.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
12. Buy or Lease the Right Clothing Store Business Equipment
To run a clothing store business effectively, you’ll need a range of equipment and fixtures to create an appealing and organized retail space.
Here’s a list of essential equipment and fixtures for your clothing store:
- Clothing Racks and Hangers: Clothing racks and hangers are essential for displaying and organizing your clothing inventory. Different types include wall-mounted racks, freestanding racks, and rounders.
- Shelving and Display Units: Use shelving and display units to showcase folded clothing, accessories, and footwear. Adjustable shelves allow you to accommodate various product sizes.
- Mannequins and Dress Forms: Mannequins and dress forms help display outfits, allowing customers to visualize how the clothing will look when worn.
- Mirrors: Full-length mirrors are crucial for fitting rooms and throughout the store to allow customers to try on clothing and assess their appearance.
- Security System: Install a security system with surveillance cameras and alarms to deter theft and protect your merchandise.
- Anti-Theft Devices: Use security tags, sensors, and clothing alarms to prevent shoplifting.
- Fitting Rooms: Provide comfortable and well-lit fitting rooms for customers to try on clothing. Include seating and hooks for their convenience.
- Checkout Counters: Checkout counters should be strategically placed for efficient customer service. They should include space for the cash register, receipt printer, and bags.
- Storage and Backroom Shelving: Backroom storage shelves help keep excess inventory organized and accessible.
13. Develop Your Clothing Store Business Marketing Materials
Marketing materials will be required to attract and retain customers to your clothing store business.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your clothing store business. Your logo will be printed on company stationery, business cards, marketing materials, and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional clothing store business website provides potential customers with information about the products you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: Establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn, and/or other social media networks will help customers and others find and interact with your clothing store business.
14. Purchase and Setup the Software Needed to Run Your Clothing Store Business
Running a clothing store business efficiently requires the use of various software solutions to manage inventory, sales, marketing, and more.
Here are some essential types of software for your clothing store:
- Point-of-Sale (POS) Software: A POS system allows you to process sales, accept payments, and manage inventory in real-time. It can also generate sales reports and track customer data.
- Inventory Management Software: Inventory management software helps you track and manage your clothing inventory, including stock levels, item variations, and reordering alerts.
- Retail Management Software: Comprehensive retail management software combines POS and inventory management functions with additional features like customer relationship management (CRM), employee management, and sales analytics.
- E-commerce Platform: If you sell clothing online, choose an e-commerce platform to set up and manage your online store. Popular options include Shopify, WooCommerce, and BigCommerce.
- Accounting Software: Accounting software helps you manage your financial transactions, track expenses, generate financial reports, and prepare for tax filing.
- Customer Relationship Management (CRM) Software: CRM software allows you to maintain customer profiles, track purchase histories, and send targeted marketing campaigns to build customer loyalty.
Research the software that best suits your needs, purchase it, and set it up.
15. Open for Business
You are now ready to open your clothing store business. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
How Big is the Clothing Store industry?
According to IBISWorld, the Clothing Stores industry in the US consists of more than 174k establishments. Over the past five years, the sector has grown slowly, at an average of 1.2% per year to $186.6 billion.
What are the Key Segments of the Clothing Store Industry?
Clothing Stores are segmented by type of clothing sold:
- Family Clothing Stores stock clothing for men, women and children, without specializing by gender or age group.
- Women’s Clothing Stores specialize in women’s wear, including misse’s, junior’s, plus-size, and maternity.
- The remainder of industry revenue comes from Lingerie, Swimwear & Bridal Stores; Men’s Clothing Stores; and Children’s & Infants’ Clothing Stores.
What External Factors Affect the Clothing Store Industry?
A number of factors affect the performance of the Clothing Store industry. These drivers include:
Per capita disposable income – Income affects demand for clothing; therefore, increasing income
Number of adults – Since adults are wage earners and heads of household, adults are the primary purchasers of clothing. Thus, the number of adults in the US affects demand for clothing.
World price of cotton – Cotton is a primary input for clothing manufacturers. When the cost of cotton rises, so do prices for finished garments. Not all input cost increases can be passed on to the consumer, so rising cotton prices could result in lower profit margins for Clothing Stores.
Online shopping – Online shopping is a direct threat to the industry. Online Clothing Stores are able to offer lower prices and larger inventories than brick-and-mortar Clothing Stores. Savvy brick-and-mortar Clothing Stores will work to capture the online audience.
Who are the Key Competitors in the Clothing Store Industry?
Major players in the Clothing Stores industry include The TJX Companies (TJ Maxx, Marshalls, AJ Wright, Bob’s Stores), Ascena Retail Group (Lane Bryant, Charming Shoppes, Maurices, Dressbarn, Catherines, Ann Taylor, Loft), and Tailored Brands (Moore’s Men’s Wearhouse, K&G).
What are the Key customer segments in the Clothing Store Industry?
The key customer segments in the Clothing Store market are Baby Boomers, Generation X, and Generation Y.
What are the Key Costs in the Clothing Store Industry?
Purchases – Purchases are the largest expense in the industry.
Wages – Wages are the second-highest industry expense.
Rent, Marketing, and Other Expenses – Rent is another significant expense for Clothing Stores. Since visibility is key for store success, location is an important factor, and prime retail locations can be pricey. Marketing costs represent a smaller, but still significant portion of revenue. Other expenses include administrative costs, warehousing, depreciation, etc.
What are the Typical Startup Costs for a new Clothing Store?
Initial, one-time costs:
- Lease – includes security deposit and other fees associated with signing a lease
- Improvement costs – includes space customization, fixtures, etc.
- Starting inventory
- Office machinery/software – cash register, POS software, computers, phones, etc.
- Advertising and events – for the store’s launch
- Rent and utilities
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Additional resources in the Clothing Store Industry
For additional information on the Clothing Store market, consider these industry resources:
- American Apparel & Footwear Association: www.wewear.org
- National Retail Federation: www.nrf.com
- American Apparel and Footwear Association: www.apparelandfootwear.org
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