How to Start a Clothing Store: A Guide to Market Research, Business Planning, Product Sourcing and More

Is owning and running your own retail clothing store your ultimate dream job?

For many people, it is. Boutique fashion retailers are independent merchants responsible for their own success who play an important role in the communities they are a part of.

While the rewards of running a small business are both fulfilling and gratifying, it isn’t easy. It will take years for your business to establish itself and begin flourishing.

Working 12-hour days for a long-term payoff isn’t for everyone. But if you have a keen business sense, a sincere enthusiasm for the fashion industry, and reliable access to capital, you can succeed. From that point, the most important thing you need is to know how to start a clothing store and grow it into a thriving brand.

The good news is there is always room for new apparel retailers. Fashion is a $385 billion industry in the United States and has grown at a consistent annual rate of 5.5 percent since 2008. The marketplace has changed radically since then, and it is up to new retailers – like you – to address those changes and speak to consumers’ needs.

Technology has played a large role in ushering in this era of change, but it is not the only factor to consider. Adopt the right approach by learning how to open a clothing store and you will be in the perfect position to capitalize on changing consumer behaviors.

Market research provides the data you need to start a clothing store

Although there is a certain romance to the idea of building a clothing brand based on your personal style, opening your doors and adopting an “if you build it they will come” strategy, it’s a risky move. If you really want your store to thrive, you need to learn how to start a clothing business based on local market factors and consumer behavior.

Remember, you’re in this for the long-term, and need to plan accordingly. According to the Bureau of Labor Statistics, only one-third of all businesses will survive beyond 10 years. A lot can change in a decade, and you need to perform market research to stay on top of those changes before they sweep the floor out from under you.

Use market research to identify your customer mindset so you can offer items that speak to their values. Find out who your customers are, what they wear, and importantly, how their fashion choices reflect who they are.

For instance, athleisure is one of the fastest-growing market segments in the industry. It speaks to the holistic way millennials approach health and wellness. They are keen to incorporate fitness into their everyday lives rather than make a distinction between “gym time” and the rest of their lives, so they choose clothing that fits.

There are two types of market research:

  • Primary market research relies on data you collect first-hand. You can do this through customer surveys, focus groups, one-on-one customer interviews, and Facebook Audience Insights.
  • Secondary market research comes from third parties. Look for reports, case studies, and publications like Nielsen.

In many cases, hiring a market research agency can be an efficient way to get a comprehensive report on the state of the retail fashion industry in your area. These agencies have experience gathering and processing data to glean insights on exactly these types of trends.

Create a business plan that plays to your strengths

Once you identify the market you wish to address, you are ready to come up with a business plan. This document will be the step-by-step guideline on how to open a boutique clothing store that you will refer to for years.

Your retail business plan should declare your clothing store’s value proposition, describe the market it addresses, and explain how you plan on entering that market. You should include information on how your business is organized and managed, and what you expect its market position to be in the next 3-5 years.

One of the primary tools entrepreneurs use when creating a business plan is a  SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats – four critical factors that your clothing business must address before it opens its doors.

If you have a well-written business plan, clothing store funding may be available for you. If your plan makes a convincing argument supported by high-quality market research, you might be able to convince an investor to support the financial risks rather than relying on your life savings.

A successful business plan includes the following elements:

  • Executive Summary. This section summarizes what you expect your business to accomplish. Although it is officially the first section of your business plan, it may be helpful to move it to the end and write it last – after you’ve worked out the details for the reader in the rest of the document.
  • Company Description. The second section of your business plan communicates key information about your commercial plans, goals, and the customers you plan to serve. You should also mention your unique value proposition here.
  • Market Analysis. This is the best place to demonstrate your in-depth knowledge of the industry you plan on joining. Use statistics and data to paint a compelling picture of how the market looks and where you see yourself in it.
  • Competitive Analysis. To succeed in the retail clothing industry, you will need to know your competitors well. Prepare an honest comparison of your store’s viability from a SWOT perspective, comparing it to direct and indirect competitors alike.
  • Organization. Briefly describe how you plan on organizing your business. The more efficient your organizational hierarchy is, the better-suited you will be to succeed in retail. Identify who makes decisions and how the chain of command will work when the chief executive (probably yourself) is not available.
  • Products and Services. This is where you identify the products and services that will differentiate you from your competitors and serve your market. If you have big-name anchor brands in mind, this is the place where you want to include them, to show exactly what type of store you plan on opening.
  • Marketing Plan. Dedicate one section to your marketing plan. You are going to have to dedicate a budget to marketing in order to get your products in front of potential customers, and this is where you should describe how you plan on doing so effectively.
  • Sales Strategy. This section discusses the exact steps customers will take when buying your products in your store. If you plan on hiring salespeople, you should mention how many you will need, how you will find them, and what their sales targets will be.
  • Financial Projection/Request for Funding. All of the previous sections will inform your final financial projections describing where you see your business going. Include annual earnings projections for at least five years and include a section dedicated to requesting capital for funding if you plan on borrowing money to achieve your dream.

Examples of compelling business plans are available on the U.S. Small Business Administration website. The SBA also has a SizeUp tool that can help you compare yourself against competitors in your area.

Budgeting for your clothing company

With market research done and your business plan underway, you are ready to begin creating a budget for your new company. Learning how to start a clothing business is already a lot of work – but paying for it is another story.

First, there is no way to do this without a considerable amount of cash on-hand. While the figures vary – a Manhattan luxury boutique will cost much more than a value retailer in Oklahoma City – you still have an impressive list of costs to support on the way to profitability.

For many entrepreneurs, the biggest and most worrying expense is rent. There are conflicting opinions about how much of your projected income should go to rent. To play it safe, keep your rental budget at between 5 and 10 percent of your total anticipated revenue. Remember that a great location can increase your revenue – but you’ll need to have capital on-hand to back up that bet.

It’s very likely that you’ll need to borrow money. Fortunately, if you know your market and have a comprehensive business plan in place, you stand a good chance of getting your business financed. You will already have the information you need to identify the major costs. Learning how to start a clothing company means budgeting for merchandise, store employees, marketing materials, store furnishings, and equipment.

What supplies and equipment do you need?

Even under the leanest possible business plan, you will still need to budget for supplies and equipment. When thinking about how to start a clothing store, prioritizing supplies and equipment is a must. Consider each of the following and aim for value when choosing a cost-efficient solution to include in your business plan:

1. Store layout furnishings

Use your imagination to conceptualize your store layout and put yourself in the customer’s shoes. How should the layout speak to the customer? Demonstrating the value of your merchandise requires putting thought into its presentation.

This means investing in shelves, racks, hangers, and display cases. The theme and atmosphere of your store will dictate what aesthetic choices you should make. Gondola shelving is popular and low-cost, but may not speak to your customers’ aesthetic tastes. But if you choose to display your wares on custom-made wooden furniture, you should make sure your margins are high enough to accommodate the cost.

2. Signs and window display materials

For passersby, your clothing store’s signage and window display is the deciding factor in determining whether your store is worth taking a look at. Prominently display your logo and give customers a feeling for what kind of products they are likely to find inside your store.

In a high-traffic area, a high-quality window display can be your most important marketing asset. In these conditions, it’s a good idea to consider your window display a spare-no-expense item. Fortunately, a little creativity can go a long way – you don’t always have to spend luxury money to look like a luxury store.

3. Point of sale, inventory, and retail management

On the administrative side, figuring out how to start a boutique clothing store without investing in the right technology from the start can be a nightmare. The days when you would operate a cash register and input end-of-day sales figures into a spreadsheet are long gone. You can now seamlessly operate point of sale, inventory, and pricing from a laptop or mobile device – and you should.

Instead of purchasing pricing equipment, scanners, and merchandise tags separately and trying to combine them into an efficient system yourself, scalable technology systems like Vend let you cut down your initial cash outlay in an integrated way. Implement a holistic payment system that scales to meet your needs so you can focus on running your store’s day-to-day business.

Further Reading

If you need more info on how to effectively compare different point of sale solutions, download Vend’s POS Buyer’s Guide. In this resource, you will learn the 7 secrets to find a reliable POS system, and avoid the costly mistakes most retailers make when choosing a new retail platform.

In it you’ll learn:

  • How to budget for your POS system
  • How to find and vet providers
  • How to get the most out of the solution

Learn More

Finding products and suppliers

Surprisingly, when learning how to start a clothing store, the last element to consider is the one you would assume is the most important – merchandise.

Finding the right sourcing strategy depends heavily on your business’s value proposition and your customers’ tastes. Set a pricing system with a large enough markup to generate margins that accommodate all your other costs. From there you can start searching for products and suppliers by:

Attending trade shows

Whether you want to focus on domestic products or international manufacturers, trade shows are one of the best places to find vendors in the retail industry. Local shows are more likely to feature suppliers in your area, which can save on logistics costs, while major shows will draw a global assortment of brands.

Doing online searches

Starting your search online can help you narrow down your choices:

  • Makers Row. Makers Row is an excellent place to start. The platform helps retailers connect with manufacturers and suppliers in a wide range of industries, and is particularly well-suited to fashion, apparel, and jewelry.
  • Alibaba. If American manufacturing is too pricey for your customers, Chinese trade giant Alibaba represents the far opposite end of the spectrum. While product quality, customer service, and logistics costs are legitimate concerns, unbeatable low prices will always make this option an attractive one.
  • Sourcify. Sourcify turns the tables by having retailers post projects and wait for suppliers to contact them. Having multiple suppliers bid for your business can be a great alternative to searching for them yourself.

Depending on where you plan on opening your store, you also may be able to benefit from local trade directories and small business associations that will put you in touch with trusted local suppliers. Between major trade shows, the Internet, and local resources, you have plenty of options for getting your store stocked with products your customers will love.

About Francesca Nicasio

Francesca Nicasio is Vend's Retail Expert and Content Strategist. She writes about trends, tips, and other cool things that enable retailers to increase sales, serve customers better, and be more awesome overall. She's also the author of Retail Survival of the Fittest, a free eBook to help retailers future-proof their stores. Connect with her on LinkedIn, Twitter, or Google+.