As the clothing industry continues to expand, opening a boutique shop can certainly be a profitable endeavor. Global apparel market revenues are estimated to be around $1.5 trillion in 2021 and are expected to reach around $2 trillion by 2026. The countries that account for most of the apparel demand are the United States and China, which generate significantly more revenue than any other country.
If you are interested in owning a clothing store, there is definitely room to make a profit. But how to start a boutique? What steps do you need to follow in order to make your business operationally legal and ready to roll? What are the costs associated with opening such a business? Read on to find out the answers to these questions.
How To Start a Boutique: Key Takeaways
You can start a boutique by following these few steps:
- Once you’ve selected the in-demand products you want to sell, you can manufacture them in-house, work with a manufacturer, or source them from manufacturers and wholesalers. You can also opt for consignment inventory if you have a limited budget.
- Find the ideal location for your store. Consider traffic, visibility, and proximity to complementary businesses before signing your lease. The site also depends on your budget. If you can’t find a location that meets all of your criteria due to a lack of funds, then consider increasing your brand’s visibility through marketing.
- Be financially prepared to cover the most prominent expenses – rent, equipment to run the store, employee salaries, etc. A bank loan can help you. However, there are many other alternative sources of financing. Make sure you have savings that will last you for 6 to a year after opening your store.
- Give your company a name. Trademark it. Register the business with the IRS for payment of your taxes. Get the proper permits and open a business bank account.
- Use sophisticated point of sale software that will streamline your inventory and accept any type of payment. The software should preferably be a cloud-based POS. Other important equipment includes office furniture and supplies, printed stationery, receipts, hangers, dress forms/ mannequins, bags, clothing labels, etc.
- Work on your branding and invest in marketing. The clothing industry is an industry where visuals play a significant role. TikTok, Instagram, and Pinterest should be part of your priorities. Partnerships with influencers are also essential to get your name out there.
Table of contents
- Choose the type of boutique you want to start
- Decide what clothes you want to sell in your boutique and to whom you will sell them
- Plan how to finance your business
- Find the perfect location for your boutique
- Decide how to source inventory
- Design your boutique
- Establish your store’s operational procedures
- Get your business legal
- Hire employees
- Develop your marketing strategy
The first step in starting a boutique is to know what type of boutique you want to establish. There are four types of boutiques based on how they stock merchandise: a consignment boutique, a traditional retail boutique, a franchise boutique, and a boutique in the form of a production house retail outlet.
In a consignment boutique, the items in the store do not belong to the store owner. Instead, they are owned by other designers, collectors, or manufacturers. The consignment store owner sells them and then takes a percentage of the sale of the items. With the consignment model, you don’t need upfront money for inventory, but the profit share will be much lower than in more traditional models. This type of store is a good option if you don’t have the initial investment to purchase goods. You will have to look for designers or factories willing to keep goods in your store for sale.
Traditional Retail Boutique
The second type of boutique is the classic retail store. You buy goods at a wholesale price from manufacturers or distributors and resell them at a higher margin to customers. With this model of the store, the profits are much higher in the end, but it takes a significant initial investment to purchase the merchandise. To make a better profit, you must develop a relationship with the wholesalers and get the best price. This model is probably the most profitable in most circumstances.
See also: How To Get a Wholesale License?
The third type of boutique is the franchise boutique. It means you will open your boutique to operate under a major brand and then sell exclusively as that brand. The franchisee will have to pay a franchise fee to the parent company (franchisor) to use the brand name, logo, etc., and be allowed to sell its goods. The initial investment can be significant depending on the brand you choose as a franchisor. Some of the best clothing and accessories retail franchises in 2022 include Apricot Lane Boutique, Style Encore, Mainstream Boutique, and Uptown Cheapskate.
Production House Outlet
Finally, the fourth type of boutique can be the retail outlet of a clothing manufacturer. This involves a much more significant initial investment than the other three. You will need to source fabric, make clothes, and then sell them – so you’ll have labor, material, and production costs in addition to the cost of setting up the store. The reward, however, will be even greater if you succeed.
While you’ll probably do better if you sell something you’re passionate about rather than something you’re not interested in, you need to make sure there’s a demand for your products. Use market research to gauge interest. You can hire a market research firm to help you get started or do your own research by interviewing potential customers. You should also visit competing stores and observe what they have in stock, what seems to be selling well, and what’s missing. Using tools like Semrush, Moz, Ahrefs, and Ubersuggest will also help you with keyword research, online ranking data, and potential competitors.
See related: 7 Trends in SEO for Small Businesses
These tools allow you to check customers’ buying preferences, their age range, and the most favorable geographical positions, allowing you to know better which niche to focus on.
Starting a boutique, or any other business for that matter, requires financial means to get the business off the ground. It is advisable to have enough money upfront to keep your business running for the next six months after its opening. Most companies do not make a profit in the first few months.
You will need a security deposit for renting a space, paying employees, buying inventory, and decorating up the store’s exterior and interior, to name a few expenses. You can use a bank loan to cover your costs. However, many other types of lenders are now available for new businesses. These options can be much faster than going through the bank. Some of the best alternative financing options you can consider are business credit cards, merchant cash advances, revenue-based financing, SBA loans, and peer-to-peer lending.
The ideal capital you need to start your store will depend on the location of your store, the type of clothing you want to offer, the size of the store, hiring employees, decorating the store, other costs, etc.
Location is one of the most critical factors in deciding the success of your store. Opening a boutique in a high-traffic area close to public transportation or in a high-traffic area with accessible parking will help attract more customers. It also means you will need to spend less on marketing and advertising. However, in such a location, the cost of rent will be high. On the other hand, a store in a quieter residential area will not have customers lining the halls, but the rent will be lower.
Consider the proximity of complementary businesses. You will generate business with minimal fuss if you open a workout equipment store next to a gym or a baby clothing store next to a daycare center. So the choice is up to you and what you can afford. The criterion for choosing a store location is one that has a high impact on foot traffic and attracts new customers.
If you still want to sell your own items but can’t afford to produce them, your best option is to work with a manufacturer who can mass-produce the items you plan to sell. Get items directly from creators, such as designers. This is called consignment inventory. Look for manufacturers who specialize in the products you have in mind. Ask for samples; website/catalog photos are never representative. After seeing them with your own eyes, you can negotiate with them, and they can budget for your quantity.
Another way to source clothing for a boutique is to contact online wholesalers like Alibaba. Attend wholesale trade shows in your area. Attending these events will allow you to connect with wholesalers or suppliers.
You might also want to read: Finding the Right eCommerce Product Suppliers for Your Store
Store decoration is a major factor in letting people know whether to buy from your store. The colors you use, shelving, and storage layout all contribute to the buying decision. The customer must feel that the product you offer is worth the price. They need to be encouraged to open their wallets; to do this, they need to have confidence – the layout of the store and the look of the storefront can instill more of this.
Become familiar with visual merchandising tactics to understand how displays influence purchase decisions. Clothing forms or mannequins can attractively display your clothing at the store entrance and attract shoppers and passersby. A wedding dress store needs space to display its collection to potential buyers. A catwalk with a large mirror is a nice touch in such cases.
Retail stores all have a fitting room with mirrors. People need to know what the clothes they are buying look like. Efficient use of space is a necessity when space is at a premium. Hire a space designer if you insist on a professional touch. All major retail stores have bright lights in the fitting rooms highlighting customers. This is essential if you want them to buy the clothes you offer. So spend money on bright, high-quality lighting.
Knowing how to start a boutique is one thing. Understanding the operational procedures needed to make the store profitable is another ball game. How do you manage the accounting for your business? Your point of sale (POS) system is the backbone of all your company’s transactions. The best boutique POS system should be able to do the following:
- Facilitate omnichannel retailing
- Enable inventory management
- Feed your business decisions by generating real-time reports and analysis whether you’re in your store or on the road
- Provide detailed product reports
- Enable fast transactions
- Use any payment processor you choose
You also need policies on how to use the cash register, maintain cash flow, deal with customers, and a refund policy for purchased goods that a customer no longer wants.
Opening any business is bound by legal rules that your clothing store cannot escape. One of these rules is determining the business structure of your company. Whether it’s a limited liability company (LLC), a corporation or partnership, or a sole proprietorship, it will impact your day-to-day operations, your taxes, and the level of risk you are willing to take with your assets. It is advisable to choose a structure that offers a balance of legal protections and benefits. Once you know what business structure to give your company, take the following steps:
Choose a name for your store
How to start a boutique begins with knowing what name to give your business. The name should reflect your brand and the products you intend to sell. When choosing a name, try to make it short, easy to remember, descriptive of the business, and able to attract attention.
Register and trademark your business
Depending on your location and business structure, you may need to register your business with the state and/or local authorities. To do this, LLCs and corporations must register (online or by mail) with the Secretary of State or the business agency where they operate.
It is important to note that if you choose to operate your business under a name other than your personal name – even if you are a sole proprietor – you will need to register that business name with the state and/or local government in a process known as “doing business as” (DBA). You must also trademark your business name to avoid any legal entanglements down the road.
Obtain Federal and State Tax IDs
You cannot open a retail store without registering your business with the IRS and obtaining an Employee Identification Number (EIN). This will be required for federal and state tax returns. You do not need an EIN if you are a sole proprietor with no employees. Instead, you will file your taxes using your own social security number.
An EIN is also required to open a business bank account and keep your business and personal finances separate. You may also need a state tax identification number. Generally, you must obtain an EIN before applying for your tax ID number. Check with your state or a business attorney, as the procedure varies by state.
Obtain Licenses and Permits
Generally, your clothing boutique store may need to obtain the following licenses and permits:
- Basic business operation license
- Sales tax license/sellers permit/resellers permit
- Building permit
- Certificate of Occupancy
- Alarm permits
- Garment/apparel registration certificate
- Wholesale license
Open a business bank account
A business bank account and credit card separate your personal and business transactions. If you start a store as an LLC or corporation, opening a business bank account helps protect your personal liability and assets in case your business is sued or found liable. A bank account and credit card also help you establish business credit, which suppliers and vendors will verify before doing business with you.
You can start your boutique and decide not to employ people to reduce operational costs in the beginning. Many business owners start on their own, doing everything themselves until they start making a profit.
However, you will need to hire someone at some point, at least temporarily. You need staff to clean the space and manage the cash flow as salespeople. When hiring employees, ensure they follow your store’s operational policies. Don’t compromise on this; if the owner is lax on rules, expect employees to flout those rules. And with employees who don’t follow your store’s management policies, you may go out of business sooner than expected.
Once you have opened your store, you need to actively maintain your store’s presence in the minds of customers. And for that, you need a good marketing strategy to achieve it. Here are some strategies you can implement:
- Get the word out that your store is open. Try to get local media coverage – send press releases to all major media outlets, even radio stations.
- Run different promotions throughout the year.
- Advertise through social media marketing (TikTok, Instagram, Pinterest in particular).
- Work with influencers.
- A website with a blog can be used as a marketing tool that will attract more customers.
- Take advantage of email and SMS marketing.
- Open an online store for your business.
Wrapping up: How To Start a Boutique
Opening a clothing store requires a lot of preparation. There are four main aspects to consider. First is your niche and ideal audience. The second aspect is the inventory. The third aspect considers everything related to your business’s legitimacy. You can’t start a boutique and make it operational without getting it registered. And the last aspect is about the management and marketing of your business. Promoting your products through social media and a website will make your brand more popular. A referral or loyalty program can also be beneficial. Finally, using sophisticated point of sale software is a must for managing a boutique. And for that, KORONA POS is the solution you may be looking for. Click the button below to learn more about this cutting-edge retail POS system.