How to Start a Clothing Store

How to start a clothing store

Business.com spoke with several retail company founders to get their best tips for leveraging brick-and-mortar and e-commerce stores in today’s marketplace. We’ve turned their guidance into a blueprint for starting a clothing store of your own, from identifying your business’s niche to buying inventory.

1. Find a business niche for your clothing store.

Figuring out your niche is an essential part of starting any business. You want to provide a product or service that connects with your target audience’s wants and needs. In this case, what type of clothing will you sell in your store? 

Evaluate whether your market will respond to a new men’s, women’s or children’s clothing store or a combination of these offerings. Then you can choose a specialty, such as vintage clothing for women, boutique items, maternity apparel, sportswear or accessories. You can create your own clothing brand as a fashion designer.

“Finding your specialization is the first step to opening a clothes store,” Josh Neuman, founder of Chummy Tees, told us. “Too many people think ‘clothing’ is one huge market, but specializing in sustainable materials, creative designs or [specific shoppers] will make your store stand out.”

Brian Lim, founder and CEO of e-commerce brand iHeartRaves, recommended focusing on uncovering what has not been done before. 

“For instance, concentrate on specific underserved markets or specific cultural trends,” Lim said

2. Identify the target audience for your clothing store.

Identifying your target audience goes hand in hand with finding your business niche. You must identify who will purchase your clothes. What type of potential customer are you targeting, and what clothing would they buy? Do you want to target those looking for a high-end fashion brand or those looking for more affordable apparel? 

“Just as I developed a brand identity that specializes in only custom festival attire, one can specialize in primarily plus-size clothing for customers, for example,” Lim said. “A business can not only satisfy but also dictate the trends of the market and develop an enthusiastic and devoted client base.”

While Lim pointed out that “concentrating on unappreciated niche markets could also mean less competition,” he and Neuman both advocated for validating demand for your clothing products before getting too deep into the development process.

“Preorder campaigns and pop-ups are great methods to gauge interest and develop buzz without spending much,” Neuman said. 

Lim, whose brands attracted attention on ABC’s “Shark Tank,” suggested using tools like Google Trends to assess consumer interest in particular clothing styles and types. Another option is surveying potential shoppers.

3. Perform a competitive analysis for your clothing store.

A competitive analysis assesses your potential business competitors. To perform a competitive analysis, you must identify the other retailers in your market that currently offer clothing products and then analyze how their stores are positioned. 

True Fashionistas founder Jennifer Johnson said she would begin by searching online for retail stores “similar” to your concept and then conducting on-the-ground research at the brick-and-mortar locations.

“When you are visiting, take note of how busy they are, how the store is laid out, what brands they carry — anything that you can use as ‘intel’ for starting your business,” Johnson said. “You want to know how others are doing in the same space. It will not guarantee your success, [but] it will give you a general idea as to whether or not your idea is viable.”

The results of a competitive analysis help you learn about current market trends, product and service pricing, market saturation, industry best practices, market gaps and business opportunities. Although a competitive analysis is necessary when conceiving your store, you should also routinely perform them throughout your company’s lifecycle to keep your business competitive.

4. Write a business plan for your clothing store.

Although it may not always be legally required, don’t skip writing a business plan. This document should outline your clothing company’s mission, brand, ideal customer, products, marketing plan and financing.

Lim said this plan should be “data-driven,” using the research you conducted when determining your niche and target audience. As you detail how you’ll bring your retail vision to life, “build financial projections with reasonable margins for production, marketing and shipping.” 

“Consider both online and in-store strategies to diversify income streams,” added Lim.

5. Secure financing for your clothing store.

The costs of starting an online business are often reasonable. However, starting a clothing store — online or offline — can be pricey, and you shouldn’t underestimate the financial capital you’ll need to get started. You must purchase merchandise, pay employees, buy marketing materials and (if you’re going the brick-and-mortar route) furnish the store with fixtures and lighting, to name just a few expenses.

Johnson urged “crunch[ing] your numbers” and working backward to see if your proposed budget is feasible.

“Know how much money you need to have this business make, how many employees you need and their pay, how much you would pay in rent,” she said. “Then, reverse engineer it to see how much you need to sell each month to make it work.”

You may need to rely on a highly rated business loan to fund your enterprise at first. Alternatively, you could use a crowdfunding platform to “raise funds and awareness upfront from interested customers,” Lim said.

Check out business.com’s guide to financing your retail store for more information.

6. Find a storefront for your clothing store.

If you want to start a brick-and-mortar clothing store, choosing a location is one of your most vital decisions. You must commit to a storefront in a specific town and state and consider the neighborhoods and streets that will bring foot traffic and a large consumer base interested in (and able to afford) your merchandise.

Once you’ve narrowed your location options, you must find the right building. Consider storefronts in strip malls and standalone locations or look into mall leases if they suit your type of clothing store. You also must keep inventory numbers in mind and consider the following questions:

• How much square footage will you need? 
• What can you afford? 
• What will it cost to fill your store with merchandise?

7. Set up your online clothing store.

Even if you’re opening a brick-and-mortar store, you will also want to create an online clothing store to sell your items. If you plan to use e-commerce exclusively to sell your merchandise, getting this step right is even more crucial.

You can build an e-commerce website yourself or hire someone to handle the web design process. Many startups and small businesses turn to the best website builders for help developing, building and maintaining e-commerce sites.

Some platforms offer retail-specific web design templates, which can simplify the e-commerce store-building process. Look for a solution that supports your initial product quantity and can scale with your business as you grow. Both Lim and Neuman recommended Shopify, although our Shopify vs. Square comparison explains why both vendors are worth a look, especially if your store will have a brick-and-mortar component.

In any case, one aspect that can’t be overlooked is the domain name for your online store. 

“You want to make sure that when someone Googles your name, your strong SEO brings your name up first,” said Ashley Full, co-founder of AMOUR781. 

Business.com’s guide to choosing a business domain name explains what else to keep in mind when setting up your site.  

8. Purchase and price your clothing store inventory.

You must purchase merchandise from designers or manufacturers to fill your in-person or virtual clothing store. Full, a former store manager and assistant buyer for Nordstrom, warned this process “can be very overwhelming.”

“I researched every single brand before I went to my first [vendor fair] and, even then, trying to get an appointment with them is not easy,” she said. “Don’t be disappointed when the proverbial door gets shut in your face because you are unknown to the [company]. Brands that shut me down at first have since reached out to me asking if they can have a spot at my store.”

Consider the following tips for purchasing and pricing your inventory: 

• Visit trade shows to connect with vendors: A trade show is an excellent place to buy wholesale merchandise for your clothing company. You can connect with suppliers at trade shows and see their product offerings firsthand. To “source unique products or materials,” Lim recommended attending MAGIC and Première Vision shows.
• Carefully consider inventory types and amounts: When ordering merchandise, consider the amount of inventory you’ll need when opening your store, plus the inventory you’ll need to replace the items that sell regularly. Don’t forget seasonal trends and new styles and brands that become popular from pop culture influences. Include a diverse mix of apparel while understanding that you can’t necessarily satisfy everyone who walks through your door. “Look for suppliers with low MOQs [minimum order quantities] so that you can explore different styles without getting stuck with stocks,” said Lim.
• Negotiate sales terms with merchandisers: “You may … find that you want to cancel an order based on current selling or market trends,” Full said. “Have these conversations with vendors ahead of time, negotiate and be sure you know your ship and cancel windows to protect yourself.” She advocated further for “hold[ing] your vendors accountable to their commitment to the ship window. No one wants to receive swimwear in August — you’ll end up taking a loss.”
• Conduct research to price products properly: Research the best way to set prices based on your merchandise. You must determine your markup amount, understand effective pricing techniques for your store type and know how to discount merchandise effectively.

9. Establish policies for your clothing store.

Anticipate problems or questions concerning employees, store hours, customer service, loss prevention, damages, returns and other day-to-day operations for your clothing store. Consider best practices from other established stores and distribute materials explaining these procedures to all staffers (if you hire any).

For example, Neuman flagged “return management complexity” as a potential challenge, explaining, “Clothing returns are high-risk due to sizing difficulties, which can cut into profits.” As a result, you’ll want to develop a return policy that protects your bottom line without alienating customers and causing a reputation for poor customer service.

10. Market your clothing store.

Write a marketing plan focusing on your store’s unique aspects, what your target customers will gain from shopping with you and how you will reach those consumers. Even before you’re ready to open your doors (physically or virtually), you’ll want to start raising awareness.

“Establish your brand early. This is your story, voice and what makes you memorable, not just a logo,” said Neuman.

Consider the following marketing tips to get started: 

• Host an open house: Hold an open house with special discounts, giveaways and other perks. Put your best foot forward and emphasize your excellent customer service to build the best brand image possible.
• Create social media marketing campaigns: Take advantage of the power of social media marketing and cultivate a following on platforms like Facebook and Instagram. “Start building social proof immediately. If used appropriately, a tiny initial customer base can create a ripple effect since customers [look to] what others have bought,” Neuman said.
• Consider physical advertising: You may want to incorporate physical advertising into your marketing plan as part of a local marketing strategy. For example, you can advertise your clothing store in local newspapers, lifestyle magazines or on radio stations.

Software and tools for starting a clothing store

To operate your clothing store on a day-to-day basis, there are essential software and tools you’ll want to purchase. While not all of the below recommendations need to be in place by opening day, the sooner you implement them, the smoother your experience will be. Others, like a point-of-sale (POS) system and credit card processor, must be set up before your virtual or physical doors open.

POS system, credit card processor and inventory management system

A POS system is used to ring up sales while a credit card processor is used to facilitate credit payments. You can purchase a two-in-one solution from a reputable vendor or find a credit card processor that integrates with your preferred POS software. 

Many options facilitate customer payments for both in-person and online settings. Check out the guides to the best retail POS systems and highly rated credit card processors for help choosing the right payment software and hardware for your business.

Modern POS platforms also contain inventory management modules, but you may want to opt for a separate (but compatible) inventory management system that better meets your needs.

“An inventory management system is a necessary tool to maintain the company’s book of record accurately and avoid costly mistakes that may arise,” Lim explained. “These tools manage inventory across different points of sale and prevent overselling or too little stock at a point in time. They may also provide the capability to forecast inventory level requirements in line with anticipated demand, which enables you to manage cash flow.”

CRM system and marketing automation tools

Businesses across industries rely on customer relationship management (CRM) systems to develop and grow their client base. The features of a CRM platform allow you to collect customer data, track sales performance and maintain strong relationships with your top shoppers.

However, some of these functions are also available in retail-specific POS systems. You could purchase a POS system that contains CRM functionality, such as loyalty program tools or seek a CRM that integrates with your POS software for a solution that gives you the best of both technologies. Similarly, many CRM and POS systems today feature marketing automation tools for promoting your store and reaching your ideal customer.

“These allow campaigns to be adequately prepared as they divide the target audiences into different segments and allow individual marketing messages for them, which can be sent through email, text or … social media,” Lim said. “In addition, together with CRM tools, it is possible to build a relationship with customers by analyzing their behavior and providing them with the right offers.”

Email and text message marketing services

As Lim mentioned, two great methods for reaching your potential customers are email marketing campaigns and text message marketing. When used in conjunction with your CRM and marketing automation tools, you’ll amass a collection of data that will be valuable for the long-term future of your store.

Lim explained, “It will be even easier to promote the business with the help of analytics tools that will provide the details about the sales, the customer and [your e-commerce] website, which can show what areas require improvements and those that will allow for the best possible growth. All of them ultimately contribute toward the formation and optimum functioning of a system that enhances business operations and ensures business longevity.”

Accounting software and payroll services

With any business, tracking accounts receivable and accounts payable is critical for managing the financial side of your enterprise. You can set up your POS system to send sales data directly to your accounting software for easy reconciliation. If you aren’t already, make sure you become familiar with retail accounting so you have a firm grasp of inventory costs.

You may be able to run an e-commerce business as a solo entrepreneur, but for a brick-and-mortar store, you will need salespeople and other staff — and a way to pay them. That’s where payroll programs come into play. You can use a top payroll service to automate the payroll process, meet your payroll tax obligations and pay yourself as the store’s owner and operator. Some vendors, such as Intuit QuickBooks, bundle their payroll and accounting products in a single package for streamlined (and more affordable) financial management. Learn more in our QuickBooks Payroll review.

Employee scheduling software

If you have staff and your chosen POS system doesn’t include tools for employee management (and not all of them do), you’ll also want to invest in highly rated employee scheduling software. These programs enable you to assign shifts, monitor overtime and identify top performers. Alternative solutions include time and attendance software or human resources software with time-tracking features.

Pros and cons of starting a clothing store

Like any business, starting a clothing store can bring enormous benefits and significant challenges. Before taking the leap, consider the rewards vs. the risks carefully.

The pros of starting a clothing store include the following: 

• A clothing store is easy to scale: Successful clothing stores can be easily scaled when you’re ready to open new locations. A single boutique next year could lead to a clothing chain in 10 years.
• A clothing store is marketable: If your clothing store has inventory that carries your logo, you can gain free marketing from customers wearing your merchandise. Word-of-mouth marketing can especially benefit your business if you carry affordable, unique and size-inclusive fashion.
• A clothing store has fast product turnover: Although you may find it challenging to switch out inventory as seasons change, you always get a new chance to succeed. For example, if your spring and summer collections didn’t sell well, your fall and winter inventory could produce enough profit to compensate for earlier lost sales. Neuman finds the “rapid product iteration” to be one of his favorite aspects of running his T-shirt business. “Real-time feedback allows clothing companies, especially online ones, to adapt. T-shirt designs are easy to change and relaunch if they don’t sell,” he said.
• You can maximize clothing store sales: Every time you have a sale, you have an opportunity to increase your revenue. Once you have a handle on your average sales volume, you can use promotions to solve cash flow problems strategically.

The cons of starting a clothing store include the following: 

• A clothing store must follow the trends: Neuman pointed out the challenge of “staying ahead of trends,” noting, “What’s fashionable today may be irrelevant in six months, necessitating ongoing innovation and forecasting.”
  You must consistently liquidate your inventory as soon as it comes in to make the most profit. Excess inventory can cut into profits and is time-consuming to liquidate.
• A clothing store may have high employee turnover: Employees working in retail fashion stores are usually at the start of their careers and may leave to seek better opportunities. You can lose workers quickly to other industries or competitors. Training new employees constantly can be mentally and physically draining for management.
• A clothing store’s location can make or break the business: Choosing an excellent physical location is crucial to the success of a brick-and-mortar clothing store. If there is too little foot traffic in an undesirable area of town or the store doesn’t attract the right audience, you will have difficulty reaching your sales goals.
• A clothing store’s inventory can be difficult to manage: “Underestimating demand can disappoint customers if [stores] end up having too little stock to offer, but overestimation can lead to overstock, which could adversely impact cash flow and profitability,” Lim said. “Balancing this requires precise forecasting and the agility to adapt quickly to shifts.”

Despite these downsides, opening a clothing store can be a fulfilling entrepreneurial experience, especially if you have the right support.

“Starting a business can feel lonely, but you aren’t alone,” Full said. “Through this process, I have met some amazing entrepreneurs who have all gone through what you are, and they are always so willing and open to share their pains and successes. There will be good days and bad days — have a plan and be nimble.”

Dave Thomas and Julie Thompson contributed to this article.