Last Updated on September 13, 2020
If you love fashion, have a talent for identifying the best deals and helping people find garments that are flattering and stylish, starting a clothing boutique can help turn your skills and passion into a profitable business. Before planning to start a clothing boutique business, take a few minutes to understand what really goes into starting up a clothing boutique, the potential earnings, and how much you may need to get started.
Clothing boutiques typically cater to high-end and niche markets. Unlike the larger retail clothing chains, boutiques are smaller, independently owned stores. Boutiques are rarely standalone businesses and are instead commonly found in plazas or even as small stores in smaller malls. While clothing boutiques carry less inventory than larger chains, they can specialize in carefully selected, quality goods and can offer excellent customer service to set themselves apart. With boutiques, a unique and desirable shopping experience is key to drawing in customers.
In 2018, the clothing boutique industry saw a total revenue of $21 billion, according to data from IBIS World. That total revenue had declined by 2% over the previous five years. However, over that same period of time, the number of boutiques grew by 1.9% to a total of 154,730 businesses in the United States. Because boutiques often market to high-end and niche audiences, boutiques’ success largely depends on a healthy, thriving economy where people are making those high-end purchases.
Clothing boutiques face competition from other retailers. Because boutiques are specialized, they rarely face direct competition from big-box retailers. Instead, online retailers and online auction sites are more likely to compete with the niche offerings of boutiques.
Sustainability has recently come into focus, and according to Retail Dive, it’s affecting the retail clothing industry, too. This sustainability focus has led to an increased demand for businesses – both clothing manufacturers and retailers – to be honest and upfront about their sustainability practices.
When it comes to e-commerce, the high cost of returned merchandise is reshaping the industry. Retailers who offer free shipping and free returns can drive sales with these offerings, but smaller retailers have to get creative in finding ways to cover those costs.
Who is the target market for your clothing boutique?
Target markets for boutiques vary according to the niche focus of each business. Generally speaking, the target market will be mid- to upper-class adults. Your specific niche may target shoppers looking for formal wear, vintage clothing, sustainably made clothes, and more.
Skills, experience, and education useful in running a clothing boutique
Running a clothing store requires certain skills and experience. You don’t necessarily need a formal business degree, but the following skills will be beneficial as you open and manage your store.
Clothing industry knowledge. Knowledge of the clothing industry is a must for any boutique owner. You should be knowledgeable about the fashion trends in your store’s niche and be able to spot emerging trends to offer customers the products they’ll be looking for. Attending fashion industry trade shows will also be important in improving your knowledge.
Sense of style. Besides clothing industry knowledge, a sense of style will help in choosing appropriate inventory for your store, and to help customers select the products that are most flattering for them. Style is also essential when planning outfit pairings and creating displays. The better the displays, the greater the chance of being able to up-sell entire outfits or accessories.
Interpersonal skills. A large part of owning a boutique is working with customers, so interpersonal skills are important. You’ll need to be able to welcome customers into your store, offer assistance without coming off as pushy, and make the shopping experience enjoyable.
Organizational skills. From tracking inventory to managing your expenses, top-notch organizational skills are valuable when you own a boutique. If you plan to offer online sales, organizational skills will be particularly important when it comes to shipping and tracking orders.
Business skills. Basic business skills will also be useful. A business background can help when locating and negotiating retail space, pricing inventory, hiring employees, and more. Business skills will also help with creating strategies in profitably meeting the unmet needs your store will fill in your community.
Marketing talents. Your boutique will require branding, marketing, and potentially some creative rewards programs or other incentives to get customers in the door when you’re just starting out. Marketing talents can help in spreading the word about the new business. If marketing isn’t in your wheelhouse, you could look to hiring out part or all of your marketing needs.
One of the major challenges of starting a clothing boutique is having sufficient startup funds available. Because of the amount of inventory needed and expense of outfitting a store, starting a boutique isn’t a small investment. The below costs can help give an idea of the budget that may be needed to get a store up and running.
Costs to start a clothing boutique
A few common costs to consider to start a clothing boutique include:
- Point of Sale (POS) system or cash register ($100-$1,000)
- Chairs ($50-$200 each)
- Full-length mirrors ($50-$150 each)
- Garment racks ($50-$200 each)
- Mannequins ($45-$300 each)
- Security cameras ($200-$2,500)
- Clothes hangers (Price starts around $20 for 24 wooden hangers; better pricing is available for bulk orders)
- Branded shopping bags (start around $200.00 for 150; price per bag decreases with larger orders)
- Clothing and accessories (Price varies according to quantity, brand, and the specific pieces you order)
Costs to prepare a retail clothing business can be significant depending on the current condition and layout of the location. Commonly the store will need dressing rooms constructed, in addition to mirrors, flooring and signage.
Any clothing boutique will need working capital to keep it operating smoothly. The common struggle is due to the high cost of inventory and the time to turn that inventory into sales, which can take weeks or even months. There is also the balance of ensuring there is sufficient inventory on hand in the right sizes.
How much can you potentially make owning a clothing boutique?
Incomes vary significantly depending on many factors, such as a boutique’s size, location, target market, and more. Not much is published on the profits of boutiques, but according to Sageworks, privately-owned clothing stores saw a net profit margin of almost 7% in 2013. This profit margin was almost double the net profit margin seen in 2011 and 2012. Sales also grew by about 5% in 2013.
Keep in mind that many business choices will also affect income potential. The clothing lines carried, whether you accept consignment pieces or not, and whether you offer online sales will all affect sales revenue. The effectiveness of marketing also plays an important role in your success.
Steps to starting a clothing boutique
Step 1. Write your Business plan
After coming up with a business idea, the next step in starting any business should be to write a business plan. Not only will a bank require you to have one in order to get funding, but multiple studies have shown that a business plan helps increase the odds of starting a successful business. A well thought-out clothing boutique business plan will serve the entrepreneur as the road map for their business, helping them achieve their business goals.
Step 2. Form a Business Entity
A business entity refers to how a business is legally organized. There are four primary business entities to choose from which include the sole proprietorship, partnership, corporation and LLC. Each type of entity has its own pros and cons such as liability exposure, business name registration, formation costs and administrative requirements.
Related: Comparison of Business Entities
Step 3. Select your Location
It’s generally beneficial for a clothing boutique to be located in higher-traffic locations which typically equates to high rent or purchase price.
Numerous factors will affect the cost of a lease, including the size of a store, its location, and the term of a lease. A prime retail location can help to bring in business, but these ideal locations also carry higher lease fees.
Related: Choosing a business location
Step 4. Apply for Business Licenses and Permits
Depending on your location, various licenses or permits will likely be needed to run a retail operation. Both your town and your state may require a business license or permits, and you’ll need these in place before you open your store.
Some of the common local, state and federal registrations most retail businesses need include a sales tax permit, Employer Identification Number, and Occupancy Permit among others.
Step 5. Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a clothing boutique is another. Fortunately, the cost to start a clothing boutique can be relatively low, with a majority of the costs going towards remodeling, garment racks, furniture, signage and inventory. Funding for a new start-up can be difficult as banks are typically going to want the borrower to have good credit and be able invest 15-25% of their own money.
Step 6. Get your Marketing Ready
Now that you are getting close to opening, it’s time to get marketing materials planned and created. The ability to take great product photos is important, especially if operating all or a portion of your business via an online store.
Marketing, especially as you’re getting your business running, can be a significant expense. You will need to budget for marketing efforts like social media, advertisements, online store and email marketing to help get the word out about your business. The more marketing you can do on your own, the more money you can save, but finding the time to consistently do your marketing well can be a challenge, especially in the early days of your business.
Step 7. Obtain Insurance
Part of your business budget will pay for insurance. Because you’ll be opening a brick and mortar store, you’ll need a few different types of insurance:
- General liability insurance will help to pay for damages or medical expenses in case a customer is injured while in the store, such as if they trip or fall.
- Commercial property insurance provides coverage in case the building or inventory is damaged by a fire or other event.
- Workers comp insurance helps to pay for any medical expenses or lost wages an employee might incur if they are hurt on the job. This insurance is required for employers.
- Theft insurance offers you additional coverage in case your store is ever burglarized. It’s not required, but may be worth the investment, particularly if you stock expensive inventory.
A number of factors will affect the cost of your insurance policies, like inventory value and the store’s location. Because of this, it’s difficult to estimate insurance costs. As you build your business plan, ask for quotes from at least three different insurance companies. Then, compare those quotes and consider the different coverage amount that each offers to get a sense of what you’ll need to pay for the insurance coverage your business needs.
Step 8. Hiring Employees
You will probably need to hire at least one employee for your store as you start out, and as your store grows, you may need additional staff. While some stores operate with just the owners, bringing on additional employees helps as retail hours are typically long and the owners will need a break or time off if sick. As clothing boutiques cater to higher-end consumers in creating an intimate experience, it’s critical to find and retain talented staff.
In addition to salaries, budget for expenses like payroll taxes and workman’s compensation insurance. A good rough estimate is 15%-20% of wages. You may also wish to offer your employees perks like paid time off, sick time, and health insurance.
Related: Hiring your first employee
Every state has specific requirements and regulations when starting a business. Select your state below to find the guide to starting a business in your state.
Things to consider before starting a clothing boutique
Starting any business can be an intimidating process, but a detailed business plan can help to remove some risk from your new venture. It’s important to understand that clothing boutiques often undergo slow times of the year, such as after holidays, where sales slow down. Being able to weather these fluctuations is a skill that any successful business owner will need to have, and it’s something that needs to be planned for in your business plan.
You’ll need to think about the need that your boutique will fill, as well as the niche that it will represent. If you can identify a need in the clothing market that no local stores currently fill, you may be on your way to establishing a successful business.
The Ultimate Boutique Handbook: How to Start, Operate and Succeed in a Brick and Mortar or Mobile Retail Business
The Blue Print To Owning Your Own Fashion Boutique (free on Kindle Unlimited)
The Online Boutique CEO – How to Start An Online Clothing Boutique Line from Scratch