If you are proud of the country and region you live in; if you enjoy showcasing its history and identity, and locally made arts and crafts, then opening your own souvenir shop may be right for you. As a souvenir shop owner, you’ll love to interact with travelers from far and wide and help them find a memento to remember their vacation or trip by. While becoming a business owner will require significant effort, the experience of running your own souvenir shop and work closely with local suppliers and craftspeople to put your region’s best foot forward can be immensely rewarding.
A souvenir shop is your typical brick-and-mortar retail. It specializes in a wide range of products like gifts, souvenirs, novelty items, t-shirts, greeting cards, and other accessories. Souvenir shops typically do well in destinations such as theme parks, monuments, popular nature reserves and beaches, and tourist hotspots. That said, the trend towards online shopping provides additional opportunities for shop owners to expand beyond their local reach.
Souvenir shops fall within the gifts, novelty, and souvenir stores industry. According to a 2021 report by First Research, demand in that industry is very much driven by consumer spending, special occasions, and tourist travel. According to IBISWorld, there are currently around 15,400 businesses operating in this sector in the US, employing over 142,000 workers. This industry is also quite fragmented in the US. There are some large players, such as Disney, Party City Holdings, or Hallmark for example, and many small individual businesses. In fact, the top 50 companies make up 40% of the entire annual sales.
This sector tends to be similarly affected by economic shifts than the tourism industry. Travel and an increase in discretionary spending benefit a souvenir shop, especially in popular tourist destinations. This means that changes in travel patterns, changes in restrictions to enter the US for example, will affect souvenir shops. On the other hand, the recent trend towards supporting local producers, finding unique as well as personalized gifts should present the souvenir industry and small business owners with great opportunities in the future.
Whilst large companies have the advantage when it comes to marketing, purchasing, and distribution, small businesses have the competitive edge by selling specialty products and delivering a unique customer experience. They might offer a great depth of selection in a niche category. Consequently, the target demographic for your souvenir shop will likely be travelers and visitors to the region looking to take home a memento. Your target market may also include locals who are looking for a unique gift. Your market segmentation will be influenced by whether your region is a family holiday hotspot or perhaps better known as a romantic getaway destination or a mecca for extreme sports.
Skills, experience, and education useful in running a souvenir shop
Industry knowledge and appreciation of local goods. As a rule of thumb, a souvenir shop owner who stays aware of industry trends will be better able to ensure the shop stocks the products and offers items that will be most in demand. As such, it will pay to understand tourism trends and supply chain matters. It also helps to be knowledgeable about locally produced items and be able to explain their origins.
Retail experience. Previous experience in the retail industry will serve a souvenir shop owner well since they’ll have a better idea of the tricks and challenges of managing a store, understand pricing, stock taking, and store display for example.
Customer service and interpersonal skills. This is a very important skill and one you need to enjoy. A shop owner who can provide a memorable customer experience, tells the story of the souvenir, is far more likely to achieve good sales results and create customer loyalty. And don’t forget to maintain a solid relationship with your suppliers as well, especially if they are local.
Management experience. Previous experience in hiring, training and managing employees will be beneficial for any shop with staff. Having a solid understanding of accounting practices and the ability to negotiate supply contracts will also be valuable skills.
Marketing talent: Your shop will require a solid marketing and branding effort to get people through the door, especially during the startup phase. If marketing is not your forte, this is a skill that you can easily hire out.
Costs to Starting a Souvenir Shop
Although the barriers to business ownership in this industry are considered low according to IBISWorld, one of the major challenges of starting a souvenir shop is having sufficient start-up funds available for the immediate larger costs for outfitting a store and inventory.
Common startup costs for a souvenir shop include:
- The rent, lease or purchase, and renovating/outfitting of the retail space. Costs will vary greatly depending on square footage, amenities, and the location of your shop. You might even like to just rent a kiosk for starters and then expand from there. Budget a minimum of $6,000 if renting or leasing.
- Equipment such as POS system (Point of Sale) or cash register, computer, alarm system, cameras, display racks, and shelves. Est $ 7,000.
- Initial inventory such as souvenirs, local art, cards, homewares. That really depends on the quality, pricing, and volume of items for sale.
- Initial marketing campaign and signage, anything from $ 1,000 to $6,000.
- Supplies such as branded bags and gift wrapping
- Licensing and Permits, est. $ 200, depending on your location
Working capital for the first three to six months of payroll, rent, utilities, internet, etc. ($ 30,000 plus).
Steps to Starting a Souvenir Shop
Step 1: Write your Business Plan
You had a great idea, you’ve discussed it with friends and family, perhaps even with a business mentor. The next step in starting your own souvenir shop should be to write a business plan. It will make you focus on some important aspects of the business, such as who your customers are, how you plan to reach them, projecting sales and expenses, and much more.
Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Step 2: Name the Business
Finding the perfect souvenir shop name can be challenging. Not only does the name have to resonate with your customers, it also has to be available to use.
Step 3: Form a Business Entity
A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
Related: Comparison of Business Entities
Step 4: Select your Location
For a souvenir shop, the location is quite important. You’ll want it to be in an area close to tourist attractions and high foot traffic, with a highly visible, inviting storefront. Rental costs will depend on the shop’s size, location, and amenities. A shop in a high-traffic area will cost more to rent, but it can also generate greater walk-in business and general public awareness.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
A souvenir shop owner will need to obtain certain business licenses and permits. These permits and licenses can vary based on the state and town where the business is located. Some common local, state, and federal registrations a souvenir shop may need to include a sales tax permit, Employer Identification Number (EIN), and Occupancy Permits, among others.
Step 6: 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 souvenir shop is another. It is worthwhile to present your business plan to investors and check in with your local chamber of commerce or business association for business incentives. If you are in need of a bank loan to get the business off the ground, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs.
Step 7: Open a Business Bank Account
Keeping your business and personal finances in separate bank and credit card accounts is vital and also makes it easier to track the income and expenses of the business.
Step 8: Get your Marketing Plan in Place
A souvenir shop will need to set aside a budget for the initial marketing and branding campaign but also to cover a long-term marketing and communications strategy. Common marketing techniques for souvenir shops include using social media platforms like Facebook, Instagram, and Twitter, online advertising, print advertising, and direct mail advertising. A souvenir shop might even explore radio advertising. Developing a website can be a significant expense, but it can also give a business greater reach and visibility beyond your region. Marketing costs will depend on the activity performed and its volume.
Step 9: Get Insurance
A souvenir shop needs several types of insurance for full coverage:
- General liability insurance protects the business from expenses like medical and legal bills that it could face if a customer is ever hurt while on the business’ property.
- Commercial property insurance can cover expenses and losses that the business could face if the shop is ever damaged or destroyed by a fire or other type of event.
- Workers’ compensation insurance covers expenses like medical bills and legal fees that a shop might face if an employee were ever hurt while working.
Insurance policies will vary in cost depending on the shop’s location, the value of its inventory, and the number of staff. To be able to factor in insurance costs in your budget accurately, it pays to request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.
Step 10: Hiring Employees
Most souvenir shops have a few employees on their payroll to cover shop hours and also factor in seasonal tourism. According to PayScale and based on almost 7,000 salary profiles, a shop assistant can earn anything between $10.11 and 19.34 an hour.
As part of the shop’s overheads, the shop’s budget will also need to include employee-related expenses such as unemployment insurance and paid time off. It’s also a good idea to factor in training and up-skilling.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an effective accounting system for your gift shop business is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government, but the data gathered can be used to track and monitor trends, stock, and cash flow in the business, and maximize profits.
How Much Can You Potentially Make Owning a souvenir shop?
Not much is published on souvenir shops’ profits, but according to the latest IBISWorld report the three main profit drivers in the industry are: accurately forecasting demand, maximizing peak period sales, and effectively manage inventory. The gifts, novelty, and souvenir stores industry as a whole is generating a combined income of around $18 billion in the US.
When it comes to hourly salaries. They were up by 4.2% to an average of $13.38 for non-supervisory staff in 2021. And according to PayScale, the average hourly pay a retail store manager can expect is $16.00.
Things to consider before starting a souvenir shop
Most of us will have brought home a souvenir at some point in our lives, to remember a special place or a particular, happy moment; so a souvenir shop is something many can relate to and can get excited about. As a future shop owner, it is however important to understand that owning your own business requires skills as well as perseverance in addition to an enthusiasm for souvenirs and the industry.
For your business to do well, you should not underestimate the need for good business skills and be well connected to your local business community, your suppliers, as well as associations such as your regional tourist board. You will need to be ready to make the transition from being employed to being a business owner and to show integrity in all your business decisions. Ensure you check out your competition and find your niche. Especially in this sector, your competition may include gift and stationery shops, chemists, florists, and supermarkets.
Don’t be afraid to start small and then grow the business from there. Owning your own business and building it from scratch can be such a rewarding and life-changing experience.