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Home Running A Business From Idea to Reality: How to Start a Clothing Business in 8 Actionable Steps
Have you always had a passion for fashion? Starting a clothing business can be an exciting and lucrative venture, but it’s not without its challenges. You may be wondering what clothes you should sell, where to turn for manufacturing, and how to attract customers to your store. Well, good news—you’ll learn all of that and more in this complete guide. Read on to discover how to start a clothing business in eight actionable steps. Plus, find tips from entrepreneurs with years of hands-on experience in the fashion industry.
Whether you are eyeing online or brick-and-mortar, here are eight steps to opening your own clothing store.
First, before opening for business, you’re going to need to jump through a few legal hoops. Here’s a quick guide:
In short, be sure that you understand all the legal requirements to operate as a business in your city and state.
Once you have your paperwork in order, it’s time to start thinking about the audience your clothing store is going to serve. While it can be tempting to be a one-stop shop for everyone, the clothing market is saturated. To attract a loyal customer base, you need to appeal to a specific niche market.
For example, let’s look at the popular clothing brand North Face. North Face is a magnet for outdoor enthusiasts aged 14 to 45 who lead active lifestyles, particularly in areas with colder weather. The brand’s customers are happy to spend more on premium clothing products that stand up to the forces of nature. And, at the end of the day, they not only get the outdoor gear they need, but also wear the logo to communicate to the world that they are active outdoor enthusiasts.
When thinking about your business’ ideal customer, you need to know exactly who they are, what they do, and how they want to be perceived in the world. Here are some questions that can help you with that process:
The more specific your ideal target audience definition, the better you’ll be able to tailor your clothing products to their needs.
Next, when starting any business, branding is going to play an important role in success.
Nathalie Neuilly, Founder and CEO of online couture service Dressarte, says “Before you start designing and producing your clothing, take the time to define your brand identity. What makes your clothing unique? Who is your target audience? What are your brand values? Answering these questions will help you create a brand that resonates with customers and sets you apart from competitors.”
But where do you start?
“Research the market to see what other companies are doing,” says Neuilly, “Analyze the competition and identify gaps in the market that your brand could fill. This will help you create products that are in demand and differentiate your brand from others.”
Marketing agencies and freelance experts can help you with the branding process, or you can do it yourself with the help of online guides (like these from Shopify, Adobe, and Oberlo).
The cornerstones of a brand’s identity include:
Once you’ve defined the foundational elements of your brand, you’ll need guidelines on how to express it through visual and written assets. This requires developing:
All of your branding elements should be kept together in a single document that functions like the bible of your brand. Anything your company says or does should align to ensure a cohesive, effective presence.
Once you know who your brand is and who you want to sell to, it’s time to decide what clothing products you’re going to offer. You’ll need to decide on various factors, including:
Sandhya Garg, a contestant on season 13 of Project Runway and the owner of a luxury online clothing boutique, adds, “Cohesion of the collection is also important—in other words, how products compliment each other so they can be bundled and bought together for the occasion they are meant for.” She adds, “For example, If you have a casual range with bottoms that match tops and jackets.”
To gain insight into what your audience wants, you can perform customer surveys, run ads and analyze the results, perform keyword and competitor research, and even test the waters with a small sampling of different products.
A forewarning: It can take a bit of trial and error to discover what products your ideal customers like best. “The clothing industry is constantly evolving, so it’s important to be flexible and adaptable,” advises Neuilly. “Be open to feedback from customers and be willing to pivot your business strategy as needed to stay ahead of the curve.”
When running a clothing business, a big question is, where will the clothes come from and how will you get them to your customers? Well, there are a few different approaches you can take, and each has its pros and cons.
Are you a seamstress or tailor looking to design and create your own clothing? You can certainly go that route. However, you will still need to source your fabrics and other materials. Then, you’ll be responsible for storage, packaging, product fulfillment, and returns.
While manufacturing your own clothes gives you the most control over your product and the experience customers have with your brand, it’s also the most labor-intensive. In time, if you’d like to scale, you can gradually outsource the various steps to other individuals or companies.
Clothing manufacturers are individuals or companies that produce clothing for other parties. If you can strike up a deal directly with a manufacturer, you can often get the lowest price point, as there’s no middleman. However, you’ll need capital to invest up front and will often need to buy in bulk to close deals.
To ensure you buy clothing that your customers want, it’ll be important to have an understanding of their preferences. “One common pitfall of new clothing businesses is overstocking on certain items, which can tie up cash flow and lead to unsold inventory,” says Sophia Jones, a financial analyst at PiggyBank.
Clothing manufacturers can be found here in the U.S. and overseas. You can find reputable manufacturers by speaking to other business owners at industry meetups, vetting them at tradeshows, searching reputable online directories like Maker’s Row, and performing your own independent research online.
Wholesalers work as a middle party between manufacturers and retailers. If you find a wholesaler that has the clothing products you want, you can buy in bulk to get a discount, and then sell items piece by piece in your store to earn a profit. However, the price will likely be higher than if you go directly to a manufacturer (the wholesaler marks up the price to earn a profit).
You can find wholesalers by performing your own research, getting recommendations from other retailers, and through online marketplace platforms like FashionGo, Alibaba, and AliExpress.
With physical inventory comes the need for storage, packaging, and shipping. As the owner, you may opt to handle all three in-house or outsource one or more steps to a third party. Regardless, it will come with costs that should be considered.
Buying from wholesalers gives you more control over the order fulfillment process, but again comes with the risk of buying inventory up front that you may get stuck with.
The dropshipping model involves marketing clothing items online and then ordering them from a third party when orders are placed. As a result, you’ll need to partner with a clothing manufacturer, wholesaler, or platform that fulfills orders on an on-demand basis.
If you’re interested in dropshipping products, you’ll need to locate reliable suppliers that offer the products you want to sell, provide the quality you want, and also provide the order fulfillment service your customers expect. Many turn to online supplier databases like AliExpress and SaleHoo to find partners. Further, if you want to sell clothing items with prints you design, you could use print-on-demand platforms like Printify, Printful, CustomCat, SPOD, or Apliiq.
Dropshipping requires less upfront capital, as you often won’t need to purchase inventory, have storage space available, pack or ship orders, handle returns, or manage stock levels. You can also access a wide variety of clothing products from many suppliers and test product-market fit without much risk.
On the downside, the profit margins are typically lower as the competition is high. A low bar to entry means more people come in and offer rock-bottom prices to win sales. You’re also putting a great deal of trust in your suppliers, so it’ll be important to ensure they’re delivering a quality level and service experience that aligns with your brand’s promise. You may also be limited in your ability to deliver a customized brand experience through packaging, tags, and details. Although, some companies do offer private labeling services.
Another option is to source items from other retail clothing shops. If you’re going to sell vintage or second-hand clothes, you could turn to thrift shops, consignment shops, estate sales, garage sales, and online marketplaces like eBay. If you’re only selling new items, you could look to stores clearing out inventory to make room for the next season’s items. Some stores sell their items on liquidation sites like Close Out Central while others may be willing to make a deal with you directly.
Next, you’ll need a place to sell your clothes. Nowadays, you can opt for an online-only storefront, a brick-and-mortar storefront, a traveling storefront, or a mix.
Wondering how to start a clothing business online? It’ll require you to establish a web presence. There are multiple ways you can go about building a website from having a website and store built from scratch, to using a platform to quickly get your store up and running.
Many turn to platforms like Squarespace, Shopify, or Square to set up ecommerce stores. While they can make the process quick and easy, they do charge fees. However, the costs will be much more affordable than hiring a developer and designer to build a custom store.
If you want to open a physical retail storefront, you’re going to need to scout a location, rent or buy a space, furnish it, fill it with inventory and supplies, staff it, and have security measures in place. This option comes with a much higher bar to entry and many more costs.
You may also want to start by going to events. You could put together a booth and attend local farmer’s markets, pop-ups, and other community events your ideal customers attend.
While opening an online store is often the easiest and most affordable route, any one of these options (or a combination) can be a viable way to reach your ideal customers.
You’ll also need to decide how you’re going to get on the radar of your target audience, attract them to your clothing store, and start making sales. The approach you take can vary a bit depending on where you plan to sell your clothes (online or in a physical store). However, in either case, online marketing is a must.
“In today’s digital age, having a strong online presence is essential for any business,” says Neuilly. “Create a website and social media accounts to showcase your products and engage with customers. Consider partnering with influencers or running paid advertising campaigns to increase visibility and drive sales.”
You can also build an email marketing strategy that helps you collect the email addresses of potential customers, so you can guide them through the buyer’s journey. Furthermore, a blog on your website can help you attract customers from search engines.
You may also want to market offline by attending community events, sending direct mail to your local audience, or advertising in local public spaces.
“One of the most important keys to success that I’ve learned so far is networking. Networking allows you to build and maintain relationships with people in your industry or related industries. These relationships can help you find new opportunities, learn about industry trends, and gain valuable insights from experienced professionals,” says Neuilly.
Business owners today have no shortage of marketing opportunities. It’s important to take time to create a plan, execute it, monitor the results, and make adjustments as needed.
Lastly, you’ll need to determine where to set your pricing. To start, figure out your cost per unit (CPU)—how much it costs to manufacture, obtain, store, and deliver each item. From there, you can decide how much you’re going to mark it up.
Two common retail markup approaches are the Keystone Markup Method and Absorption Pricing.
With the Keystone Markup Method, the cost per unit (CPU) is doubled to get the wholesale price and doubled again to get the retail price.
The Absorption Method is a bit more complex and takes your overhead costs into consideration. Once you have your CPU, divide your overhead costs by the number of units you have in your inventory. Then, add that number to your CPU. From there, you can determine your desired profit margin and add it to your overall cost per unit to get your wholesale price (50% is common). After that, you multiply the wholesale price by a number between 2 and 2.5 to get your retail price.
You’ll also need to decide if you’re a budget brand, a luxury brand, or something in between—and consider that when setting your prices.
“Pricing is vitally important. I suggest a thorough analysis of your competitors and a meticulous cost sheet for your products to figure out the optimal price,” says Cynthia Wylie, former CFO of BCBG Max Azria and current CFO at Bloomers Edutainment LLC.
By completing the above eight steps, you’ll be well on your way to opening the doors of your clothing store—whether online, in-person, or both. From there, the entrepreneurial journey of raising brand awareness, earning the trust of your customers, and keeping them coming back will begin.
“Starting a new clothing business requires hard work, dedication, and a willingness to take risks. By following these tips and staying focused on your goals, you can build a successful brand and achieve your entrepreneurial dreams,” says Neuilly.
Need help funding your new clothing venture? Check out Lendio’s retail business loans.
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