Wednesday, September 13, 2006
How to Start a Clothing Store
We'll presume that your desire to open an apparel store isn't because you want to prove to your ex that you're actually hip and happening, or that you're so confident of your style that you need to share that good taste with the community. We'll instead presume that you have an acute business sense, a sincere interest in the clothing business and more than a little cash in the bank.
Opening an apparel store is serious business. For some of you, it may mean giving up the safety of your corporate job with its steady income, paid holidays, vacations and the opportunity for advancement. All this, and guaranteed 12- to 14-hour days. "Running an apparel store is more than a full-time job," stresses Nancy Stanforth, professor of merchandising at Oklahoma State University. "Running an apparel store is something you do all day every day."
Always Room For More
Fortunately, there's always room for the right kind of apparel store. Although you might not guess it by the number of malls and outlet centers cropping up, we're mostly a nation of small, independent merchants. In fact, most retail stores, and that includes apparel stores, are small, both in size and in sales volume, compared to a Gap or Old Navy. The typical apparel store is a small operation, usually run by the owner alone or by a husband-and-wife team.
Here is a handy set of questions that will help you determine whether fashion is indeed your forte.
1. Is this a business in which you have experience? Maybe you've taken those merchandising classes; maybe you've watched your father, mother or grandparents run a business; maybe you spent a summer selling makeup over the counter at Macy's. In any case, your experience and business sense are as important as your interest in clothes.
2. Can you live with the inherent risk in the apparel business? This isn't meant to scare you; we're only trying to present a balanced picture. If you're serious about opening an apparel store, you need to know that, like the restaurant business, the apparel business is risky. You may pour your life savings into a business that goes bust within a year.
"Nothing is sure-fire, and there are risks attached to starting any kind of business," says Fred Derring, president and owner of D.L.S. Outfitters, a New York City-based apparel marketing and consulting company, "but you've really got to love the clothing business because you can make more money doing almost anything else. Even in the restaurant business--if you're successful--you can make more money in five years than you can in 15 years in the apparel business."
3. Do you believe strongly in the apparel industry? On a serious note, you really need to think about why you've decided to open an apparel store vs. a homeopathic pharmacy or an organic grocery store. Whatever your particular fashion passion, it has to be enough to carry you through the yearly holiday rushes as well as the slow summer lulls. It's like marriage: When times get tough, you need to remember why you took those vows in the first place.
4. Is your niche overcrowded or dominated by a few? It doesn't take a Ph.D. to see that the apparel industry is crowded. All you need to do is save all those catalogs stuffed in your mailbox or visit your local mall on the weekend. But there always seems to be room for more, particularly if you're offering consumers something they feel they're lacking.
5. Can you become a specialist? If you're opening an apparel store for the right reasons, you probably think you've got the corner on something someone else in your professional community doesn't. Maybe it's surf clothes; maybe it's chic plus-size fashions; maybe it's leather and jewelry imported from Turkey.
Specializing, or finding your niche in this business, is crucial to your success. And in many cases, all it takes is a little common sense. As Kira Danus, a buyer from D.L.S. Outfitters in New York City, says, "No apparel store should be stocking twill khaki shorts if there's a Gap within 10 miles."
6. Do you have a competitive advantage? In a word, this is called "marketing." For now, hear this collective quote culled from every apparel entrepreneur interviewed for this business guide: "Today the competition isn't two doors down the block; it's at the local mall. People can get everything we sell at their local mall, so we have to set ourselves apart other ways. Pay attention to the demographics in your area, to the location and available foot traffic, to television and movies and what people are wearing on the street."
Whether you decide to specialize in high-end fashion or sporty casual merchandise, never lose sight of what sets you apart from Target, Sears and all the other apparel chain stores. You may not be able to mark down a pair of jeans to $9.99, but what you do have going for you is the old adage: "You get what you pay for."
"Department stores all look alike because merchandisers like Polo, Tommy Hilfiger and Nautica are all fighting for the same brand space," says Fred Derring, whose company helps retailers across the country market their stores. "And when everything begins to look alike, consumers can become disenchanted. In addition, people just don't have as much time to shop today, and when they do, they want to go into a store and be serviced properly. Forget service with a smile. If you can even find someone to help you in most department stores, you're lucky.
"Small stores are more focused on the community," Derring adds. "They know their customers better, they give terrific service, and they generally have a more interesting collection of clothes on their store floors that will add to making customers feel special. These are the kinds of features customers are looking for in a smaller, independent store."
Let's start with the hardest first. If you're going to open a women's apparel store, you already know that the tastes of the "fickle" female customer are hard to stereotype. Every expert we spoke with agreed that the very first thing a prospective women's apparel retailer must do is decide where the "market-vendor" gaps are. In other words, which customers in the store's trading area will you serve, and what apparel can you provide (and at what price) that can't be found easily elsewhere? Once you've determined this, you can buy accordingly.
"'What do I have that will entice a woman into my store?' That's the big question the women's apparel store owner needs to ask," says D.L.S. Outfitters' Kira Danus. Yes, we know that's easier said than done, and it really depends on where you're going to open your store, as Danus notes. "There's a huge difference in consumer mentality across the country, and I'd advise a store owner in Duluth much differently from one in Los Angeles."
The typical male customer is between 18 and 40 years of age, with a smaller percentage in their fifties. (We didn't even bother listing a female customer's age because, frankly, women of all ages like to shop.) The male consumer is often single and usually has money to spend--but typically still has to be brought in kicking and screaming by his girlfriend or wife to spend it on clothes. His job may not require a coat and tie, but unless he's working in the Silicon Valley with hipster entrepreneurial types, he still wants to look good.
As we've said, if given the choice, most men would rather throw a bridal shower than shop for a new sportcoat. The only good thing about the casual dress trend, however, is that because of the trend, men seem more willing to be dragged into a clothing store.
Cashing in on the baby boomers' baby boomlet of the 1980s and 1990s, the children's apparel market is estimated to account for $20 billion to $22 billion in sales every year and is considered among the fastest-growing segments of the overall retail market.
Even though little girls have been known to throw temper tantrums when they're forced to wear gingham jumpers to preschool, you're not really targeting kids here. You're aiming more for their parents--at least the parents of children up to age 10, those who still make the executive decision when it comes to their children's clothes.
Obviously, the more financially stable parents are, the more they'll be willing to spend on boutique clothing for their children--if they're into clothes themselves, that is. Just because parents have money doesn't mean they're spending it on Calvin Klein and Jessica McClintock for tots. They may well be shopping at Target and socking the rest away for a college education at an expensive Ivy League school.
It all goes back to doing your homework. If you're in an old-money, Mercedes or Volvo station wagon-driving area, you can bet those parents may not necessarily be shopping at Target or Sears, but they may be shopping the Gap sales. If you're in a more flashy nouveau riche area where mothers are driving Jaguars and wearing diamond tennis bracelets, or even one where the women spend $100 on their own designer jeans, that's a market for children's fashionable boutique clothing.
The bulk of children's clothing sales--up to 60 percent--comes from those cute matching outfits, like matching top-and-bottom coordinates. When it comes to colors, seasonal trends like animal prints come and go, but the consistent top sellers are still--no surprise here--light blue, pink and green.
Yes, opening an apparel store will cost you, and Oklahoma State University merchandising professor Nancy Stanforth, who once owned a clothing store, recommends a bankroll of as much as $250,000. But before your heart stops, read on. You can do it for less.
"You may not have $250,000, but my advice is to not even think about opening a store until you've got the right financing," says Margie P., a successful Redmond, Washington, store owner who sells women's, men's and children's clothing.
Like several other apparel 'lifers' we interviewed for this guide, Margie, whose store has been around for 23 years, first opened her doors in 1976 with her eyes wide shut, so to speak. Eager to get out of the real estate business and 'spending my Sunday afternoons sitting in other people's homes,' she opened a clothing store in the same downtown building where her husband had a restaurant. Margie got a $30,000 loan and was off and running.
We know this fly-by-the-seat-of-your-pants attitude--as well as the notion that $30K is enough to start a clothing store--goes against our principle of good business acumen, especially today.
Minimally most entrepreneurs interviewed for this business guide wouldn't dream of opening a store with less than $50,000. Stanforth recommends $150,000 to get a store up and running, while Debbie Allen, the owner of a Scottsdale, Arizona, women's clothing store and industry speaker, says you should start out with $200,000 for a 1,200- to 1,500-square-foot store--the average in this business.
The point is, you'll find many conflicting opinions when it comes to the amount of cash you should have to open an apparel store, but we won't get into any trouble by saying the more money you have, the better off you'll be. (Isn't that true in any business?) As Allen says, "The more undercapitalized you are, the longer it will take for you to turn a profit." Now that about says it all.
An Easy Rule
If reading numbers in columns makes you dizzy, we'll spell it out for you. "People get into trouble because they don't know how much their rent should be in ratio to the amount of sales their store is generating," says Dan Paul, an industry consultant with retail consulting firm, RMSA. "The fact is that rent should be kept between 5 and 6 percent of your total sales, so at the top end, you can figure that you'll need $18,000 a year for rent. That means in order to keep rent at 6 percent, your store will have to generate $300,000 in annual sales."
There's never a dull moment in the apparel business. When you're going to have time to read the trades and watch TV is anyone's guess--though not ours--because you'll practically live at your store, especially in the beginning.
"No one day seems to be exactly the same," says Meridian, Mississippi, store owner Robert L., who adds that he can't ever remember a dull moment in his apparel store. "Day to day, you'll be wearing many different hats, whether you're managing people, receiving merchandise or creating displays. One minute you're on the phone with a customer, and the next minute you're talking to a radio station about your advertising. Then you might have your nose in the books wondering why your expenses were so high last month."
Your Policy Position
One of the things that will help balance your daily juggling act will be to establish your store's operating policies, or the rules under which you decide to run your business. It's not until you actually start your own apparel store that you'll realize how many decisions you'll be making on a daily basis, and for that reason, you want to make sure you have a plan. Believe us; a plan will eliminate making last-minute reactionary decisions that could result in some costly mistakes, like maybe losing a valued employee. We suggest sitting down, writing up your store's operating policies and supplying copies to your employees. You may also wish to post some of these policies, such as those involving cash and credit card acceptance, for your customers to read.
A seemingly endless number of these "policy" questions will arise when you enter the apparel business, among them issues surrounding pricing, consignment, purchasing unsolicited products, credit, cash layaway, returns, special orders, damage, children in the store, credit cards, gift wrapping, gift registry and hours of operation.
We put hours of operation last for emphasis, because when your doors are open will be a big factor in your success. Most apparel stores that don't conform to a mall's shopping hours stay open a minimum of six days per week, usually Monday through Saturday from 10 a.m. to 6 p.m. or 11 a.m. to 7 p.m. Frequently, stores will stay open until 9 p.m. or later on certain, or even several, days of the week, typically Thursday and Friday. Flexible hours allow for lunchtime and evening shopping, and in this business, flexibility is your friend.
Choosing a Location
In choosing a community in which to open your store, you'll want to consider a number of location "whether" factors (this will serve as a review of our marketing chapter), including whether the community has a large enough population, whether its economy is stable enough for you to make money and whether the area's demographic characteristics are compatible with your target market.
Almost all apparel store lessors, or landlords, require a square foot rental from their lessees, usually paid on a monthly basis. Apparel store rent can run as low as $8 per square foot in certain parts of the country, and close to $40 per square foot in big malls or shopping centers in high-traffic areas or in higher-rent metropolitan areas, like New York City, Los Angeles, Chicago and Dallas. Landlords also sometimes ask for a percentage of the tenant's monthly gross sales--above a certain specified amount--on top of the minimum monthly rental.
In addition to paying flat rents and sales percentages, apparel store owners who decide to locate in a shopping center or mall may be asked to pay what's known as an add-on charge. This per-square-foot charge or small percentage of a store's gross sales covers advertising and promotion costs for the shopping area and upkeep of the common areas surrounding the businesses (parking, sidewalk, walkways, sitting areas, patios, restrooms).
Do all the following before you choose a location for your apparel store:
1. Look at several locations before choosing your store site.
2. Check into any local ordinances and zoning regulations that apply.
3. Determine your store's parking needs.
4. Decide whether the site is worth the rent.
5. Define the selling point of your store's location.
6. Determine whether the location is an area of potential growth.
7. Define your store's space needs.
Your store needs will vary according to your store hours and customer traffic, but a good rule of thumb is one full-time and one part-time person for a 1,000-square-foot store.
When hiring sales staff, sales ability and personality come first. With both of those traits upfront, you can always train your salespeople to track inventory and handle apparel. Hopefully, with that combination, your salespeople will also be able to deal with the everyday apparel pressures of customer personalities and demands that require a thoughtful combination of tact, persuasiveness and a sense of humor. You also want a person who is mature and honest, one who will not only help you move merchandise out the door but also one you trust to handle your cash and to keep careful and complete records.
"You obviously have to be particular about who you hire," says apparel entrepreneur Robert L., "because ultimately it's customer service that separates us from the mall stores."
There are lots of reasons why advertising is important for a business startup, but in the apparel business, it comes down to a couple of things. Not only do you want to convince potential customers once and for all that you've got more to offer than Banana Republic or Ann Taylor, you want to make sure you have a strong image, like Banana Republic or Ann Taylor. In short, you need to create the desire to come into your store instead of those of your more established apparel competitors. If your ideal customer never strolls past your store, you'll hope that he or she at least pays attention to the mail and mass media.
Try to look at advertising as not just another business expense but as a way of building your sales. Whatever media you decide will work best within your community, your advertising campaign should be well planned, distinctive and consistent with your store image. Advertising informs your customers about the merchandise you carry and your store's special events, services and sales. And it's also going to be all those things that Advertising 101 says it should be: simple, straightforward, informative and eye-catching.
You'll have to decide the most effective way to advertise your store by taking a good look at your business and at your potential customers. In doing so, you might ponder the following questions:
* How is my store different from my competitors'? (e.g., he sells Levi's; I sell dress pants)
* What quality merchandise do I sell? (e.g., he sells Levi's; I sell dress pants)
* What kind of store image do I want to advertise? (e.g., trendy, tailored, casual, chic)
* What customer services do I offer? (e.g., special-order clothing, free on-site tailoring, a children's corner)
* Who are my customers? (e.g., Beverly Hills matrons, Manhattan models)
* What are my customers' tastes? (e.g., trendy, tailored, casual, chic)
* Why do they buy from me? (e.g., convenience, the only store in town that sells plus-size business suits)
More resources here
How to Start a Clothing Store
By Laura Tiffany
February 22, 2001
Originally Published at Entrepreneur.com
Small & Medium Business
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