How to start up a clothes shop

Sales of clothing continue to increase each year and consumers show no signs of falling out of love with spending money on fashion. Get the essentials for starting up and running your own clothes shop in our practical guide.

• Research the clothing market
• Selling clothes on eBay and Amazon
• Decide what clothing to sell
• Operating practices
• Price your clothing
• Buy an existing clothes shop

Research the clothing market

Estimating demand

You will need to find out whether there is going to be enough local demand for your new clothes shop. First of all, check out the competition. Count how many outlets there are already in your area selling clothing. Don't forget to include non-specialist businesses that sell clothing that's similar to the type that you're intending to stock such as sports shops, outdoor leisure shops, large supermarkets and other outlets.

When you're making an estimate of the level of local demand, don't forget that selling online is now a significant part of clothes retailing - government figures show that sales made online by high street and online specialist clothing stores have been increasing every year and are forecast to continue to grow. This shift away from the High Street has inevitably affected the volume of sales made by traditional premises-based clothes shops without an online presence. Almost all of the major clothing chains such as Next and Zara now sell online as well as from their stores and online-only specialists like Asos also exist. Remember as well that very many clothing brands sell direct through the eBay Fashion Outlet and through Amazon, as do shop-based retailers of all sizes. In April 2017 Amazon launched its own fashion brand, Find.

Shop location

Generally, for a retail outlet such as a clothes shop, it is important to have as much passing trade as possible. If you are planning to set up in your local town or city then it can often be a good idea to locate your shop as close to the centre as possible. Alternatively, you might consider setting up in an out of town retail park or a suburban shopping precinct. A shop in a secondary location like a suburban precinct may have less passing trade than one in the city centre, but the premises costs are likely to be more affordable. Premises in a retail park are likely to have higher rents, but these are often justified by the increased footfall. Also bear in mind that research has found that retail businesses located in retail parks have outperformed their High Street counterparts in recent years.

It's also a good idea to check out local crime rates - you don't want to have to cope with excessive levels of shoplifting, break-ins, vandalism and theft.

Why will customers choose your clothing shop

You need to do everything you can to make sure that enough customers choose your shop rather than your competitors. Check out the competition to see:

• what range of products they offer
• whether they stock recognised brands
• what services they offer, if any
• what prices they charge
• what their opening hours are
• what type of customer they are attracting
• if the premises and fittings are modern and smart

This might indicate that there is a gap in the market that you can exploit. For example, it is possible that none of the shops in your area stocks a particular designer label.

Check out future developments

Try to confirm that there are no immediate plans to open a large clothes retailing outlet in your proposed area which would introduce an unwelcome level of competition. However, some other large developments may benefit your business. For example, a new supermarket can significantly increase the amount of passing trade. It's also a good idea to find out if there are plans to build new road systems which mean that local traffic will bypass your shop. Also check for any proposals to impose parking restrictions nearby.

Find out what people want

It can be difficult for small, independent shops in the clothes retailing sector to survive in the face of competition from national chains, department stores, online specialists, mail order companies and other non-specialist outlets that sell clothing. So it is very important that you make sure that there will be a market for the goods that you are going to stock. You could carry out some surveys of the people in your local area to find out:

• what sort of products and brands they would want you to stock
• what opening hours would suit them best
• if there is a demand for a clothes hire service
• what they think of your proposals in general
• what they like and don't like about the existing clothes shops in your area

Research current trends, plus legal and tax issues

• Shopping in clothes shops
• Legal issues for clothes shops
• VAT rules concerning clothes shops

Selling clothes on eBay and Amazon

Selling online can be an excellent way of reaching new customers and boosting your sales. But setting up your own ecommerce website can be expensive and you may not be sure at the beginning whether the value of the sales you'll make online will justify the set-up costs.

As an alternative, trading on eBay or Amazon lets you get a feel for selling online but with much lower start up costs. And you may decide to keep on selling through eBay and Amazon even when you have your own online shop.

Getting started

You might already have your own personal eBay account that you use to buy items for yourself and to sell things that you don't need any more. But if you're trading as a business on eBay you're legally obliged to make it clear in your listings that you're a business seller. This means that you'll either need to register a new business account or upgrade your personal account to a business one. There's guidance in the eBay Seller Centre on the definition of 'trading' if you're not sure whether you need to register as a business seller.

Similarly, with Amazon you can use an existing account or create a new one when you register as a business seller.

If you're not already running a business and you intend to start selling things on eBay or Amazon - perhaps just in a small way to begin with - then you'll need to notify HM Revenue & Customs (HMRC) that you're trading. There's guidance on the Gov.uk website that gives an overview of what counts as trading and what counts as self employment. It also gives details of your tax and record keeping obligations.

Decide whether to have your own virtual 'shop'

Having your own virtual storefront will give your business a valuable online presence and will allow you to display all your products together in one place.

When you sign up to sell on eBay, you have the option of setting up an eBay Shop. This allows you to create your shop using an existing template or to customise it to your own design. You don't have to choose the eBay Shop option straight away - you may decide it's best to wait until your monthly sales build up to a certain level and then upgrade.

With Amazon, you'll automatically create your own storefront regardless of the package you choose. You won't be able to customise it very much but you will be able to add your name and logo and provide some information about your business.

How much does selling on Amazon and eBay cost?

Before you start selling on Amazon and eBay it's a good idea to find out how much you'll have to pay in fees. Depending on the items you sell and the method you choose for selling them, your total fees can be quite substantial. And while some of the fees you pay will be linked to the number of items you sell each month, others are likely to be fixed costs which you incur even if you don't sell anything.

Both eBay and Amazon give you the option of selling as a business seller without paying any fixed monthly fees, although it's usually more cost-effective to choose a subscription-based package unless you're only selling a small number of items each month.

The eBay website has a fee illustrator tool and a fee calculator that will help you compare the fees for different selling methods and get a good idea of how much your actual per-item selling fees are likely to be.

The Amazon website gives detailed fee guidance, including some examples of pricing for their subscription and non-subscription packages.

Managing your listings

Uploading your inventory to eBay or Amazon and managing your listings can be a time consuming task, particularly if you're planning to sell a large number of items.

Both eBay and Amazon offer useful listing tools, some of which are free and others that you'll have to pay for.

Promoting your items

Because there's such a huge number of items for sale on eBay and Amazon at any one time, it's very important that you do everything you can to stand out from the crowd.

Always make sure that your listings include accurate, spell-checked descriptions and that your photos and other images show the items that you're selling in the best possible light.

You might want to take it a step further and use the various marketing tools provided by eBay and Amazon such as search optimisation, cross-promotions and paid-for advertisements.

Your reputation

As an eBay or Amazon seller your online reputation is extremely important. All sellers have a feedback score based on actual customer feedback and this is the main measure that future customers will use to check that you are trustworthy and reliable.

So you'll want to keep your rating as high as possible by providing an excellent level of customer service and fast delivery at reasonable prices. Make sure you always respond promptly to customer queries, deal with returns efficiently and keep an eye on your stock levels to avoid your listings showing an item as being in stock when it has sold out.

Be aware that packing up orders and sending them out can be time consuming, but it's important to stay on top of the job to make sure that the right items get delivered in good time to the right people. Very many parcel delivery services now offer bulk shipping tools that integrate with your eBay or Amazon account and these can greatly simplify the process of arranging and tracking your deliveries.

If you're selling on Amazon you might also consider using the Fulfilment by Amazon service, where you send Amazon your inventory and they do all of the picking, packing and shipping as well as providing customer service.

More information

The eBay and Amazon websites have a great deal of useful guidance to help you get started as a business seller and to expand your business as demand for your products grows. Both also have lively seller community forums where experienced sellers are often happy to answer questions.

Decide what clothing to sell

The range of products you sell will very much depend on the type of shop you intend to run. You may be intending to specialise in a certain category of clothing such as women's wear or men's wear, or clothes in unusual sizes. Alternatively, you may decide to cater for people of all ages and genders, as much as the space available in your premises allows.

Many clothes shops sell some or all of the following:

• men's wear
• women's wear
• children's and babies' wear
• specialist garments for a variety of purposes and occasions, for example, workwear

These broad categories include such garments as:

• trousers, shorts, skirts and dresses
• shirts, tee-shirts, sweat shirts, jumpers, waistcoats, cardigans and blouses
• jackets and coats
• underwear, lingerie and hosiery
• hats, scarves and gloves
• suits and ties
• swim wear and beach wear
• overalls, waterproofs, sports wear, surf wear and track suits

There may also be some demand for ethically sourced products like Fairtrade clothing, sustainably produced clothes and niche products like organic cotton garments.

You may also consider stocking accessories, such as footwear, sunglasses, costume jewellery and leather goods (for example hand bags and belts). You might even offer 'lifestyle' products such as home furnishings.

If your shop is very small, you might offer an efficient ordering service rather than holding a large amount of stock. This will also help your cash flow as you won't have a lot of money tied up in stock. However, bear in mind that the growth in online clothes retailing means that most items are now readily available from a range of different retailers so many customers may simply go elsewhere if you don't have what they want in stock.

Seasonality

If you're a fashion retailer, you'll probably stock seasonal ranges which change throughout the year. However, the weather in the UK seems to be getting less and less predictable, so you may decide not to stick too rigidly to this stocking pattern. It's usual to hold sales events every so often to clear out last season's stock ready for the latest range.

Traditionally, clothes retailing shops have two sales periods in the year - one in January and the other in early summer - but many shops now offer almost year-round sales.

You may find that the run up to Christmas is one of your busiest times and if so, you should make sure that you have enough stock to cope with demand.

Operating practices

Shoppers have grown used to the high standards set by the High Street chains and it is important that your business:

• is clean, tidy and professionally fitted out (don't forget to look critically at the outside of the shop - smart paintwork and good signage are important)
• is well-stocked with the brands that are in demand from your target customers
• is staffed by knowledgeable and smart employees
• offers a high standard of customer service

Also give some thought to the type of shop that your target customers would want to visit - it might be worth engaging the services of an interior designer to create a theme for your shop if you're not confident of doing this yourself.

Advertising your clothes shop

Whatever the individual characteristics of your shop, you must make sure that your potential customers know about you and your product ranges.

Don't overlook the potential of your window display - a bright, regularly changed display is a good way of attracting passing trade. Signs in your shop window can inform passing customers as to what you offer, although they can make a nicely arranged shop window look messy.

You can also use your shop window to advertise any special offers or promotions you will make, or to highlight the new season's ranges.

You could advertise your business in the local press, although it's important to monitor the effect of this type of advertising to see whether you are getting value for money. For example, using vouchers that customers can cut out from your advertisement and present in-store for a discount should give you a good idea of how effective your campaign has been

You could have a leaflet printed outlining some of the unique features of your business which you distribute to local residents and workplaces. For example, you could invite people to a fashion show to view the latest collections.

Whenever possible you should leave the door of your shop open to welcome customers in.

Price your clothing

Some suppliers recommend retail prices for their products. You might decide to stick closely to these, to use them only as a guideline or to ignore them altogether. Other suppliers offer no guidance on pricing, leaving it up to the retailer.

Getting the price right is very important. You must make sure that the difference between the cost price and the selling price is enough to cover all of your operating costs, including your own drawings.

Also consider the following points when setting your prices:

• what do your competitors charge for the same items? Don't forget that many customers will shop around for the best prices in particular by looking online, so you may have to charge in line with your competitors
• will you aim to compete on price? Undercutting your competitors can be effective in achieving sales but your business may struggle to survive on slender profit margins
• do you really need to discount? People may be prepared to pay high prices for the latest season top quality and exclusive designer labels

Sales and discounts

Clothing can go out of fashion very quickly and if you are unlucky you can find yourself with money tied up in garments that nobody wants. This can also happen during times of particularly unseasonable weather. Think about how you'll shift stock that isn't moving and what you'll do with items that are no longer in fashion. Your suppliers may agree to take some back - perhaps for a charge - but you'll probably have to discount other items in your sale. You might decide to have a permanent sale rail or regular sale events or sell old stock on eBay with a 99p start and no reserve. Think about what percentage of your stock you're likely to have to sell at sale prices and decide how much discount you'll offer on sale items.

It is traditional in the clothes retailing sector to hold sales at certain times of the year. These usually take place in early summer and in January, and give the retailer an excellent opportunity to clear out old stock. However, it's now quite common to hold sales almost year-round to satisfy shoppers' love of bargain hunting. Regular discounting can be an effective way of shifting stock, but if your sales periods are too frequent you may find that customers simply wait for these rather than buying clothes at the full ticket price.

You may decide to offer discounts to customers such as students or pensioners, as well as to staff, family and friends. Be sure to brief your staff on what discounts are available so that they don't offer unauthorised discounts.

Buy an existing clothes shop

You might decide to buy an existing clothes shop rather than start your own venture from scratch. Buying a going concern can mean that:

• the premises, equipment and possibly some stock are already in place
• a website has already been set up, perhaps ecommerce enabled to allow the business to sell online. Amazon and eBay 'shops' may also have been set up already
• there are established customers
• the business can generate income immediately
• suppliers have been identified and relationships established with them
• the business has a track record which can help if you are looking for finance
• staff are already in place

However, look critically at any business that you are interested in to make sure that the price you negotiate with the seller is a fair one. Try to establish why the business is for sale - for example, is the owner keen to retire or is there another personal reason for selling up.

Your market research into the sector as a whole and the locality in particular will help you to establish whether or not the owner is selling because he or she can no longer generate enough income from the business. This may not necessarily deter you - many business people are confident that they can turn a failing business around. The important thing is to have established the current position so that the price you pay for the business is not too high.

Other matters to consider include:

• the state of the premises, equipment and so on. Will you have to spend money refurbishing or replacing assets
• the condition of any stock you are buying. Check this over carefully before agreeing a price. Bear in mind that clothing fashions can change very quickly, so make sure you're not paying over the odds for last year's fashions that will be practically unsaleable by the time you take over the business
• existing staff rights
• how to retain key personnel once you've taken over
• does the business owe money that you will be responsible for
• if you are paying for goodwill, to what extent does this depend on the skills and personality of the seller

Ask your accountant to look critically at the business accounts for the past three years and discuss with him or her the selling price in the light of what the accounts reveal. Make sure that you budget for other professional fees such as legal fees and valuation and survey costs.