by Brandon Boushy
Have you ever wondered how to start a boutique business?
Lee Smith started Urbanity in 2009 after traveling to New York City and realizing that Bellevue, Washington didn’t have a clothing store where you could go to select full outfits of designer clothing and accessories in one place.
Today it’s making over $1,000,000 a year.
We’re going to walk you through the process of starting your own boutique and share advice from Lee throughout. If you’re ready to join a group of successful small business owners making more than $1,000,000 annually, keep reading!
What is an online boutique?
If you are thinking about starting an eCommerce business and staying up to date on current fashion trends, you should consider starting an online boutique.
The boutique sells everything you need to make an outfit complete. This is a niche market of the clothing industry.
To properly start a boutique, the boutique owner should have styles that work together to create an outfit. This includes brand name:
- Shirts
- Shoes
- Pants
- Accessories
- Shopping bags
- Purses
Make sure to sell accessories because they are typically high-profit items and easy upselling opportunities.
Defining the Idea
Before we start looking into the logistics of starting a new business, let’s consider some of the aspects that may impact whether you want to start a clothing boutique.
When you are starting any business, you should consider the following things:
- What type of business models are used in successful boutiques and which is best for me?
- Who are the major players in clothing boutiques?
- What is the industry outlook?
Which Business Model is Best for a Clothing Boutique?
It’s important to know what business model will work best for your own boutique. There are many different models to choose from.
The most common business models are:
- The traditional retail boutique
- An online boutique
- Both a retail boutique and an online boutique
The traditional retail boutique
For new business owners, it may be difficult to start a clothing store with a physical location due to the additional costs involved with a physical location.
Lee told us:
If you have the funds to rent a space in a high-traffic shopping area, starting a boutique with a physical shop can be beneficial because the location introduces you to prospective customers.
Lee also told us:
Check out our interview with Lee from Urbanity below.
An online boutique
An online boutique uses an eCommerce platform such as our partner Shopify to sell clothing.
It’s far easier to start a successful online boutique because your online store can be seen anywhere in the world for a much lower cost than starting a successful clothing boutique with a retail location.
When you start an online boutique, you may be able to benefit from reduced starting costs by using dropshipping options that are easily available via Shopify, like Printful or Oberlo.
An online business also reduces or eliminates the costs of a physical location.
While a small business will see cost-saving benefits when you start an online boutique, the small business owner will also see some increased costs compared to retail spaces.
You should expect higher business expenses around:
- Increasing brand awareness
- Shipping
- Having higher cost-per-item with drop shipping because you are not ordering in bulk
Both a retail boutique and an online boutique
While new boutique owners may not be able to start a retail boutique early in their journey of starting a fashion business, the ones that can afford to will benefit more from having both your own store and an eCommerce website.
As Lee pointed out, there are some items that he can only sell at the store location.
In addition, clothing stores will increase their revenue from their existing customer base, while an eCommerce website will increase brand awareness by having a physical location.
Who are the major players in the clothing boutique business?
The largest online boutiques include some major players.
You’ve got major Chinese retailers like JD.com and VIP.com with revenues of over $10B per year.
Then you’ve got some of the US retailers, like Macy’s and Kohl’s that, make over $5B/year, but here are some of the largest revenues that are only boutiques:
- Asos $2.5B/year in revenue
- Revolve $479.5M/year in revenue
- NastyGal $167.7M/year in revenue
- Lulus $385M/year in revenue
- Francesca’s $34M/ year in revenue
All revenues are based on eCommerceDB for 2020 online fashion sales unless noted otherwise.
Small Players (the opportunity)
- Urbanity $102K/month in revenue
- Portland Gear $120K/month in revenue
- Check out our interview with Marcus
- Throwbacks NW $25K/month in revenue
- Trendy & Tipsy
- LF Stores
What is the industry outlook?
Everything points to retail sales going more and more to online sales. In fact, Tech Crunch expects 2022 to be the first year that eCommerce sales in the US hit $1T.
According to a Presearch about the “percentage of clothing sales online,” online store sales are increasing by 3-4% every year.
However, they are currently less than 30% of the $369 Billion dollars that Statista attributes to the US apparel and footwear sales.
That means you can expect a successful online boutique to benefit both from the increasing trend of retail sales going online and the increasing sales from people spending more money since most places have abandoned Covid restrictions.
Because of the growth in the industry and the move to online sales, people should expect higher revenue, more competition, lots of new entrants, and increased marketing spending.
Starting a successful boutique
There is a ton of work that has to be done before opening a boutique. Whether you are wondering how to start a boutique from home, online, or opening your own retail location, you’ll need to consider the following:
- Writing a Boutique Business Plan
- Purchasing Inventory For Your Boutique
- How Much Does It Cost To Start A Clothing Boutique?
- How to start your own clothing boutique with little or no capital
- Funding Your Clothing Boutique
- How Profitable is a boutique?
- Naming Your Clothing Boutique
- Getting a domain name
- Meeting the legal requirements for a boutique business.
We created a checklist for you to follow if you proceed with starting an online boutique. Download our starting an online boutique checklist here.
Write a Boutique Business Plan
You need a business plan for your boutique. A business plan helps you define your vision while starting a boutique.
Small businesses should use the plan to refine their business idea, guide decisions, secure financing, and develop partnerships with other businesses.
Boutique owners should have a flexible business plan so their process can evolve as their online boutique grows and fashion trends change.
Here are some resources to help with this step.
Templates
We’ve gathered templates to help you develop your business plan. Here are some of the best:
- One-page business plan
- U.S. Small Business Administration (SBA) Business Guide
- State-specific templates
- Business Plan Template for a Startup Business
Resources
It gets better! Here’s some free and low-cost education on business plans:
- UpFlip’s blog on How to Write a Business Plan
- SCORE’s free business plans and startup assistance resources
- The Complete Business Plan Course (Includes 50 Templates)
I’d also suggest checking out our interview with Mike Andes on how to write a business plan below.
Where to buy clothes for a boutique
When you’re a small business owner, it can be a challenge, but you have to figure out how to get inventory for your online boutique. Do NOT buy clothes from local department stores — you may want to consider wholesalers online.
Wholesalers are retailers who sell clothing in bulk at wholesale. Price and quantity requirements to buy from a wholesaler are much less than buying from manufacturers.
These types of companies are perfect for boutiques looking for affordable inventory without sacrificing quality or style options.
Let’s get even more specific about where to buy boutique clothing. Here are some ideas:
- Check out resellers like Goodwill and other nonprofits. Sometimes you can find steals for a low cost.
- If you frequent other boutiques, you can sometimes find improperly priced items. A friend of mine has sold over 1,500 items on Poshmark this way.
- Magic Fashion Events are a great way to keep up with trends in the fashion industry.
- Dropshipping companies which I discussed earlier.
- Check out Brands Gateway’s blog about 70 wholesalers for a great list of wholesalers to contact.
These are just some of the solutions for where to buy clothes to start a boutique.
How Much Does It Cost To Start A Boutique?
The cost of starting a boutique can vary dramatically based on your location, target market, and whether you are starting an online boutique or retail shop.
Online boutiques can be started for as little as $1,000 assuming you use dropshipping, an eCommerce platform, and free social media platforms to target customers.
When you are opening a retail store, you can expect it to cost at least $50,000 to start a boutique. Talk to other boutique owners in your area to get an idea of how much money they invested in their space.
If your boutique ideas involve creating your own product lines, you can expect to spend $10K-$100K per product between design, manufacturing, inventory, ordering SKUs, and more.
How to start a boutique with no money
As I mentioned previously, if you want to know how to start your own boutique without money, you’ll need to start an online boutique. I would use the following solutions:
- Shopify – 14-day free trial, which is plenty of time to set up an online shop and sell some products.
- Dropshipping – Check Shopify’s app store for options that sell the brand-name clothing you want to sell.
- Amazon – Connect Shopify to Amazon Marketplace to increase exposure to potential customers
- Instagram – Create an Instagram shop and connect your Shopify to it.
- Use social media marketing to start selling to potential customers.
- Reinvest earnings to get some inventory for photoshoots and paid advertising to start marketing and attract even more customers.
That’s how to start an online boutique with no money. Alternatively, we’ll discuss other ways to start with no money in the funding section. Keep reading for funding options.
Funding Your Clothing Boutique
Common funding paths include:
- Personal funds/personal assets
- A loan from family or friends
- Funds from a business partner
- Government programs
The SBA offers free courses on financing options and funding programs. For info on using personal funds to start a business, check out this article from The Hartford.
Alternative sources of funding include:
- Crowdfunding
- Credit cards
- Home equity loan
- Business loan – check out our partners
- Rollover for business startups (ROBS)
I can’t really tell you much about this as it’s just a Facebook ad I have seen, but if your boutique has a recurring revenue stream (for instance, a new outfit each month) there are companies that will basically buy your future sales revenue at net current value.
This might be something to look into if you are an insurance agent who receives payments each time someone renews their policy.
How much profit can a boutique make?
Lee says:
He also says that a smaller brand name will tend to allow you more profit margin if they really want to get into your boutique. If a brand can get new customers, you can make way more profit from their products.
Naming Your Clothing Boutique
You’ll need to decide on a business name for your boutique. The elements of a good business name include the following:
- Does it describe what you do?
- Is it easy to remember?
- Does it prevent weird acronyms?
- Is it available as a domain name? Check that the domain name and social media accounts are available with namechk.
Try the business name generator from SquadHelp.
Get a domain name
You can buy domain names from a ton of places.
You can normally buy them directly from the platform you set up your online store on, but if you want to spend money on it elsewhere, you can find domain names for as low as $0.88 at NameCheap.
Other providers include:
You can’t learn how to start a clothing boutique without learning about the legal requirements. We’re about to discuss that next. Keep reading.
Meeting the legal requirements for a boutique business
You’ve created a name and business plan. It’s time to establish the legal structure. For best results, hire legal representation that has experience starting a business, like an attorney, accountant, or tax specialist.
They’ll help you get your business started quickly so you can focus on opening your own boutique.
Each location has different licenses, permits, or tax forms required. Use the SBA License and Permits page to identify what your boutique needs. Keep reading for information on different legal structures.
Sole proprietorship
A sole proprietorship is the easiest way to start a clothing boutique, but the structure doesn’t protect the owner’s assets from legal issues.
That means if something goes wrong, you could lose both your boutique and your home.
This structure should only be used if you can’t afford an LLC because the boutique includes work and materials that can cause injuries to employees or customers.
To start a sole proprietorship, fill out a special tax form called a Schedule C. Sole proprietors can also join the American Independent Business Alliance.
Limited Liability Corporation (LLC)
An LLC is the most common business structure used in the United States because the company protects the owner’s assets.
It’s similar to partnerships and corporations but can be a single-member LLC in most states. An LLC requires a document called an operating agreement.
Each state has different requirements. Here’s a link to find your state’s requirements.
People may register in specific states due to the cost of doing business. Delaware and Nevada are common states to file an LLC because of their business-friendly laws.
Here’s a blog on the top 10 states to get an LLC.
Partnerships and corporations
Partnerships and corporations are typically for massive organizations or legal firms. Unless there is a specific reason you need a partnership, it is better to do a multi-person LLC.
Investopedia has good information about partnerships and corporations.
Apply for an EIN
Every business operating in the United States needs an employer identification number.
It’s like a social security number for your business. Apply for it on the IRS website. It’s used on tax forms when filing taxes and to tie employees’ pay to the proper employer.
Sales Tax Permit
Most states have a sales tax, and you need to adhere to their requirements. This blog isn’t the place to discuss the permits for all 50 states, but Avalara has a guide on Sales Taxes. Check it out.
While you are learning about sales taxes, consider using AvaTax with Shopify Plus to make your tax compliance super easy.
Tax filing and withholding
Federal and state tax filing requirements apply to new employers.
You must keep records of employment taxes for at least four years, including special forms and accounting for state taxes.
Don’t worry! We’ve got you covered! Check out the IRS guide for employers.
Federal employment and labor law posters
All employers must display Workplace Posters, which you can download from the website.
Other requirements include:
- Employment Eligibility Verification (Form I-9)
- State’s New Hire Program
- Worker’s Compensation Insurance
- Disability Insurance—varies by states
- Occupational Safety and Health Administration (OSHA)
Unemployment Insurance
The U.S. Chamber of Commerce has a ton of information on unemployment and also offers links to each state agency that handles state unemployment.
You’ll have to pay $420 per employee on a federal level plus any state UI.
Now that you are familiar with the aspects of starting a boutique, let’s look at some of the things you’ll need to do before your online store is ready to launch.
Launch a Website
Every online store needs a website to sell its products online and have full control of the layout, content, and customer data.
A boutique online store differs from other websites because it handles the sale of products, which means you’ll have some special requirements when starting a boutique business.
The primary differences between an online store and other sites will be some of the pages, including:
- Product pages
- The backend of the platform
- Cybersecurity requirements to protect your customers’ credit card information
Product pages
Product pages are dedicated to selling a specific product online.
Customers expect certain information from a product page. Anyone who wants to sell products to their customer base should follow these best practices:
- Multiple pictures of the product. I suggest following Amazon photography specs as they are the leader in e-Commerce sales.
- Capitalize the 1st letter of each word in the title but don’t use all caps. Make sure the brand and product name is in the title too.
- Include the price, quantity, and an add-to-cart button.
- Product descriptions should communicate the purpose of the product, important features, dimensions, care instructions, and warranty.
- Product identifier that is used to differentiate products. To learn about them or buy some for your products, go to the GS1 website. You’ll need a separate barcode for each variation of size, color, style, or quantity.
- Quick checkout buttons, like the Checkout with Paypal button, are fabulous for conversions.
- Manufacturer information if it is not your own brand.
Modeling your pages after Amazon’s pages makes a lot of sense because potential customers are familiar with their layouts. Check out Amazon’s Quick Style Guide for more information.
The back end of a boutique online store
An online store has a lot of features that other websites might not.
Given most boutique businesses sell on multiple platforms, there are elaborate backends that help manage your business. The most common services to run a boutique online store on are:
I’ve used most of these at different times. I personally prefer Shopify because I find its interface easier than the others, but most have either a completely free version or a free trial.
Make sure to integrate the backend with popular sales channels like Amazon, Instagram, and Facebook.
The downside of Shopify is it uses a proprietary code called Liquid that you’ll need to familiarize yourself with if you want to do extensive search engine optimization or custom coding.
This limits the number of developers who can help you.
If you are going to build your store yourself, I would recommend looking at each of them to see which you find least difficult to use.
Check out our blog How to Create a Website (in 9 Simple Steps) for a more in-depth look at how to build a website.
Cybersecurity requirements
According to Magneto, e-Commerce is the most vulnerable industry to cyber attacks. That’s no surprise given how easy it is to start an e-commerce business.
To best protect your brand and customers, it’s a good idea to review and implement internet best practices as outlined in SOC2 requirements or ISO 27001.
While meeting cyber security issues is complex, they will help protect your sales and customers to reduce the chances of a cyber-attack.
If you’re still not confident that you can protect the brand name with technology, talk to your insurance agent about cybersecurity insurance.
Payment Processors
Payment processors are responsible for collecting payments from your customers.
The majority of website payment processing is through PayPal. Other payment processors include:
All of them include similar features and pricing. If your store has the option to integrate with them, offering the payment options your target customers want can increase sales dramatically.
Shopify allows multiple integrations fairly easily.
Strategies for Opening Day of a Clothing Boutique
To launch your clothing boutique successfully will require different strategies based on your ideal customer.
Lee told us:
Another strategy he used was creating flyers and paying someone to hand them out.
Other strategies that have success:
- Set up social media pages for your business. Post whole pictures of whole outfits on your social media with links to each product page. Add a discount if they buy the whole outfit.
- Partner with popular brands and do popup stores at fun locations.
- If you are comfortable with Facebook Live, TikTok, or other social media that uses video, launch your brand there.
- Hire teenagers to help you keep an eye on the market and help spread the word with your business.
Grow through marketing
Marketing is the trick to growing a business. You have to get your business and products in front of people to sell them.
Marketing should be considered in all parts of the business. Some of the most important aspects of marketing include:
- Market Research
- Marketing Plan
- Marketing on Social Media
- Growing Your Email List
- Tapping Into and Growing Your Network
Keep reading for more information on marketing.
Market Research
Market research is simply identifying the amount of demand for the products or services the business offers.
In our blog How to Start a Business: The Ultimate Guide (2021), Mike Andes goes into great detail about market research, including identifying potential customers, target markets, and demographics.
The following is a summary of the points in that blog, but I’d strongly suggest reading it as well.
How do I find out who my potential customers are?
You can identify your ideal customers through Facebook surveys, but Lee makes an argument that in the fashion industry, you need to be your own customer. He told us:
In the fashion industry, I’d look at the characteristics and interests of you and your friends, then take note of them. We’ll talk more about this in the next section.
Here’s another great interview we’ve done with Rio Estolas from Throwback NW:
Demographics and Psychographics
Demographics are statistical characteristics of a population or a subset of the population. Some considerations you’ll want to make are:
- Location
- Age
- Gender
- Other Interests
- Marital Status
- Number of children
- Job title
- Income
Psychographics are behavioral characteristics like things you like to do, what you value most and other opinions. These can be helpful as they can help a boutique recognize the best places to reach their demographic.
An example of a fairly obvious psychographic for boutiques would be that people who shop for clothes multiple times a week at the mall would suggest you should have a store in the mall, while someone who shops for clothes at Walmart once a year is not someone you are targeting.
Use Demographics and interests to build your target market
You know the type of people your boutique should be attempting to attract, but how do you define them?
Facebook has mastered defining your target audience.
Wordstream published an infographic with all of Facebook’s targeting options that I would suggest using to specify the exact characteristics of your target audience.
If you use paid advertising, you’ll use this profile to market your boutique.
Use your marketing plan and update it regularly
When writing the business plan, you should have written a marketing plan. Make sure to use it. As you learn which strategies are working and which aren’t, you’ll need to adjust the plan.
Make sure to include what strategies you want to test, what you consider a success, and what you consider a failure.
You should also define what percent of the budget should go to each initially and a point where you should cut off the funds to that channel of marketing.
Marketing with Social Media
Most clothing boutiques are going to use social media for most of their marketing. Each social media platform has a different business purpose and target market.
Let’s talk about a few of the main platforms and what makes them unique:
- Facebook (rebranding as Meta) – the largest platform with over 2 billion global monthly users. You can use it for lead generation and email collection.
- Instagram – another Meta-owned platform with approximately 500 million global monthly users. With the highest engagement rate and the best ability to reach 18-29-year-olds, Instagram is best for showing off outfits and linking to product pages.
- Twitter Advertising – I’ll be honest with you: I find Twitter to be a way to communicate in industries that move the quickest. While fashion changes, it doesn’t change as fast as politics, current events, crypto, and other financial news. If your target market falls into these categories, it might be worth it. If not, don’t bother.
- Pinterest Advertising – 175 million monthly users that are mostly women. Pinterest is best for products without being a promotion because the promoted pins blend in with the rest of the styles.
- LinkedIn Advertising – 227 million monthly users that are primarily in the B2B market. I’d only use this if you are offering fashion for business professionals that are too busy to do their own shopping.
It’s important to first define your goal/objective so that you don’t waste time and money on the wrong platform:
Lee recommends using Instagram, and he told us:
If you are going to do paid ads, I would highly recommend reading this Oberlo blog about lessons learned from spending $20k on Facebook ads.
Grow Your Email List
Email lists are a great way to remind your customers about your business. Most businesses collect emails by offering something for free.
For a boutique clothing company, I would recommend offering either a discount or the first item in a subscription for free.
Once you’ve collected their data, you can use it to let them know about sales, remind them about abandoned carts, or let them know when a new product line is released.
Tap into your network
Lee told us:
Don’t be afraid to ask them for advice. Many of them probably have their own website
Running your boutique
Running the boutique is what you will spend most of your time doing. This includes aspects like hiring employees, helping customers, keeping inventory in stock, accounting, and payroll.
Hiring employees
Hiring employees is primarily focused on hiring people who represent the brand well. Lee told us:
When hiring employees for a boutique, you’ll be required to:
- Post Open Jobs
- Conduct Interviews
- Establish Compensation
- Manage Tax Filings and withholdings
- Comply with Federal and local labor laws
Keep reading for more info on each step.
Job Posting
Hiring people requires posting “now hiring” signs and posting on prominent job boards. Some places you can start posting job requirements are:
Interviews
Having a prepared list of questions for interviews can make hiring the right people easier.
Indeed offers a variety of resources to help you make better hiring decisions. Read their guide on how to hire your first employee.
Some questions you should ask during the interview process include:
- Who is your current favorite designer?
- How does your previous experience make you a better fit than other applicants?
- How do you respond to a customer when you don’t know the answer to your question?
- Have an article (or articles) of clothing ready and ask them to go through the store and find accessories to go with it.
- What are your compensation expectations?
- Do you have any ongoing commitments that impact your availability? If so, what dates and times will it impact?
Compensation
Employees are typically a company’s biggest expense. There are three common pay structures in business.
Each fits different scenarios. Let’s take a closer look.
Salary
Flat weekly/monthly rate based on a person working a specific number of hours.
This is typically reserved for owners, managers, and some admin roles. You might want to assign this to yourself for budgeting purposes.
Hourly
This pay structure just tracks the hours an employee works and pays them a set hourly rate. This pay structure is solely based on time, not performance.
Commission
Typically used in sales to give employees a percentage of revenue. It is a strictly performance-based compensation model.
Hybrid Models
Hybrid models combine two pay structures: for instance hourly and commission to compensate for time and performance.
The hourly rate will typically be lower than an hourly rate without commission, but the commission should make it where good performing employees make more than they would without commission.
These structures also help reduce the variability of pay from week to week.
Paying employees an hourly wage works for most positions for clothing lines, but depending on your business structure, a commission or hybrid payment model might make sense.
The article, “How to Create a Pay Structure That Promotes Team and Company Growth” offers some insights into thinking about pay structure.
Outsourcing
If you don’t need a full-time employee, you can consider outsourcing or hiring a freelancer on sites like Upwork.com.
You may pay more per unit hour, but it saves you time in hiring, training, and other time-consuming activities.
Accounting and payroll are often prime targets for outsourcing because they can be done remotely on a weekly or biweekly basis.
Tax filing and withholding
Federal and state tax filing requirements apply to new employers. You must keep records of employment taxes for at least four years, including special forms and accounting for state taxes.
Don’t worry! We’ve got you covered! Check out the IRS guide for employers.
Lee told us:
Federal employment and labor law posters
All employers must display Workplace Posters, which you can download from the website.
Other requirements include:
- Employment Eligibility Verification (Form I-9)
- State’s New Hire Program – This is required so that people who owe child support remain in compliance
- Worker’s Compensation Insurance – Insurance for when employees get hurt on the job. Check out this guide to state laws
- Disability insurance – California, Hawaii, New Jersey, New York, and Rhode Island, and Puerto Rico have requirements. Learn more about disability insurance
- Occupational Safety and Health Administration (OSHA) – Federal and state laws govern what are safe working conditions. Fines can be up to $136,532/violation or up to $13,653/day. Make sure you understand your area’s laws at OSHA.gov.
How To Retain Customers For Your Clothing Boutique
Retaining customers is primarily about customer service and making it easy for them to interact with you via methods they are comfortable with.
Lee suggests spending a lot of time in the stores.
If you are running an online boutique, you should be thinking about aspects of the user experience like:
- Can they shop without logging in?
- How many steps does it take to check out?
- Can customers easily get to other products that will look good with the item they’ve added to the cart?
- Do you save items they’ve added to the cart?
- If they leave the cart (and you have their contact info), do you send them a friendly reminder in case they got distracted?
Managing inventory
Lee told us:
He uses Lightspeed, which costs $150/month, but he doesn’t love it.
Lightspeed is an all-in-one payment sales platform, payment processor, and inventory system. He suggests looking for better ones. He told us:
Top Influencers
- Lime Lush
- CladandCloth
- The Pretty Dress
- Ganni
- Francescas
- Check out StarNGage for a ton of other influencers that might fit your boutique.
We’ve given you all the knowledge and tools you need to start your own boutique. Make sure you focus on a style you are passionate about.
We’d love to hear about your journey to starting an online boutique. If you’d like to tell your story or have tools you’d really love to share, leave us a comment below.
We love hearing about strategies that work for you.
