How to Start a Clothing Business

If you’re starting a clothing business, you likely have a lot of questions. That’s a good thing! The really good news is that we all need clothes, so you’re in an evergreen market.

The clothing business is also a fairly barrier-free market to break into, and one that most entrepreneurs have the skillset for already. The challenging part is standing out among your competition. And when it comes to the clothing business, there is a lot of competition.

So, where do you start? Glad you asked. We’re here with this step-by-step guide to help you through the biggest hurdle: getting started with your new clothing business.

What kind of clothing are you selling? 

You need to create a business plan, and to do so, you need to decide on what kind of clothing you will sell. This may seem like a no-brainer, but it’s something that needs more contemplation than you’d think. Are you focusing on one article of clothing such as sweaters, suits, or dresses, or are you widening to a full wardrobe retailer that is a one-stop shopping experience?

If you’re focusing on a particular clothing brand that isn’t your own designs, the answer is pretty simple. But if you’re starting a clothing line with your own designs, asking yourself what kind of clothing you plan on selling goes hand-in-hand with what is on-brand with your clothing line. What’s the look and feel of your brand? For example, if you’re designing leather jackets, will you also be offering wallets? Is that where you want your brand image to go?

That said, if you’re focusing on one type of clothing, don’t exclude the smaller details like accessories from your business. If you’re selling bespoke men’s suits, maybe partner up with a local brand owner of cufflinks. This is called a business-to-business to customer business model (B2B2C). It’s an easy upsell and will help round out your own clothing business. You’ve already got the niche market—now capitalize on it.

Consider gender as well. Are you selling for all genders, genderless, or one gender only?

It’s important to remember that the kind of clothing you plan on selling isn’t the same as your business niche. You can sell shoes, but who is your demographic? What is your specific niche? Narrowing down what type of clothing you are selling will help you focus on your niche. This is where the real fun begins!

Find your niche 

To find your niche, you have to really ask yourself what feels passionate to you. Would you wear the clothes you sell? Why or why not? Do you believe in your products? If you wouldn’t, you may want to rework your strategy. This is all part of creating your business plan.

Ideally, your niche will come naturally to you, as you already have a passion for it. If you don’t, you may want to go back to the niche drawing board.

What is a niche?

If you’re scratching your head, don’t worry. A niche is a subcategory of a type of product (or market) that is specialized and caters to a particular demographic. In women’s clothing, plus size is a niche market. A vintage clothing store also falls under a very particular type of niche market and has become quite popular. A graphic T-shirt business is a niche market, as are specialty sock stores. You get the picture.

Think of a niche as something that will help inform your own brand.

Why do you need a niche?

Unless you’re a major department store, you can’t sell to everyone, plain and simple. When focusing on your niche, the likelihood is that you would be your own target demographic, in some way or another. You’ll already have some experience with it, even if as a consumer (which is a great way to gain experience!). This consumer experience brings a level of authority and expertise that outshines your competition.

Other than the absolute joy you’ll get in entrenching yourself in something you love (even on the crummy days when things are slogging), developing a niche also fosters trust and customer loyalty. When your customers are satisfied with your product, they will return looking for the same unique style and service. That’s how your niche speaks to them. This is also translatable to online clothing stores, so don’t think it’s only relegated to an in-person experience.

It doesn’t stop there. Your loyal clientele will start to tell others about your business, primarily through social media. So, it’s important that once you land on your niche, you stick to it. Of course, over time styles change, and that’s something you, as a savvy entrepreneur, will have no trouble keeping up with. But your niche will remain more or less consistent and should be firmly anchored in your business plan.

Your clients will thank you, and the trust will continue.

How to decide your business structure

While deciding on a business structure may not be as inspiring as nailing your niche or creating your fashion brand, it’s an essential step before moving forward with your business plan. A business structure is basically a legally defined entity and is set up usually for tax purposes, although there are a few other reasons.

There are two primary business structures available to you: sole proprietorship and incorporation. There are significant differences between the two, and choosing which business structure depends entirely on your business goals.

Sole proprietorship

A sole proprietorship is the simplest business structure and one that many first-time entrepreneurs choose. It allows for the most control and freedom. With a sole proprietorship, there is a single owner (you!) who takes on all the financial responsibility, decision-making, and marketing of the business.

Given the rapid increase of self-employed entrepreneurs in Canada, a sole proprietorship is an affordable and simple option. Taxes under a sole proprietorship are considered self-employed taxes and you may be able to write-off many expenses as business expenses, particularly if you’re working out of your home.

Incorporation 

An incorporated business creates a new legal entity, otherwise known as a limited liability corporation. This means activities conducted under the company’s name are the company’s legal responsibility, including debts, litigation, trading, and any assets. Income taxes are also the purview of corporate tax rates.

It also means you, as the owner, have less control over the running and future of your business. Not always ideal, but if you are looking to protect your personal assets in the event of any debt collections, incorporating is an attractive option.

Obtain a creative space 

Now is the time to get creative, and the perfect space is essential. The type of space you’ll need depends on your business goals. Are you starting your own clothing line, or are you partnering with other clothing brands as a boutique retailer? Are you going to run a physical storefront, an ecommerce shop, or a hybrid of the two? This decision will be part of your business plan.

For those entrepreneurs who are creating their own fashion designs and starting a clothing line, you’ll need extra studio space for the creative process. Some designers create in the storefront, which offers a certain allure to their customers who can see the actual process happening. Some creatives need an isolated space to get the juices flowing. Whatever the case may be, you’ll need space to start your clothing line.

When looking for a creative space, think about just how much space you need. If you’re designing your own clothing brand, you might need more space than if you’re retailing a collection of brands. Maybe you just need a creative office space with adjoining storage where you can run an online business from.

In any case, there is a caveat to opening just a physical storefront and not offering online clothing. Canadians are spending more money online shopping now more than ever. You might be missing out on a large clientele if you restrict yourself.

Brick and mortar storefront 

If you’re opening a clothing store that is brick and mortar, it’s all about the location. Get out into the community you are looking to situate your business in and see what other businesses are around. If there are a lot of clothing stores, that doesn’t necessarily mean the market has been saturated. It could just mean there is a gap in the market that only a niche clothing store like yours can fill.

If there are a lot of other retailers around that aren’t necessarily selling clothing, that can be beneficial to your business as you could see a lot more foot traffic along than destination buyers. As you and your neighbourhood businesses will be sharing the space and, therefore, customers, it can be a win for everyone.

Online storefront 

In 2019, the largest purchase type Canadians were making online was clothing, which accounted for 62 per cent of all purchases. That’s not a figure to take lightly! You may want to consider that regardless of if you’re opening a physical location or not, having an online clothing store is essential.

If you’re running an online store only, you can save on overhead costs if you can use space in your own residence for the creative design process. If not, you may need to lease a small studio space. Look into a space that could be shared with other creatives. With an online clothing store, you might not need a location in a prime real estate market, which will help reduce lease costs.

Even with hybrid businesses that have both an online and a physical store, potential customers do the bulk of their retail research prior to even before going into a clothing store. This also leads to larger purchasing patterns and multiple items sold.

Basically, no matter what you do, have an online ecommerce platform. Etsy is a popular ecommerce platform.

Design your products 

If you’re like some entrepreneurs and opening a clothing store also means starting your own clothing line, you have extra (and exciting!) work cut out for you. Designing your own clothing line isn’t just about fashion design. It’s also about clothing manufacturer costs, outsourcing suppliers for fabrics. Doing some research is a good idea, and maybe even print-on-demand in the case of graphic T-shirts might be a possibility.

Find your inspiration

Inspiration usually comes from something that you are passionate about. Again, this goes back to your niche. If you’ve never worn sock suspenders in your life, how can you reasonably be expected to become inspired by them enough to create your own?

To find some inspiration for your own clothing line, browse other clothing lines and designers, via Instagram, Pinterest, or Etsy. Find what styles, fabrics, and looks inspire you. Creating your own boards and sketches, including colours and fabrics, can be a great place to start a clothing line. Look to see if they have an online store or sell another way. The nice thing about the clothing industry today is that there’s something for everyone. Take advantage of that and find what speaks to you, because if it’s inspiring to you, it’ll inspire your customers.

Make mockups

Mockups, or test samples, are the perfect way to also test a market. This doesn’t necessarily mean actually making the garments, although that does have its benefits. Specialized mockup software is available where you can get creative and design mockups. From there, you can envision and make adjustments without the cost of materials.

Find a wholesaler

Finding a wholesaler is crucial if you want to build your business, regardless if you’re making your own designs or carrying other lines. You want to make sure you get the biggest bang for your buck, and a wholesaler is the most economical way to do this.

Wholesalers include clothing items from either an existing brand you will be carrying or materials for creating your own clothing line (or both!). This might also include print on demand wholesalers if you are making graphic designs or creating an online store.

Starting a clothing store is an investment, so finding a reliable and cost-effective wholesaler could save headaches down the road. Sourcing local wholesalers could also save you challenges as you will have easier access to customer service, and you could negotiate rates for cross-promotional trade.

Make a website for your online store

The second type of creative space you’ll need (and probably the most important) is a website for online shopping. You can either outsource web designers or do this yourself. Depending on your available time and resources, spending a few thousand dollars on a professional web designer may be advantageous.

If this isn’t an expense that is feasible right away, which is the case for many small businesses, there are website hosting platforms that are fairly user-friendly. Make sure you check those out and compare rates, customer service availability, and ease of use. A lot of these website builders have readymade templates to choose from that are user friendly and intuitive.

You can purchase a domain through the website builder, and purchasing a template is fairly inexpensive. You’re looking around $40 CAD per month on average.

Website builders also have an additional ecommerce platform that you can purchase as an extension on your website for an additional monthly cost, which usually isn’t steep and available in a tech pack. This way, your customers can go directly to the product they want to purchase, add it to their cart, and purchase it through the website. Easy peasy!

There are, however, some pros and cons to having an online clothing store.

Pros to an online shop:

1. Low startup costs compared to a physical store

For new entrepreneurs, startup costs can be limiting. Finding a reasonable lease rate for a storefront, renovations necessary, property and contents insurance, carrying enough products to fill the store, and labour costs can be challenging. Looking into startup grants may be an option for you.

2. Near-zero overhead

One of the main reasons many smaller businesses (and even larger ones now) are heading online is that the overhead is significantly less than a physical storefront. If you’re a startup entrepreneur, the likelihood is that you won’t need to carry a lot of stock until your brand name gets out there and sales pick up. Options like print-on-demand can help with this too. This saves a lot of sitting capital that isn’t making you any profit, and with the fashion industry, you don’t want items sitting around too long as fashion changes so quickly. You need to be able to move your product fast. Well, with less physical stock, you’re generally good!

Overhead also includes a location to run a business out of. Many online startups are home-based, which also opens up potential tax benefits. 

3. Self-employed taxes

Taxes are never fun, but tax returns can be helpful. If you’re running your own business as a sole proprietor, you’re probably eligible for several business expense write-offs, particularly if you’re running your business from your home or conducting a lot of your business, like creative design and communications there. Here’s a list of some expenses that might be considered business expenses:

  • Electronics such as laptops and mobile phones;
  • Internet service;
  • Mobile and data service;
  • A percentage of your residence space, including rent or mortgage;
  • A percentage of your residential utilities;
  • Transportation and/or vehicle costs.

Consulting an accounting well-versed in sole proprietorships and start-up entrepreneurs might be helpful.

Cons to an online shop:

1. Customers can’t try on the clothes

This can deter customers from purchasing clothing from your online shop. One size doesn’t fit all, and customers might be hesitant to hand over their credit card numbers for something they aren’t sure will fit or look good on them. This can result in returns and refunds, which can also present its own set of challenges.

2. Returns

Returns of online purchases are never fun. They are a hassle, cut into your bottom line, and even if the return goes smoothly, there is less likelihood of that customer returning than if they were satisfied with the product. With a clothing business, you run a higher risk of returns.

However, this can be mitigated with a full sizing guide on your website, along with excellent customer service, which of course you’ll provide!

3. Harder to sell old stock

Old stock is something to consider. This may be harder to swallow for aspiring fashion designers who don’t have brand awareness yet, but markdowns may be necessary to bring in new lines. A bargain-hunter may not hunt the sale section online as much as they would in a physical store. Markdowns can also cut into your production costs and may impact profit.

Determine payment methods

No matter if you have a brick and mortar storefront or an online shop, or a hybrid of the two (which is recommended in this day and age), you need to figure out what payment methods you will be using. This requires third party payment processors, such as Moneris.

Payment also includes shipping costs. Many online stores offer free shipping with a minimum dollar purchase. Think about what is most cost-effective for you and plan your clothing line accordingly. If a customer’s cart is just shy of free shipping, make sure you offer clothing items that are lower price points.

It’s also a good idea to do some research on shipping companies. Make sure their customer service is top-notch, they deliver on-time, and their rates are reasonable. A lot of shipping companies now offer shipping software. The last thing you want to do is manage an unhappy customer who didn’t get their shipment when promised. This can also cut into your bottom line if you have to swallow that cost.

Search engine optimization

Search engine optimization (SEO) is a tool used to increase your online visibility. It uses a search engine’s search machinery, called web crawlers, to gain a higher ranking in search engine results pages (SERP). A search engine’s web crawlers scour the internet for particular search terms that the average person inputs If your website or social media uses these terms effectively, that will put your presence higher on the search results list.

Basically, SEO increases both the quality and quantity of your website traffic (“hits” or “clicks”), which improves your brand.

Here are the five general steps to understanding SEO for small businesses:

1. Search engines crawl, index, and rank content

When a user types in words in the search bar of a search engine, the web crawlers use those words and “crawl” the database (which is upwards of a billion results) for the more relevant keywords The crawlers then index the information by storing, organizing, and ranking them by relevance to that particular search. The sites that best suit that search’s match are at the top of the SERP.

2. Select the right keywords 

Optimizing keywords is all about understanding how the average internet searches, particularly your target audience. Start doing some internet searching yourself and see what different keywords and phrases are returned in the SERP. This is also where your niche will come in handy. A search like “plus size women’s clothing” will generate a lot of results but should still be in your keyword list. Narrowing the question to “vegan plus size women’s clothing near me” is far more specific and will push you up the results list to folks closer to you.

But what if you are shipping nationally, or even internationally? You want to be found by a broader audience. In these instances, you can focus on your niche again, but just change some of the keywords. Do you carry particular brands? Are your clothing lines organic, vegan, locally sourced? Are they vintage? Use those.

Once you’ve done some searching, create a list. This is the list that most likely, your target market will be using in their searches.

3. Know where to insert keywords

Optimizing keywords means using them in the text of your website and descriptions (the text that appears below your website URL in the SERP). Using these keywords in headers makes it easier for web crawlers to find your site. You can also use them in URL slugs.

It’s important to note though, that overuse of keywords (keyword stuffing) can be counter-effective as search engines could demote your rankings. Not helpful!

4. Include hyperlinks in your copy 

The next step is optimizing hyperlinks, and keywords in those hyperlinks are a great way to increase access to your target audience. Text that is hyperlinked is called “anchor text,” and if used effectively, it can read naturally, help website traffic, and be a great way to use important keywords.

5. Use Google My Business index

Google is a widely used search engine, so using Google My Business index tools can help your online clothing company gain exposure.

To use it, create a business profile on Google, including address, email, and website. Once this is authenticated, your business gets a little index card on the SERP’s right-hand side.

Social media presence

A fashion business without a social media presence is taking a risk. Social media has profoundly impacted consumer behaviour. With information such as reviews available at the swipe of a finger, consumers are deferring to online shopping now more than ever. More clothing stores are now attracting clientele through social media than website clicks, and word of mouth has morphed into “likes” and “follows” and “shares.” So, as a startup clothing company, how do you do this?

  • Follow other brands that are similar or complement yours. This increases your algorithms and will result in your social media presence showing up in your potential clientele’ feeds.
  • Reach out to Instagram influencers to provide exposure for your brand. Offer to send them a few samples of your private label and use a unique hashtag that identifies your brand. Instagram is a widely used platform for fashion retailers and designers, and with over 1 billion users, it’s a market that should be optimized if you want to make an impact.
  • Facebook advertising is fairly inexpensive, and depending on your budget, you can reach target markets already established by Facebook on any scale you choose. Facebook also cross-promotes through its affiliate platforms like Instagram and Twitter. As a new clothing line, this might help get your products out there.
  • Online and in-person events are always a great way to gain exposure while networking with successful clothing lines you can learn from and potentially cross-promote with.

When using social media, find the most effective hashtags to help increase visibility. When you hashtag, this tags your post in those particular searches. But don’t stuff it with hashtags. Use a couple of keywords and keep it at that.

#noonewantsanoverhashtager

#keepitsimple

You get the point.

Promote and grow your brand

Now it’s time to take off! You’ve got your business structure, your niche, your inspiration, designs, and target market. You’ve done your research through social media and SEO. What’s next?

Promote, promote, promote. It’s time to use advertising techniques to market your small business.

How? You’ve already done a lot of the work:

  • Create a website;
  • Network both online and in-person;
  • Engage with your audience! People want to see a face behind the clothing products now more than ever, and as a small business, that’s important. Offering that personal touch goes a long way in building trust and loyalty. It also shows the personality behind the genius.
  • Unique packaging helps create an experience for your clientele. An extra flare in your shipments just might make your clientele smile.
  • Hire a professional photographer for both your website and social media. You can create and carry the most beautiful items, but if you can’t display them in an artistic and stunning way, your brand will fall flat.
  • Become a fashion stylist, not just a retailer of a clothing line. Offering looks on your website and through social media helps potential customers envision what they can do with your apparel, while also setting you as an expert in both your own products but in fashion in general. Plus, this encourages customers to buy the whole look, if that’s something you offer.

Ready to start your business? Ownr has helped over 25,000+ entrepreneurs hit the ground running quickly – and affordably. If you have questions about how to register or incorporate your business, give us a call at 1-800-766-6302, Monday through Friday from 9 am to 5 pm EST, or email us [email protected]

This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates