By Joleen Small
Know What You’re Getting Into. If you love fashion and decide to open your own retail clothing store, SCORE Westchester mentor Fred Krawchick has one message for you: It. Is. Not. Easy. It may not be the message you want to hear, but it’s probably the message you need to hear before diving in. Fred has been in the retail industry for 45 years and operated 150 stores in 15 states. He can tell you from experience the ups and downs of running a retail operation.
Most people who want to start a business have visions of customers flooding their shops and cash registers ringing with dollar bills filling their drawers. However, they have no idea how much work is involved in making their business a success.
The failure rate is extremely high and became even higher due to the COVID-19 pandemic. It also takes a large amount of money just to get started. Even businesses that make a sizable profit can run into trouble if they don’t understand financial management. It can be an uphill battle if you haven’t researched the essentials of managing a retail enterprise.
First things first. It is always good to know the industry you want to enter before getting started. Getting a job working in retail before venturing off on your own is the best place to begin. Think about spending at least one year working in the retail space so you can gain real-world experience in the business.
“Everybody should have some time spent in the industry, even if it’s a small amount, just so they understand what brings in a customer,” Fred says.
Start with the Rent. You should also be financially prepared. Commercial rents alone are an extremely expensive part of going into retail.
“Most rents you’re looking at are probably a minimum of $30/square foot. If you’re renting in Manhattan, you’re looking at $300/square foot or more,” says Fred. That number varies depending on the location of the venue. You would also have to know the number of square feet you need for your store. The average store space is 1,000 square feet, but you need to think carefully about how much space you need for such things as displaying your merchandise or locating changing areas. Most importantly, you will need to know how much space you can afford.
Cash Upfront. Keep in mind that if you are just starting out, lenders may hesitate to loan you the money. If they do, they may require that you personally fund a minimum of at least 30% of your total investment. This is to make sure you have a financial interest in the business. You will also need a large amount of cash upfront to purchase the goods you will be selling and any equipment you will need to run your business.
“As an individual store, you’re going to have to pay for everything upfront. Nobody’s extending you credit because they don’t know you,” Fred warns.
It’s also in your best interest to make sure you have enough money to sustain the business for a few years. Retail stores tend to lose money in the beginning, so being able to ride out the financial challenges is very important.
“You better be prepared to lose money for at least a year, and probably up to three years before you can expect to make a profit,” Fred advises.
Know Your Customers. Now you have to find customers. Your retail store is nothing if you don’t have anyone buying from you. Before starting your marketing campaign, find out how to target your ideal client. Figure out who your target customers are, what age they are, how much disposable income they have, whether will they buy a cheaper or more expensive product, etc. Once you know about your customers and how much they are willing to spend, you will be able to market to them appropriately and stock the items they’d buy.
“You’re certainly not going to start out trying to appeal to both teenagers and people in their seventies. That doesn’t make sense,” Fred jokes.
Consider Selling Online. Most of these challenges can be met by having an online presence. Opening an online retail store cuts down on overhead costs including rent. Platforms like Shopify are an option, but you’re one of many vendors and have to know how to stand out. Social media is absolutely essential to promoting your business. If you have a strong social media strategy, your chances of being seen are greatly increased.
“You could have the best product in the world, you can have the most exciting, newest looking thing, but at the end of the day, if nobody knows you’re there and nobody knows how to find you, it gets lost in the shuffle,” Fred says.
Start by Learning. Spend as much time as possible learning about the retail industry before opening your own store. Gain the marketing and finance skills necessary to complement your knowledge of fashion. Find someone who can teach you the basics. Solid preparation will save you a lot of headaches.