What is it?
Clothes are big business in Britain. Every year, fashion-conscious shoppers spend around £20 billion on their wardrobe, which is more than £300 per person. By 2008 the market was worth an estimated £22.2bn, a 9.6% increase since 2003. And to supply this extra large spending habit there is an equally burgeoning clothing retail sector.
In fact, there are as many different types of clothes shops as there are varieties of clothing - from the large department stores such as Marks & Spencer, high street chains like Next and New Look, to the thousands of independent clothes stores scattered throughout the country.
So it may seem that this is a market made to measure for the budding entrepreneur. Unfortunately, it's not that simple. Clothing is also one of the most highly developed retail sectors in Britain and the established brands are frighteningly competitive. If you want to break into this market, you will have to look hard to find a gap and, even then, it will take a lot of work and resources to make it succeed.
So where are the gaps? How can a smaller clothes shop offer something that isn't already provided by the chains or larger stores? The key is specialisation. Generally the larger stores offer the greatest choice to shoppers - they have the space and resources to carry an extensive stock range and the purchasing power to offer that stock at low prices. The smaller, independent stores, on the other hand, can profit through specialising.
The crucial point is to identify a niche. This may centre on the style of clothing you sell or on the type of customer that you want to attract. For example, you may stock only suits or second-hand clothes. Alternatively, you may look to sell clothes to a particular group such as schoolchildren or extra large men.
Whatever type of shop you eventually decide to open, one thing is certain - you will have to put a lot of effort and money into making it work. It's a risky sector but if you get it right, the rewards can be high.
If you are thinking of starting a shop click here to read our general retail guide.
** Image courtesy of Valentinian on Flickr
The current market
According to the British Retail Consortium (BRC), clothing and footware sales have been ‘largely flat’ recently. Kevin Hawkins, director general of the BRC said clothing sales were ‘sluggish’ and retail growth was ‘heavily slanted towards the grocery sector’.
Weather and interest rates can hit clothing sales hard. Winter 2006 was relatively mild, meaning people had little need to go out and buy a new winter wardrobe. Increased in the rate of interest also reduces consumer confidence as it makes the cost of borrowing more expensive. New clothes are not always a neccessity so sales can be hit hard.
Michael Goodmaker is an adviser to the clothing retail sector and, as a member of the Institute of Business Advisers, works with many small clothing stores in East London. "Independent clothing shops are in the largest decline that we've seen in the last 10-15 years. The lion's share of clothing sales doesn't come from clothing shops anymore, it comes from supermarkets. And on the high streets, the chains are doing a better job than the independents."
Like any business decision, you will have to assess the risks and use your judgement to choose the right time to start.
Who is it suited to?
Like many retail businesses, you don't need any formal qualifications to start up a clothes shop. However, to increase your chances of success, there are certain skills you will have to learn.
Controlling stock
The fashion market changes throughout the year, with clothes coming in and out according to the seasons and busy periods from March to May and September to December. Stock control, is crucial. You need to have enough of popular lines when it's busy, but also make sure that unsold clothes don't pile up when trade slackens or when the seasons change.
You will therefore need to be well organised with a good understanding of fashion so that you can predict changes. To help keep control of stock, it might be worth investing in an electronic point of sale (EPoS) system, which will record every item that is sold and calculate how much stock you is left. It enables you to keep your shop well stocked, and will quickly tell you which lines are selling well.
Creating an image
Clothes are all about image and you need to ensure that the image your customers aspire to is reflected in every part of your shop. This obviously starts with the clothes themselves, so knowledge of fashion and the ability to know which labels your customers will like is essential.
Image also extends to the shop as well - the way clothes are displayed, the fixtures and fittings, the ambience of the shop and even the name. So setting up a shop can require a certain flair for interior decoration.
Serving the customer
Many smaller shops distinguish themselves from their larger competitors through the service they offer their customers. Running a shopping you'll be in close and constant contact with the general public, so the ability to get on with people is a must.
Making your customers feel welcome may simply mean chatting to them and giving advice on fashion, colours and fitting. However, the personal service can also extend to taking measurements or making alterations, so some tailoring expertise can be useful.
Liz Urwin, who owns Bottega, a ladies fashion boutique in Cheshire, explains, "You need to relate to people and get on with them. I was surprised to discover that people come to independent shops to see the owner as much as to see the shop. They are disappointed if I'm not there."
"You have to be good at getting on with people. It's an intimate relationship, sticking pins in and doing alterations on people. You have to be comfortable getting up close and personal."
The nuts and bolts
As well as dealing with clothes and fashion, remember that running a clothes shop will also require some business expertise. You will need to be competent with figures in order to calculate stock levels, work out profit margins, negotiate prices and complete tax returns.
You should be prepared to work six days a week and put in long hours, especially in the lead-up to Christmas. Underlying all of this should be a passion for fashion and an enthusiasm for the clothes you are selling. "You need to be able to enthuse about your stock in order to sell it. You need to be excited about new stock when you are showing it to customers - and not just for the first week, but over the following couple of months," says Urwin.
What type of clothes shop?
If you believe that you have the enthusiasm, skills and personality to set up a clothes shop, you next need to think about what type of shop it will be. As already mentioned, most small independents tend to specialise.
"Niche market retailing is generally the only growth area in retail," explains Michael Goodmaker of the Institute of Business Advisers. And if you are wondering which area to specialise in, he suggests that the answer may be looking at you in the mirror.
"One way to work out a niche is that you may be a niche customer yourself. For example, imagine you are 6ft 7 and you find that you can't buy trousers in London that fit. You realise that there are other people with the same problem, and so there's the market that you can supply to."
To make your clothing store successful you will have to focus very strongly on who your customers are and what they want. Your target market could be any sector of society, for example teenagers, affluent women, or outdoor enthusiasts. Even if you specialise in just one type of clothing, such as suits or school uniforms, you should still be able to define your customers to a large extent.
Ideally, you will stock clothes that are not available anywhere else near you. In fact, you may have little choice, since many suppliers sign exclusivity agreements with the shops that they supply, under which they agree to not supply the same clothes to other shops in the immediate area.
So you may be restricted in the labels that you can stock. This is not necessarily a bad thing. If you have clothes that are both popular and exclusive to your shop, there will be a good chance of building up a loyal customer base.
Location
Once you've worked out what type of shop you want to open, you'll need to find premises. "The first thing to do is find a site. This is critical," says Goodmaker. "And there's no point being off the prime locations - you can't get people to go around the corner for a clothes shop."
All the large clothes store chains occupy prominent positions on the high street to catch passing trade. In particular, locating en route to a superstore can massively increase the number of customers that enter your shop.
Naturally these are also the most expensive premises to rent. Conduct some market research to find out whether you would be able to locate just off the high street without harming your business. If so, this will save you a considerable amount in rent.
Consider locating near other small independent shops that stock similar but not identical fashion items to you. This could help attract customers since clothes shoppers like to browse several shops before buying.
Promotion
Once you've found premises, you will need to think about how to promote your shop. Inside, you will need to ensure all the garments are clearly displayed and kept up-to-date. You will need to keep the shop fresh by moving all the new ranges to prominent positions, while an eye-catching window display and mannequins throughout the shop will be important in attracting trade.
Customers will expect to feel comfortable when they enter your shop - if they don't they won't even stop to browse let alone take the time to try on and buy clothes. So make sure the atmosphere that you create inside your shop is suited to your target market. Glitter balls and pop music may be essential in attracting teenage customers, but they will obviously look out of place in a formalwear shop.
You should also advertise to as much of the local area as possible. Make sure that your shop's details are in the Yellow Pages and advertise in local newspapers, especially when you get new stock or are putting on a sale.
A website can help promote your shop by showing customers what you sell and keeping them informed of new stock, sales and details such as opening times and phone numbers. Moreover, an online shop can contribute significantly to your turnover, especially if you sell items that don't need to be tried on, such as socks, ties or T-shirts for example.
Liz Urwin, who runs a ladies fashion boutique in Cheshire, says you could also try some more imaginative methods of promoting your shop. "Fashion shows seem to work quite well, especially if they are in aid of charity since people are keener to attend these"
Using the internet
If you love clothes but are concerned about the large investment needed to start up a clothes shop, there is a cheaper alternative that could be equally as profitable - selling clothes though the internet, mail order, at shows or through a website.
Having lived in the country all his life, Mike Dene knows that working outside requires a special type of clothing. But he also knows how difficult it can be to buy high quality outdoor clothing in high street shops.
This is what compelled Mike and his wife to set up Denewear, a company importing specialist outdoor clothing from all over the globe, including Australia, New Zealand and Scotland. It was a starting point from which Dene believes any budding entrepreneur can build a business.
"All small operators need to do is find a selection of funky products that aren't available in the high street. Finding this product is key to the future of your business."
With their collection of outdoor clothing, the couple started touring the many shows and exhibitions aimed at their market, such as country shows and fishing shows. At the same time, they built up a mail order business and later started developed thier website, www.denewear.co.uk.
"I now spend around six months doing the shows and six months marketing and doing the catalogues. We used to get 50% of turnover from the shows, but as the mail order has grown it's come down to 40%."
And after 18 years in the business, Dene is testimony to the fact that you don't need a shop to sell clothes. "A lot of people would be better off avoiding the shop and getting better known by doing the show and exhibition circuit. And if you're short of capital, I can't see any other way of doing it."
The set-up costs depend greatly on how large your shop is and where you locate, since rental costs will be a major expense. The location of your shop will determine how much you pay on to rent. For example, around 800 SqFt on the high street in Chester will cost about £22,000 a year to rent. However, the same amount in space in central Manchester can top £100,000.
You will need to have storage space as well as a shop floor. The shop floor will need to be equipped with display rails and shelves, chairs, mirrors and changing facilities. You can buy many of these second-hand, but remember, the image of your shop will reflect on the clothes, so beware of using cheap display equipment.
Liz Urwin, who runs Bottega a ladies fashion boutique in Cheshire, completely refitted her shop when she took over the business. "The cost for renovating this place was £15,000, although it was done expensively and involved a new floor and all new fixtures and fittings. The shelves alone were £5000 and the floor is maple. But the clothes are upmarket, so it has to be displayed in a nice environment," she explains.
You will need a cash-till, which can cost from £200 for a basic stand-alone machine to around £2000 for an EPoS machine and software. You will also need a computer, printer and basic accountancy software in order to deal with the administration of the business. Crime can be a serious problem for clothes shops so it is worth investing in CCTV and a security tagging system if necessary.
Finally, you will need to purchase the stock. Initially this could be expensive since, as a new business, suppliers may refuse to give you credit. Urwin explains,
"If taking a £5000 order with 30 or 60-day credit, the supplier will need to take out credit insurance. But they can't always get insurance when supplying a new business. You can therefore get caught up with difficult payment terms. It doesn't mean they won't supply to you, but you may have to pay up front, which can seriously dent your cashflow."
So although the initial cost depends to a great extent on where you are, how you furnish your shop and what you stock, it is safe to say that you will probably need upwards of £50,000 to get going.
What can I earn?
Your turnover will vary greatly on what you stock and how much you sell. There will be a higher profit margin on more expensive items but you would expect to sell these less frequently. A way to boost your income is to stock accessories and jewellery, for example, as these will often have a bigger mark-up than clothes.
Michael Goodmaker of the Institute of Business Advisers believes that it’s not uncommon for people to make a tidy profit from this type of business.
“If you get it right, you can do really well. The risks can be enormous but so can the rewards. Unfortunately, these days the rewards are so much harder to come by."
Tips for success
Find a niche - smaller shops need to specialise rather than compete with the bigger stores by stocking large ranges of clothes. Find a gap in the market and fill it.
Location is key - high street locations near a supermarket have most passing trade but are expensive. Look for the most accessible site for the amount you can afford to pay.
Work on your image - fashion is all about selling an image. Your customers need to be attracted to your shop as well as the clothes you sell.
Be inventive - try more imaginative ways to stand out from the crowd such as organising fashion events or writing editorial pieces in local newspapers.
Control stock - all your marketing will be worthless if you don't have enough garments in the right size when the customers come.
Useful Contacts
Association of Suppliers to the British Clothing Industry
www.asbci.co.uk
01422 354 666
British Retail Consortium
www.brc.org.uk
020 7854 8900
British Shops and Stores Association
www.british-shops.co.uk
01295 712 277
The Alliance of Independent Retailers
www.indretailers.co.uk
01905 612 733