Opening a Fashion Store Costs $132,000 to $171,000

Are you looking to open your own fashion store? As part of your business plan, make sure to consider the total cost for startup and operating expenses to open and run a fashion store.

We’ve identified that it costs anywhere from $132,000 – $171,000 to start a 1,500 sq. ft. fashion store plus $43,000 in operating costs per month to run the business the first few months.

Want to know more? In this article we’ll go through all the different costs you will need to budget for before you can start running your own fashion store. Read on!

Are you opening or running a fashion store? Have a look at our free resources below:
How To Open a Fashion Store In 10 Steps
8 Strategies to Increase Fashion Store Sales & Profits
How Profitable are Fashion Online Shops?
How to Write a Business Plan for a Fashion Store: Complete Guide
How to Build a Financial Model For a Fashion Store

Fashion Store Startup Costs

The total cost to open a fashion store business depends on multiple factors such as the size of the store and its location. While some business owners have successfully launched their fashion stores for as little as $50,000, other sources claim that you can’t open a fashion store with less than $150,000. 

So we’ve decided to give you below a clear overview of all the key expenses you can expect for a 1,500 sq. ft. fashion store.

Startup cost	Amount
Renovation and improvements	$85,000
Lease deposit	$10,000 – $20,000
Starting inventory	$25,000 – $50,000
POS System & furniture	$3,000 – $7,000
Legal and licenses	$2,000
Website & Signage	$5,000
Business insurance	$2,000 (per year)
Total	$132,000 – $171,000

Fashion store renovation cost

Unlike some other businesses, the appearance of a fashion store matters a lot to customers. And with that in mind, one of the first expenses related to this kind of investment will be renovations, repair, and improvements.

At the very least, you will want the interior of your fashion store to be well furnished, reflecting your favorite theme and design considerations. On average, it costs $56 per square foot to renovate a fashion store.

So, assuming you want to renovate a 1,500 sq. ft. store, the total costs will be about $85,000.

Lease deposit

Getting a suitable location might be the hardest part of starting a fashion store business, but it is just the first part of solving the puzzle. 

Because after that, you must pay a lease deposit to show your commitment to staying in the rented space for a couple of months or years.

Assuming you rent a 1,500 sq. foot retail store in a city in the US at $25 per sq. ft. you would be paying $3,125 in rent per month. In this case, you will be expected to pay a lease deposit of about $10,000 to $20,000, covering 3 to 6 months lease.

Fashion store starting inventory cost

A healthy initial inventory is mandatory for the smooth running of your fashion store business. However, fashion accessories aren’t a one size fits all affair. So, you must be ready to stock what will appeal to consumers most.

Depending on your preferences, the upfront inventory can reflect the latest fashion trends and only include brand names with strong market demand. However, you need proper market research to achieve that, focusing on the current fashion items, styles, and designs that suit your target market.

When it comes to the cost, it depends of the quantity and the average cost you pay per piece of clothing to your supplier. As rule of thumb, start with 1 to 2 months worth of inventory.

So assuming you expect to sell 500 clothes per month at an average supply cost of $50 per piece of clothing, you should set aside $25,000 to $50,000 alone for starting inventory costs.

Fashion store POS system & furniture

The point-of-sale system is vital to successful order tracking from the first time you launch your fashion store business. And setting up a POS costs at least of $2,000 for a small or medium-sized business like an independent fashion store.

Other valuable equipment you may invest in for your fashion store business include hangers, racks, jewelry, accessory cases, window dressing materials, shelve and wall fixtures, mirrors, bags and packaging.

Legal and Licenses

When running a fashion store business, the safest approach is to work closely with a lawyer. This saves you from the hassles of grasping complex legal terms even though it comes with additional costs.

What’s more, ensure you have all the mandatory licenses to run this business, depending on the federal or statutory regulations. Typically, running a fashion store business in the USA is only feasible if you have at least one or more of the following licenses;

• General business license
• Federal employer identification number (EIN)
• Sales tax permit
• Resale certificate
• Certificate of occupancy

A business license in the USA can cost a few to hundreds of dollars. It all depends on the statutory laws and the nature and size of the business. To be on the safer side, simply set aside about $2,000 to get all the necessary documentation. 

Website & signage

Sometimes, how determined you are to fill your fashion store with high-quality products doesn’t matter. What matters most is your dedication to proper marketing. This is done through advertising, targeting a suitable market base while exploring all the possible avenues you need to reach the consumers. 

For a start, building a modern, reliable business website can do the trick. This is the right platform to increase your company’s visibility by adopting a few simple strategies like providing discounts.

You can always handle this step alone if you have the relevant skills. But if you need extra help, there’s no harm in contacting a seasoned web designer to create and manage the business website. This can cost up to $5,000 on average. 

On top of that, signage is another useful aspect of marketing when launching your fashion store business. Here, the priority shouldn’t be to sell your products on the cheap but to reach as large audience as possible. Again, setting up useful signage may cost up to $500, depending on its content. 

Business Insurance

Don’t make the mistake of opening your fashion store without the right insurance cover. Business insurance is your only weapon when everything else fails, guaranteeing your business’s and your employees’ safety in the face of adversity. 

There are multiple insurance options for different purposes. But at the very least, you will need general liability insurance, the business owner’s policy, and workers’ compensation. All in all, it will be worthwhile to put aside at least $2,000 upfront to cover the annual insurance costs.

Fashion Store Operating Costs

The operating costs are the ongoing expenses you must keep in mind to ensure your business runs smoothly from the first day of operation. Here are a few examples:

Operating cost	Amount (per month)
COGS	$25,000
Staff	$12,000
Rent (incl. bills)	$4,000
Other (bookkeeping, etc.)	$2,000
Total	$43,000

Fashion store Cost of Goods Sold (COGS)

The cost of goods sold refers to the actual expenses you need to stock your store on an ongoing basis. This is sometimes called the cost of inventory and entails all the expenses associated with stocking your fashion store.

Logically, the profit margins for a fashion store vary depending on the products themselves.

Yet, the average gross profit margin for a retail clothing store is 53%, meaning that if you sell clothes at an average price of $100, you must pay $47 to your supplier to buy the inventory first.

Using the same example earlier with 500 orders a month with an average cost of $50 per item, this represents $25,000 in COGS per month for a total monthly revenue of about $53,000.

Fashion store staff cost

What about the staff? Running a fashion store business isn’t the easiest task you will ever face, which is why you need a helping hand in the form of devoted employees.

A standard fashion store with 1,500 sq. ft. can do with a minimum of 2 employees at all times. Assuming you operate 1 shift (say 10am to 6pm) 6 days a week, you will need part-time employees too.

When it comes to pay, here are a few examples of average annual salary package:

• Retail store manager ($50,000)
• Retail store assistant manager ($42,000)
• Sales associate ($29,000)

So assuming you hire 2 sales associates on top of yourself (store manager), you should expect to pay anywhere around $12,000 in salary expenses per month.

Fashion store rental cost

The cost of renting a space for your fashion store depends on the size and location of the shop.

As we mentioned earlier, assuming $25 per sq. ft. and a store of 1,500 sq. ft. you would be paying around $3,000 in rent each month.

Utility Bills

Utility bills are the ongoing expenses associated with gas, water, and electricity bills. Because the monthly rent and utility bills are ongoing expenses, it’s always advisable to set aside a significant figure to cater to both expenses every month.

Logically, utility bills also vary based on the season and where your store is located. Whilst you may need to spend a lot of money on electricity (or gas) for heating in winter, some stores must pay significant expenses for their AC instead.

As a rule of thumb, add 20-25% on top of your rental expenses for your utility bills. So assuming you pay $3,000 in rent each month, set aside $750 to $1,000 for utility costs.