The global clothing market is witnessing a boom, reading $406.7 in value as of 2023. With a. 8.84% compound annual growth rate (CAGR) from 2023 to 2028, the market could reach a whipping $621.10 billion by 2028.
From clothing boutiques to custom tailoring services and beyond, small businesses can thrive in the shadows of retail giants. The only limits are your imagination and willingness to learn the ropes of product development, branding, marketing, and streamlined operations.
This guide will walk you through how to start a clothing business. topics include market research, competitive analysis, marketing, registering an EIN, obtaining business insurance, and more. Here’s everything needed to get started with an online clothing store.
1. Conduct Clothing Market Research
Market research is essential to starting your own clothing line. It involves primary and secondary research of information compiled by yourself and through a third party. The research offers insight into fashion brand trends, your target market, the best platforms for an online store, and trends in the industry.
Some details you’ll learn through market research to develop your business plan include:
- The women’s apparel segment accounts for the largest share of the total clothing market.
- Fast fashion and increasing demand for plus-sized clothing are key trends driving growth.
- Athleisure, business casual, and made-to-measure segments present growth opportunities.
- Sustainable materials and adaptive/inclusive clothing are popular in this segment.
- Strong economic expansion in China, India, and Southeast Asia is powering growth here. North America follows with a 25% share, while Europe claims 20%.
- E-commerce is hugely impacting the clothing industry.
- Online sales are growing 4 times faster than total apparel sales.
- Social commerce and curated subscription boxes present additional direct-to-consumer avenues.
- Sustainability has also become a major factor influencing purchasing decisions.
- Brands need to focus on sustainable materials, ethical manufacturing, transparency, and recycling/upcycling.
- Additional trends to note are size inclusivity, adaptive/accessible clothing, personalization, fitness clothing, modest wear, baby clothing, footwear (e.g. socks), vintage-inspired looks, and streetwear crossing into luxury.
By thoroughly understanding market dynamics across segments, geographies, formats, and trends – combined with consumer and competitor research – entrepreneurs can make strategic decisions to launch and grow a successful apparel business.
2. Analyze the Competition
Gaining a comprehensive view of the competitive landscape is vital for any entrepreneur entering the fashion industry. Whether launching a brick-and-mortar boutique or an e-commerce clothing brand, you need to assess existing players who could eat into your target market share.
Start by identifying direct competitors – brands that closely align with your positioning around price points, styles, target demographics, values, and more. Analyze their product catalogs and inventory availability. Also assess their branding aesthetics across logo, website design, social media, marketing collateral, and brick-and-mortar store interiors if applicable.
Evaluate strengths and weaknesses across product quality, fit/sizing accuracy, materials sustainability, manufacturing ethics, and price perceived value. Review customer feedback on platforms like TrustPilot to detect pain points and opportunities for differentiation.
For online competitors, use digital tools to analyze traffic metrics. SimilarWeb provides data on monthly site visitors and engagement metrics. This showcases leading brands’ digital footprint and marketing effectiveness.
Evaluate SEO elements like keyword rankings, backlinks, and domain authority. Use SEMrush or Ahrefs to analyze how visible a clothing brand’s website is in search engines when users search for related product terms.
Assess social media follower counts on Instagram and TikTok along with engagement rates. Track competitors’ influencer collaborations and digital promos. Review advertising spending on platforms like Facebook and Pinterest for context on budgets.
By holistically reviewing competing fashion labels across products, branding, websites, social media traction, advertising, and brick-and-mortar presence, emerging brands can detect white space opportunities and craft differentiated positioning. The goal is to understand strengths to emulate and weaknesses presenting potential competitive advantages. Ongoing competitor monitoring then tracks industry movement.
3. Costs to Start a Clothing Business
When starting a clothing brand or retail store, the initial expenses quickly tally up. From registrations to inventory to marketing, entrepreneurs must budget adequately to build their fashion house vision.
- Business Entity Registration & Permits: First, legally register your business. Form an LLC that offers liability protection – fees range from $40-$500+ depending on the state.
- Product Design & Sampling: For 10 initial styles, budget around $1,500 for a freelance technical designer and $5,000 for creating physical samples.
- Inventory Production: Expect to spend at least $10,000 on your first inventory production run.
- Ecommerce Website Build-Out: If selling online, budget $5,000-15,000 for an optimized custom site with slick branding.
- Brick-and-Mortar Storefront: For in-person retail space, upfront costs associated with leasing, buildout, and decor can reach $100,000 or higher depending on location, size, and boutique design.
- Initial Marketing: Set aside at least $15,000 for digital ads, influencer seeding, content creation, PR agency fees, and grand opening promotions.
Additional Start-Up Costs include:
- Product liability insurance ($1,000/year)
- Bookkeeping setup ($300 one-time), payroll provider fees ($1,000/year)
- Business banking fees ($500/year)
- Legal counsel retainer fees ($250/month)
- Office equipment like a computer, printer, and supplies ($2,000 one-time)
- Product Manufacturing Reorders: Once inventory sells, reordering is key for availability. Allot at least $5,000 monthly for manufacturing costs if releasing multiple new styles per season and maintaining adequate stock levels.
- Software & Technology Fees: From e-commerce platform subscription fees to accounting software to paid digital marketing tools, stay on top of monthly and annual recurring fees. These average $500 per month when launching.
- Talent & Staffing: Whether it is in-house employees or outsourced support, factor in creative, production, marketing, sales, and operations staffing costs. For lean early team structure, budget around $7,500+ in monthly payroll.
- Marketing Activities: Maintaining brand awareness and customer acquisition requires significant marketing investment. Budget at least $5,000 monthly here.
By planning for both start-up and ongoing costs, fashion entrepreneurs can strategically fund business operations as they start a successful business. Partner with an accountant and financial planner to forecast adequately.
4. Form a Legal Business Entity
Forming a business as a clothing manufacturer means forming a legal business entity. There are four main entities to choose from for a clothing line business, including:
Operating as a sole proprietor means that legally your clothing business is not distinguished from you as an individual owner. It is the simplest structure requiring minimal registration paperwork, though you remain personally liable for all business debts and obligations.
While convenient initially, sole proprietors must report all income on personal tax returns. This structure becomes problematic with ambitions for growth. Until forming a legal entity, sole proprietors cannot take on investment capital, obtain business insurance, or hire employees at scale while limiting liability risks.
A general partnership enables two or more owners to jointly operate the clothing brand, splitting managerial duties and merging various skills and resources. Each partner files a Schedule K-1 with personal tax returns, paying taxes on their proportionate share of income.
However, partners assume “joint and several liability” meaning each is personally responsible should the business accrue serious debts or face legal action. The viability fully depends on the interpersonal dynamics between partners over time. Difficult to dissolve if fundamental disagreements emerge compared to a sole proprietor shutting down.
Forming a separate LLC entity shields personal assets if the clothing company faces debts, lawsuits, or bankruptcy. Only the LLC assets are impacted. Owners (called “members”) manage daily operations and file taxes through the business only once on either a corporate tax return or via pass-through income to personal returns.
Additionally, members’ level of involvement does not change LLC liability protections, and tax classifications like an S-Corp or C-Corp can be elected as the company needs to evolve. The operating agreement also allows members’ ownership percentages and roles to be legally defined and updated over time as well.
C-Corps require a significantly more complex, bureaucratic legal setup but enable companies to sell stock to attract outside investment from angel investors or venture capitalists more smoothly compared to LLCs. C-Corps file corporate taxes Separately from individual owners’ returns.
C-Corps limits owners’ liability protection if courts determine they acted fraudulently or illegally. They also incur “double taxation” – corporations file and pay taxes then shareholders also file taxes on dividends. Given most clothing brands are self-funded initially, forming a corporation too early causes unnecessary legal hurdles.
5. Register Your Business For Taxes
Obtaining an Employer Identification Number (EIN) is crucial when forming an LLC or corporation entity for your clothing brand. Think of it like a social security number just for your business. It allows you to file taxes, open business bank accounts properly linked to the entity, and hire employees down the line.
To apply, simply head to IRS.gov, click “Apply for an EIN” and follow the streamlined application process which takes less than 10 minutes to complete online. You’ll need basic information handy like the official LLC entity name, address, and ownership details. EINs are assigned immediately upon successful form submission at no cost.
Save this EIN confirmation letter from the IRS in your vital business documentation folder along with formation documents from your Secretary of State office to prove verification of proper legal business formation needed to open a dedicated business checking account.
Additionally, as you start a clothing line business plan, explore your state’s requirements related to sales tax permits, contracting licenses, and annual filing of good standing certificates which keep your LLC active year after year. For example, check the California Secretary of State and New York Department of State websites for entity search tools to look up all requisite registrations in your home state.
6. Setup Your Accounting
Proper financial tracking is imperative for apparel brands to gain insight into cash flow, profitability, tax liabilities, and overall fiscal health. While tedious paperwork is involved, the right accounting foundations will support growth for years to come.
Open a Business Bank Account
Start by separating personal and business bank accounts. Never commingle funds. Consumer banks like Chase or Bank of America offer free business checking accounts, with upgraded options adding perks like high monthly transaction limits.
As transactions accelerate, using accounting software becomes non-negotiable. QuickBooks streamlines categorizing income, matching expenses like manufacturing invoices to inventory assets, reconciling accounts, sending client invoices, and more in one cloud-based platform.
Plans start around $30/month. QuickBooks integrates with major banks and e-commerce platforms, syncing transaction data to auto-log entries. This saves massive time on manual data entry.
Hire an Accountant
Supplement DIY software abilities by partnering with an accountant, especially if lacking financial acumen. A dedicated advisor safeguards your interests year-round, not just during tax season. They handle bookkeeping, payroll, quarterly sales tax filings, and managing deductions/write-offs strategically.
Apply for a Business Credit Card
Opening a dedicated business credit card also simplifies tracking expenses without impacting personal credit scores long-term. Business cards offer higher limits thanks to projected company earnings used to determine approval amounts versus personal salary income only. Financiers like Capital One, Chase, and American Express cater options to small businesses specifically.
7. Obtain Licenses and Permits
While completely dry on the excitement scale, researching and securing the appropriate commercial business licenses is crucial. Find federal license information through the U.S. Small Business Administration. The SBA also offers a local search tool for state and city requirements.
Taking the time to understand what’s required demonstrates professionalism and commitment to following regulations that ultimately protect consumers – a responsibility clothing brands shoulder on customers’ behalf related to safe, accurately marketed products.
- Zoning Laws & Commercial Location: First up – know your local zoning laws! Residential locations prohibit operating apparel manufacturing, warehousing, or storefronts as home-based businesses mainly due to foot traffic, noise level concerns, and parking restrictions homeowners associations enforce.
- Reseller & Wholesale Permits: Clothing businesses that manufacture and sell their designs plus buy wholesale for resale require registering for a resale certificate through their state government office.
- Garment Manufacturing Licenses: Producing clothing domestically requires registering your shop as a garment manufacturing facility if sewing products onsite rather than outsourcing offshore.
- Trademark & IP Rights: Don’t start marketing apparel with your newly created business name, logo, or branded slogans without first trademarking intellectual property through USPTO.gov.
- Selling Internationally: Should overseas opportunities arise to distribute products in Europe, Australia, or elsewhere, register your business with an entity like the Export Information Partner International Company Directory.
Respect the formalities government agencies uphold or face otherwise avoidable legal wrangles down the road. Protect your passion project so that fashion can change the world, not be burdened by it!
8. Get Business Insurance
Despite seeming like just an extra expense, proper business insurance protects clothing brands from the unexpected, keeping companies financially and legally shielded. It’s truly an investment that could make or break your future. Consider coverage across products, facilities, delivery vehicles, and cyber policies to minimize risks.
- Scenario A – A customer wearing your silk blouse claims a loose thread caused them to trip downstairs and break an arm. They sue for $500,000 in medical damages though your LLC only has $2,000 across business bank accounts. Without adequate liability insurance, the LLC protection unfortunately dissolves and their house, car, and personal assets could be seized to cover court judgments.
- Scenario B – An electrical fire sparked from a sewing contractor’s building destroys your entire 10,000-unit inventory two weeks before Black Friday sales. Without business property insurance, you single-handedly face at least a $300,000 loss and frustrated customers with no holiday stock to purchase let alone reorders to fulfill going into 2023.
- Scenario C – A disgruntled employee hacks into the e-commerce platform and deletes all customer data, destroys product images and disables site functionality for a week until resolved. No data breach or cyberattack insurance means paying costly technical forensic teams and potentially steep legal fines out of pocket.
Rather than gamble everything on best-case scenarios, visit a commercial insurance broker’s website like ProgressiveCommercial or CoverWallet to access quote comparison tools for your unique coverage needs and risk history.
Expect to budget at least $1,000 to $5,000 in annual premiums depending on layers selected across:
- Commercial property damage
- Commercial general liability
- Product liability
- Professional liability
- Cyber and data breach policies
- Commercial auto for company vehicles
- Worker’s compensation for employees
Umbrella coverage in higher tiers capping liability and more.
The broker will translate insurance jargon and navigate suitable bundles to protect your clothing empire across facilities, supply chain logistics, products, people, and crucial data assets enabling operations. Payment plans help ease investing 10-20% of yearly revenue into this financial safety net.
9. Create an Office Space
While tempting to be a wandering nomad early on, securing some sort of consistent office or creative studio space lends clothing brands professional legitimacy and practical room facilitating logistics central to product design, sampling, and order fulfillment.
Leveraging a spare bedroom or basement keeps overheads lowest during fragile beginnings. Expect costs of around $100-500 to outfit workstations, storage, machinery, lighting, and tools. However, noise, pet interruptions, limited space, and distractions from personal life blur work-life balance significantly. And good luck meeting professional vendors like manufacturers at your kitchen table!
Plugging into trendy, flexible coworking spaces like WeWork brings turnkey creative offices with sleek furniture, conference rooms, phone booths, printing, events, kitchens, and community networking built-in. Hot desk rates start around $300 per month with dedicated offices from $500-1,000 monthly. Scaling according to project needs adds flexibility lacking when stuck in commercial leases.
While not every apparel startup needs customer-facing outlets right away, some leverage flagship store visibility to showcase products IRL versus only online. If opting for a physical retail presence, choose locations getting heavy foot traffic near similar boutiques. Triple net leases cost around $3-$8 per square foot averaging 2000 square feet. That tallies $6,000-16,000 monthly before designing and building out interiors.
Commercial Creative Studios
Long-term, securing your dedicated headquarters via commercial leases allows fully customized build-outs like showrooms, photoshoot sets, pattern-making tables, machinery stations, office work areas, and conference spaces that evolve with your team. Upfitting and leasing costs vary significantly based on location and market rates but prepare to spend at least $100,000-$250,000 to do it right while signing 5+ year leases.
10. Source Your Equipment
Aspiring fashion entrepreneurs can tap various channels to acquire the core equipment that brings apparel designs to life, from sewing machines to mannequins and more. Strategize across new purchases, used deals, rentals, and leases depending on budget and long-term plans.
Turnkey starter equipment bundles are available through retailers like Singer Sewing and Janome Machines, which carry everything from compact units under $200 to industrial-grade setups over $10,000. Consider an entry-level machine, basic notion supplies, pattern-making tools, dress forms, and shelving to begin around $3,000 total.
Niche marketplaces like e-commerce consignment site Swap.com also sell pre-owned machines affordably to bootstrap initial space build-outs before investing in advanced tools. Facebook Marketplace and Craigslist may list local deals on notions too.
Renting sewing equipment monthly allows testing or scaling production seasonally as order volumes ebb and flow, avoiding major upfront investments. National rental companies like General Rental and Angel Equipment carry commercial-grade machines like Juki, Brother, Consew, and Siruba models from $50-$500 monthly. No long-term commitments are required.
Equipment leases secured through specialty financing companies provide long-term access to buy top-tier machinery via predictable monthly payments over 3-5 years. This breaks high-ticket equipment like advanced sewing, cutting, spreading, embroidery, and laser-cutting machines into more affordable chunks.
11. Establish Your Brand Assets
Before sketching that first fashion design, laying branding foundations through visual assets, websites, and promotional collateral conveys polish and professionalism from day one. This recognition equates to customer confidence.
Getting a Business Phone Number
Toll-free virtual phone numbers from RingCentral route calls seamlessly from one central business line to employee cell phones. Expect starter plans around $30 monthly. Never miss sales inquiries again just because reps are out of the office.
Creating a Logo & Brand Assets
A thoughtfully designed brand logo sets the visual tone for packaging, tags, storefront signage, and marketing materials. Looka’s AI logo maker helps craft icons, wordmarks, and abstract symbols aligned to apparel on brand budgets starting at $20.
From color palettes to font choice, ensure assets resonate with target demographics. For clothing, conceptual logos evoking inspiration or hand-drawn sketches reflect fashion artistry nicely.
Print Business Cards and Signage
Once logo files are finalized, order 500 to 1000 business cards from Vistaprint starting around $20. Cards serve as walking billboards when networking at trade events or meeting buyers. Ensure cards and hang tags feature brand styles alongside contact info.
Purchase a Domain Name
Every business needs one dedicated domain name for its central web address. When considering naming, keep it short and simple related to “clothing” and category styles. Establish domain availability first through registrars like Namecheap for under $20 annually.
Building a Website
Given that e-commerce drives fashion sales now, build out an engaging, conversion-focused site on platforms like Wix. Expect to spend between $300 to $1,000 annually for secure hosting, SEO optimizing pages, integrated payment processing, and automated email nurturing functionality.
Or hire a freelance web developer from Fiverr to construct a custom responsive site from scratch unique to intricate business specifications and traffic volumes projected. Budget $5,000 to $15,000+ for bespoke builds.
12. Join Associations and Groups
Beyond developing sharp style instincts, cultivating connections with fellow visionaries shapes creativity and success, especially within an insular industry like fashion.
Groups including the California Fashion Association, Atlanta Apparel Mart, and Dallas Fashion Incubator host networking mixers, production resource guides, and runway events to foster community. Annual memberships average $500. Consider leadership committees or panel speaking once established.
Attend small business meetups through Meetup for startup solidarity across challenges faced daily. Hash out growth hurdles and celebrate wins with supportive peers who just “get it”. Don’t see a meetup you like? Create your own.
Thousands connect daily for crowdsourced advice in Fashion Classified groups including designers, manufacturers, stylists, bloggers, and boutique owners. Best practices get traded across design stealing concerns to shipping provider recommendations specific to apparel handling needs.
13. How to Market a Clothing Business
Implementing marketing consistently develops brand visibility and invaluable customer connections over time. Budgeting a hefty 20-30% of revenue towards promoting new product launches, sales, and overall brand stories should be built into annual plans.
Start with existing friends, family, and professional contacts who likely want to support your entrepreneurial endeavor. Offer insider incentives for sharing label sneak peeks with their networks to stimulate initial buzz. Send free products to social media influencers with comparable aesthetics to organically seed content wearing the clothes as a thank you.
- Run Google Ads campaigns targeted locally and to customer demographics nationwide focused on branded terminology and category terms like “women’s blouses”. Expect to invest at least $500 monthly to attract site traffic.
- Sponsor influencer Insta Stories and feed posts through Facebook and Instagram’s Brand Collabs Manager to put new inventory on followers’ radar.
- Launch TikTok-style videos showcasing clothing detail close-ups and styling outfit ideas. Use viral sounds and hashtags to expand views.
- Send abandoned cart email sequences and SMS messages with time-sensitive sales offering discounts to nudge customers to complete purchases.
- Write and distribute press releases to announce new collections or philanthropic initiatives that the media may share.
- Print full-color postcards with brand messaging and site/social media links for mailers to local zip codes where boutique storefronts would thrive.
- Secure high-visibility billboard placements on busy highway stretches and transit stations featuring seasonal campaign images and QR codes to drive site traffic.
- Arrange pop-up shops at community events, festivals, or holiday markets to meet local customers, gather email signups through giveaways, and survey product feedback.
- Run radio spot ads on local stations before drive times when commuters remain engaged listeners.
- Provide free items to television shows or movies for subtle product placement that mass markets recognize.
Consistency across digital and traditional channels nurtures awareness of sales. Allocating 15-20% of revenue towards retaining talent also ensures dedicated marketing specialists execute the above smart promotional strategies quarter after quarter.
14. Focus on the Customer
In the fickle world of fashion where trends fade fast, customer loyalty remains the most valuable competitive asset when thoughtfully cultivated. How shoppers feel wearing your designs, interacting with staff, and resolving issues shapes brand affinities over time.
Suppose a bride-to-be nervously orders her reception dress online after COVID-19 postponed original nuptials. Your empathetic customer service agent senses her angst. She swiftly resolves a shipping snafu before the reshuffled ceremony date, also including complimentary veil veiling as a special gesture.
That bride undoubtedly shares her positive experience across wedding planning Facebook Groups frequented by 12,000+ engaged women. She specifically shouts out the attendant by name who saved the dress debacle from total disaster.
Alternatively, indifference from support staff around problems faced sparks enough irritation that the bride actively discourages connections from ever shopping with you. Lost loyalty lingers longer than delayed deliveries ever could.
Caring deeply for the humans behind each order builds local legend status for customer service and community support that fuels referrals automatically. Listen graciously, respond promptly, and recover sincerely to nurture the relationships runway success ultimately struts on.