What's the gross/net profit margin of higher-end boutiques? - Page 4

People get into fashion from all sorts of backgrounds, especially if you are talking about retail. Nearly all of them have had previous retail experience, but there are exceptions.

How much it costs to open a boutique depends a lot on your location, and how much work you are willing to put in yourself. Capital costs vary a lot, but a typical buildout probably puts you in the $100K range - and that's not going to get your anywhere near the best installation money can buy. Put it this way, laying down hardwood is going to cost you $10K off the bat. Of course, you have to pay rent, utilities, etc..., while all that work is being done. I'd say that if you break even after 18 months after you open, you are doing phenomenally. There is a lot of guesswork involved as well. Best to have a buffer. So, during this 18 months, you will have to pay operating costs, including lights, other utilities, maintenance, replacement of different parts of your installation, salaries, and lots of taxes, as well as pay off your capital, which is all the while depreciating. I know at least 2 boutique owners who did not pay themselves for a full year (lived off savings), and had no employees, in order to make things work. This meant no holidays, no days off, etc... Yeah, fun.

Markup is typically 2.3-2.5. That takes into account what you are going to have to sell at discount, and then even after that, you will either have to sell excess inventory to a discount store or jobber, who will typically pay $0.06-$0.10 on the retail dollar for your goods, or just keep a lot of deadstock. Typically, new boutiques, opened by people without connections and/or deep pockets, are going to have trouble getting good accounts. Having a consultant who can help you open doors is good, but expensive, and you are not going to have any guarantees. I've heard from a good source that the TBS guys got a lot of doors opened through one serendipitous incident. You can't rely on being as lucky. It's that typical thing - you can't get a credit card without good credit, but you can't get good credit without a credit card. You will also get very unfavorable terms, at least at the beginning. Nearly every rep tells me that they prefer older, more established boutiques and chains. If you are brand new, you may have to prepay, pay COD with a deposit, or, if lucky, you might get a net 10 or net 30. Also, brands have high minimums. A $10K wholesale minimum is not uncommon for the brands you are talking about.

Finally, there are the intangibles. TBS and some other stores (Oki-ni, LN-CC) are successful (or at least seem that way) primarily because of a good web presence. If you have no web experience, you could easily get taken for a ride. Best to have someone who can really help you in that respect.

A good publicist or the ability to publicize yourself really go a long way. I know some retailers who advertise on about 10 websites. That's thousands of dollars a month (a very conservative estimate, could easily be in the $10K+ range) plus lots of time. A decent publicist charges at a $1K floor retainer, and it only goes up depending on what level of service you want.

Any way you cut it, it's not easy.