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

[Optimistic]

Originally Posted by wsanford-shanghai

As an owner of a small tailoring shop, I thought I'd chime in with a few comments and questions: Wholesale prices vary from place to place and even from shop to shop. That is to say, the guy down the street that sells more suits than me gets a better price per meter on cloth, better credit terms, and probably gets new bunches before me. You will never know what the other guy gets unless you get chummy and he tells you. Even then, you still don't really know. Generally speaking, if you aren't at least doubling you won't be able to pay the rent. Unless you find a dirt cheap place to rent. Try to find a place that has the "vibe" rather than something conventional like foot traffic, etc. If your shop is truly unique and has "personality" people will come. Especially if you have excellent products and good, conscientious service. The place I rent used to be a cigarettes and sports lottery shop. They had a very basic business and my rent probably doubled their monthly income. Of course I had to spend more on remodeling, but that was a one time cost followed by months of cheap rent. Low rent lessens the burdens on your cash flow and gives you more freedom in other aspects of running the shop. Plus having the shop exactly how I wanted it increased the "vibe" and "personality" in the space. In the end, since things can be bought anywhere, people come to the shop because it feels comfortable and because of "You". Now the question is who are "You"? Do you want to wear MMM and live the lifestyle that it conveys? Or do you enjoy menswear, like to talk about it, and think it would be fun to own a shop? In the case of the former, most likely you will never be able to afford the clothes you sell, unless you are wearing merchandise from the shop, in which case you are losing the potential income from selling it. While you may wear some of the clothes, you will find as you get older, you most likely are not living the lifestyle of the people that come to your shop. If the latter is true and you enjoy the concepts, history, and philosophy behind menswear and discussing it at length, then perhaps you should open a shop. But you should think hard about who you are and why you want to open a shop before you do it. Profit should be least of your concerns, because there are many more profitable things for you to do. I will sum it up with this: Opening a shop is easy, sitting in one all day is not. That's why mine is by appointment only.

Wow; thanks for the great reply! I completely forgot about the bolded advice... hahaha

 

[LA Guy]

Originally Posted by Optimistic

I'm currently a third year student studying Economics @ Cal... one of the businesses I would like to potentially open is a clothing/lifestyle boutique.... basically exactly like

http://www.tresbienshop.net/ or http://store.unionlosangeles.com/

I would like to sell Japanese, South Korean, Asian and SEA clothing in the USA and vice versa... Obviously such a business requires a lot of time and passion(traveling to look at and choose lines each season, collaborations, etc.)... so I was wondering what a boutique's net/gross profit margin is on items such as http://www.tresbienshop.net/brand/visvim/

Also, how much would the owner of such a boutique make per year on average? More than enough to wear the clothing they sell? Hahaha... ex. how much does a boutique like http://www.tresbienshop.net/ or http://store.unionlosangeles.com/ make per year?

A lot of the people in the boutique business seem to have sort of "fell" into it... more or less... and I sort of want to force my way into it through sheer passion hahaha... Also, what kind of start up capital is typically required for such a business? IDEALLY, I would like to be a Management Consultant after I graduate, then go to HBS or start a boutique... which would hopefully expand to a chain of boutiques. It seems like people like to ostracize those in the clothing industry who come from a business background? People seem to like boutiques, etc. that spend a lot of time posting Polaroid(a little poke...) pictures on their blog, etc... and I would love if if this wasn't my ONLY business.

After reading

"Brief history
2003 - Store in Lund, Sweden opens

2005 - Store in Helsingborg, Sweden opens

2005 - The webshop tresbienshop.net launches

2008 - Store in Malmö, Sweden opens

2009 - Major redesign of the webshop

2009 - Store and warehouse in Malmö relocated to bigger space

2010 - Complete remake of the Malmö store in the works

2010 - Store in Stockholm, Sweden opens autumn"

I wouldn't mind if it was my only business... LOL! Four locations... wooow...

Thanks!

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.