We Answer: Are Clothing Businesses Profitable?

Planning to start your own business or working with an established fashion house, it doesn’t matter—you need to be educated about the process and what you could be getting into. What should you expect as you consider getting into the fashion industry? Is it worth the stress and worry for a profit and a way to share your creativity? 

Are clothing businesses profitable?

Clothing businesses are profitable if you can sell enough product at a high enough markup. The markup for clothing can be up to 2.5 times the cost of production, while your profit margin after paying for the product, production, and shipping can be between four and 13 percent. For smaller businesses, this may not be a high enough profit margin. For those who can sell enough product, it is high enough to create a profitable business. 

When you’re looking to start your own business, you need to know if it’s possible to turn a profit. But how do you start that business? What trends should you focus on? How do you increase your profits? Read on to find out more.

Are clothing businesses profitable? 

The industry standard for markup in the clothing business is around two and a half times—if a designer creates a dress for $100, it would be sold for upwards of $250. The retailer, then, can sell it for a profit of $625. 

We Answer: Are Clothing Businesses Profitable?

This may seem high, but also consider the fact that many clothing retailers end up discounting their items. Because of that—and because so many consumers plan for that discount—many clothing companies actually increase that initial markup so when they discount their products, they’re still making a profit. 

So what does that mean for your profits? By the time that you factor in all the costs of your product and labor, shipping and production, you could be making somewhere around four to 13 percent profit in your clothing industry. While the markup may seem high and the profit seems low, you’re right to think that—the cost can sometimes be overwhelming compared to the markup. 

Because of this, it’s easy to expect that clothing businesses are not profitable, but it really comes down to how much product you’re moving. If you can market your shop and sell enough product, this percentage can actually be considered profitable—turning your business into a success. 

How much does it cost to start a clothing business?

While it varies from business to business, most clothing businesses can be started with around $10,000 if you plan to sell online. That number jumps drastically when you add in a physical location. 

What do you need to start your clothing business? 

  • Product. This can cost about $4,000, but you need product before you can start selling. Decide what you want to sell and whether you’re making it in house or purchasing through a wholesaler. 
  • Point-of-sale. This can cost about $500 if you’re simply getting a point-of-sale system. You can also do this online, making it that much easier—you just need a website with a shop capability built in. 
  • Advertising. Your own website will vary in cost, but usually comes in around $250. Create your own to keep your costs low. You can create social media pages for free. 
  • Insurance and business permits. Usually around $1,500, you need to make sure your business is legal before you start selling, so talk to a lawyer. 
  • Modeling and photography. About $1,500, this cost can be drastically reduced if you use people who need experience. 
  • Employees. If you’re working on your own, this could be much lower, but this cost is always dependent on your business decisions. 
  • Delivery costs. Especially if you’re shopping online, you need to factor this in. United States Postal Service priority mailboxes can be ordered for free, but you also need to consider the cost of shipping. 

If you’re looking to create a physical brick-and-mortar store, that cost isn’t on this list because it could cost over $20,000 just for your building to start. If that’s the way you want to go, you’ll need more funding than just the initial $10,000. 

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Is online shopping more popular than in person shopping?

We Answer: Are Clothing Businesses Profitable?

At this point in time, yes, online shopping has outpaced in person shopping. Whether it could swing back the other way, only time will tell; deciding to sell your fashion online is a great way to tap into the market and get a piece of that profit. 

Why does it continue to grow? Because it’s so easy for your customers to do. It’s so convenient and easy that people continue to shop online—for clothing, for groceries, and for everything in between. 

What trends continue to grow in the fashion market?

As mentioned before, online shopping continues to be a trend and it looks like it’s here to stay. But there are several other trends that are starting up and will be a part of the fashion industry for decades to come. 

People are focusing more on the environment. What that means for you in your fashion businesses is that people like businesses who are focused on helping the planet—sustainability, recycling, etc. If you can promote your business in that way, you are sure to gain repeat customers. Why is it important when you’re selling online? Lean into the fact that without a true brick-and-mortar shop, you’re saving energy costs—and helping to save the environment in the process. 

The workplace culture has also shifted, leaning into more comfortable clothing. As more and more businesses work from home, you can tap into that business by shifting your own clothing line to become more relaxed and comfortable. 

As we shift in our culture, genderless clothes are becoming more and more popular. While this is something you may want to consider, there are advantages and disadvantages to shifting towards this model. 

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How do I start a clothing business?

While starting a clothing line may seem hard, there are certain steps you can follow to get to that point. 

  1. Learn about the industry. Know what you’re getting into so you can make better business decisions. 
  2. Decide on your inventory. What clothing would you like to sell? 
  3. Define what success means to you and create your goals. What do you want out of your business? What factors must be met for you to consider your business a success?
  4. Build your brand. Start deciding what your business will look like. 
  5. Create your business plan and budget. Write down your entire business plan and your decisions that you must make, including names, employment, insurance, your budget, your goals, etc. Having it written down in one place will make your life much easier. 
  6. Purchase or create your inventory. Using your business plan, start collecting your inventory. 
  7. Set up your store. Online or physical, it doesn’t matter—you need a way for your customers to purchase your items. 
  8. Start marketing. Most will start with free postings on social media, but feel free to branch out as you go. 
How can I make more profit from a clothing business?

There are several ways that you can increase your profits in your clothing business. 

We Answer: Are Clothing Businesses Profitable?
  1. Know the industry. Without knowing the trends and what people are doing in your industry, you can’t make the best choices for your business. Look into niches, what other companies are doing, and consider how unique your business is. 
  2. Plan ahead. Create a business plan, budget, and start making a list of everything that you would need to start your business. By planning ahead, you can make all the important decisions beforehand, so when you get started, you don’t have to waste time considering your options.
  3. Prioritize your funding. Your budget is going to be as tight as possible. Focus your capital on the things that you need most—usually inventory, a way to sell your items, and way to market your items. 
  4. Create a marketing plan. Be as streamlined as you can on social media, and make sure you link everything back to your website. 
  5. Do not purchase too much inventory. Work with a minimum order quantity manufacturer to keep those costs down.

There are many ways to go about starting your own clothing business, but completely understanding the industry and knowing how your decisions could affect you are most important. If you just want to make a quick profit, starting a clothing line may not be best for you. If you want to create a lasting legacy while creating a successful business that leads to high profits, a business in fashion may be your next calling. 

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RELATED QUESTIONS

Why do fashion businesses usually fail?

There are a multitude of reasons why a fashion business would fail, but most of them do because of poor supplier choices, incorrect pricing, and buying too much stock. 

How do I find capital for my clothing business?

There are several ways to get funding for your clothing business. Consider using the Small Business Administration for resources—found at SBA.gov. You can apply for grant money, secure a business loan, ask friends and family for an investment, sell your assets, or tighten your budget. 

To learn more about how to start your own fashion clothing line check out my startup documents here

Please note: This blog post is for educational purposes only and does not constitute legal advice. Please consult a legal expert to address your specific needs.