This article is meant to be a very rough outline in the process of starting up an e-commerce based clothing store or boutique. In the high-paced and competitive world of fashion retail setting up your store is just the first step and quite honestly has little bearing on how successful your store will actually be. For example, Bluefly.com has an estimated monthly traffic of 840K, but since going public in 1998 has never made a single year of profit. As of December 31, 2009, Bluefly has an accumulated deficit of $147,468,000. Your guess on how they remain in business is as good as mine, but think of it this way. Even if you only make $1.00 of profit your first year of business, then you are technically doing better than Bluefly.
Please note, many of these steps can be done concurrently. For example, while you are filing your legal forms, you can work on your web design. This is especially true if you are depending on a third-party to design and set-up your website. They may work on a longer time frame than you initially anticipated. I do highly suggest that you just focus on the business plan initially. For example, if you decide that you are going to design your website with a specific concept while you write your business plan, then you just might find after researching that your concept is not what you’re going to move forward with. In this case, you probably spent 40-60 hours on non-productive output.
1. Write a business plan.
To be honest with you, when my girlfriend and I launched our website, we did not have a business plan, but we did write one eventually. The simple fact is that if you are planning for success, then you must write a business plan sooner or later. In business school, you write it sooner than later. The business plan is important because it forces you to do research about the industry, your competitors, and your resources. Additionally, it forces you to think deeply about how you are going to succeed in this highly competitive industry. If you think that you are going to be just like Modcloth, then why would you expect to be successful compared to Modcloth when they are working with millions of dollars of venture capitalist funds for a workforce, marketing, inventory, etc. I don’t have an answer for you, but my point is that you have to come up with a plan before investing your life’s savings into this new venture. Also, the business plan is important because it also forces you to estimate how much money you will need and where that many is coming from. The reality is that unless you have real background in finance, you will not be able to build a 5-10 year projected Discounted Cash Flow Model and figure out your WACC, but having some kind of rough idea of your cash flow is better than nothing.
You should also include a plan on how you are going to initially set-up your website. For example, using a subscription-based shopping cart will change your budget than if you decide to use an open-source shopping cart. Also, you should also do your initial research on web hosting companies since they can range from $10/month to over $300/month. My only suggestion is that you get the fastest and most reliable that your budget will allow. Please note, that all I’m suggesting is that you plan what you are going to do as far as web design and hosting is concerned, not that you go out and pay for these services right now. The only expense that you may want to consider at this moment is that for registering a domain name. That’s because they are relatively inexpensive to register and you don’t want to possibly miss out on registering your wanted domain.
You should come up with a budget and plan for marketing, public relations, and search engine optimization. These will most likely be your largest expense heading into the future. Remember, buying inventory is not an expense, it is an asset.
Last, but not least, you also want to plan on order fulfillment. This is just a fancy way of saying how you are going to pack and send your product, as well as what return procedure and policy you will have in place. Will you use USPS, UPS, FedEx, or DHL? Will you have free shipping, returns, and/or exchanges? These are all things that should be planned for, though will change over time.
2. Apply for a Employer Identification Number with the IRS
Once again, if you are planning for success in the future, then you are going to have to run your business legally. You will need an EIN to open a bank account, apply for a business license, and get a seller’s permit. Just search “EIN” in the Google search engine and the IRS website should be the first result. When applying for your EIN, you will need to know the legal structure of your business. For example, if your business is going to be a one man or woman show, then you are going to apply as a sole proprietor. If it turns out that you and your mom are going to run the business, then you may choose partnership or decide to incorporate.
Pick your fictitious business name, “Doing Business As,” and file it with your county clerk
One of the more exciting step in setting up your business will always be picking a name. My girlfriend and chose T.I.L. Darling because before we were officially a couple, she would tell me that in Thailand, her home country, that she and I could never go out alone as even friends. I told her, “This is London, Darling.” So, I guess our business name should technically be T.I.L., Darling, to be more grammatically correct. Once you have your fictitious business name, you need to make a pretty good attempt to make sure no one else is using that same name. Otherwise, years down the line when you are making money, you can expect a letter from a lawyer saying how they are going to sue the designer pants off of you.
If your county registrar/clerk has a website with downloadable forms, then search for the DBA filing form, fill it out, and bring it to the county clerk. Otherwise, you will just have to do everything in person. There, you will probably have your first business expense with the filing fee. Your second expense will be the requirement that you advertise your new business name in an approved newspaper or public publication so that if anyone has a problem with your DBA then they can step forward. The county clerk will be able to point you in the right direction for this step.
3. Open a business bank account
Again, planning for future success, you will want to open up a separate bank account for your business. This way, you can track and easily separate business expenses from your personal expenses, write checks or have transactions under your business name, and just generally feel like a real business.
4. Start designing and setting up your website
There are actually a few methods of going forward with your website. I will explore a few options starting from the most costly to the least costly. Even though I would have to question whether or not running an online business if for you, but if you have extremely limited experience with web design or are just not internet savvy, then you may need to do everything third-party. If you realize that you’re going to need someone to design your website, initially set-up your domain and site, then you will probably need to find some kind of subscription based shopping cart. For example, if you have money to spend, then search “boutiquecommerce” in the Google search engine. This company will do just about everything for you, from web design, domain registration, web hosting, to ongoing support. There are many third-party shopping carts fitting almost any budget. To be honest, I have no experience with any paid or subscription based shopping cart and so I will limit any opinion I have on them.
Another alternative is to buy a website template designed on top of an open-source (free) shopping-cart platform. Search “templatemonster” in the Google search engine. Filter your search to include E-Commerce templates and choose “fashion” as your category, though you can customize any template to your needs in reality.
On a side note, before you purchase your template, you should set-up your server. During your business plan research, you should have figured out what web host fits best for you, but now is the time to actually spend some money because you will not be able to test your template unless you have a server to upload it to. This also means that if you haven’t done so already, then you will have to finally register your domain name, which is something you should have also figured out in your business plan. Most web hosts will actually register your domain for free, but feel free to use a service, such as godaddy, and you’ll need to change the namerservers to point to your web host.
Once you have your template and web host, then you need to upload your template and start customizing it. You can either use a “template tuning” service or if you have enough html, php, and photoshop experience, then you can do it yourself. Unfortunately, this step can be pretty difficult even for somewhat internet savvy users because this is where you will need to learn a little bit about setting up a database, setting up a database user, and how to use an FTP program to upload your site. That’s why some may opt to use a third-party shopping cart, but this option is by far the most flexible and cheapest if you have the time and are willing to learn.
You will also need to figure out how you will accept payment on your website. If you want to accept credit cards, which you should, then you will need a payment gateway. The most popular would be PayPal Pro and Authorize.net. You will need to apply for an account.
Of course, there is the ultimate DYI approach, where you can not only design your own website, but also code your own shopping cart. If this is the case, then I highly doubt you need to read this section of my tutorial.
5. Make Business Cards
Yes, I actually made this an individual step because you will need a business card to register for trade shows, as well as deal with suppliers. Since you are also working on your website design, it is also more efficient to work on a business card design. Additionally, you need some lead time because printers will charge you extra to expedite printing and shipping. So, if you plan ahead, you can save quite a bit of money.
6. Apply for a business license in your city
Once again, if your city has website dedicated to business, then you should be able to download an application for a business license. In some cities, you can even apply for a home-based business license. Of course, only fill out a home-based business license if that is your case. Bring or even possibly mail your completed application and filing fee to the appropriate location. The reason I put this step after designing your website is because the business license fee is a yearly fee and so why pay when you are not even close to launching your website.
7. Apply for a Seller’s Permit
At this point, you should be fairly proficient at filing out forms. The last application you should have to file is for your seller’s permit, sometimes mistakenly called a resale license. The seller’s permit will allow you to buy from your wholesalers without paying sales tax, but it also requires you to pay the sales tax on any items sold, within your state, every quarter. Of course, in modern commerce, you are allowed to collect the sales tax from your customers.
8. Figure out how you are going to display your products
Before you actually source your products, I believe it is wise to first figure out how you are going to display your products on your website. Are you going to use a mannequin, model, or just lay it flat. Will you outsource your product photography or do it right in your bedroom, which is how we first started. If you are going to do it yourself, then you still need to make sure it fits your budget and business plan as far as purchasing equipment. If you are going to need equipment, then now is the time to either jump online or go out and start making a real investment in your business.
9. Plan your product mix and find suppliers
While you are figuring out how you will ultimate display your products, you will want to start researching where you will buy your products. If you haven’t done so, then you will want to start thinking more about your product mix. Of course, it needs to fit perfectly with your business plan, concept, and budget you already established in step 1. Fashion buying is another topic completely and I highly suggest you read up on it if you can.
After you have some kind of buying plan, it’s time to find suppliers. If you are lucky, then you will be able to catch the MAGIC Marketplace trade show in Las Vegas. They have vendors for vintage inspired clothing, juniors clothing, indie clothing, etc. It is essentially the largest fashion trade show in the USA and maybe the world. If you cannot find suppliers at MAGIC, then I would honestly be surprised. If you cannot wait for the bi-annual trade show, then you are most likely going to need to take a trip to the Los Angeles Fashion District. If you are looking for the glamorous world of designer labels, then you will be spending your time at “The Intersection.” At this intersection you will find the California Market Center, Cooper Design Space, Gerry Building, and The New Mart. Here you can find brands such as A.B.S. By Allen Schwartz, BCBG, and Betsey Johnson. If you are in this market, then be sure to bring copies of your business license, business card, and seller’s license. Also, as an online business, be prepared to be rejected by many showrooms. If you’re like me though, then it should only inspire you to be more successful so that when the time comes you can reject them.
If your price point is a lot lower, then you are going to really want to spend time around the San Pedro Mart area. You will probably find that 80-90% of these wholesalers are not right for your target market, but that only means that you should find 10%-20% that is right and will be able to focus on building those relationships into the future.
Of course, you can always turn to the internet, registering with sites like fashiongo and lashowroom. Additionally, you can contact individual brand sales reps and they should send you line sheets and look books. In fact, this is how most business will be later in the future, but I suggest you visit trade shows and marts to get your feet a little wet.
Since you should have planned earlier for product photography, this step should be self explanatory. You want to add the products to your website and get it ready for a more official launch.
11. Start your marketing campaign, Search Engine Optimization campaign, and PR campaign
Again, these campaigns should have already been planned in the first step. This step is pretty much a hundred different subjects on its own and so I will not really dive to deep into it. The most rudimentary start would be to submit your site to search engines, such as Google and Yahoo!, sign up for Google AdWords, and start a Facebook and Twitter account. There is probably a good chance that will have to depend on paid advertising to get decent traffic at the beginning, but I highly suggest you plan and budget appropriately.
It might take one day or a whole month, but you’re going to get your first order and at that point you can finally say you really set-up your online clothing store.
12. Keep learning as much as you can