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9 (Helpful) How Much Does It Cost To Open A Retail Store

How many does it cost to open a retail store? Well, the actual costs vary from one type of retail store to another. Some retail stores cost more than others.

Cost factors at play include the size of the store location, and the product offered. Estimates may start from a three-digit to a six-digit figure. Some startups often have a seven-digit figure as startup costs.

Most costs incurred are similar, regardless of the retail store, but some are specific to a retail store.

9 Aspects to Consider Before Opening a Retail Store Today

Retail Store

Initial inventory Costs

The most significant asset of a retail store is its inventory. You can estimate the cost of inventory by sending proposals or talking to your prospective suppliers. Strike a bargain with them.

Usually, suppliers can give you wholesale prices or distributor price. The exact cost depends on the product you will sell.

To estimate the cost of each item, take research on a supplier site that offers wholesale buying. Often, these suppliers require a minimum quantity. Higher quantity means a lower price of buying the items.

Retail mark-up may range from 50% to as high as 300%. Low-volume products often have higher inventory costs than high-volume products. Low-volume products are gadgets. High-volume products may include clothes, art supplies.

You must consider transportation, expense, and the location of your supplier, too. Import dues may also be part of your inventory cost if you’re buying your items overseas.

Finally, stock up to a four-month worth of inventory.

Property and Equipment

Business properties include furniture and fixtures, POS Systems, computers, display cases, equipment, building, workstation, among others.

Interior design is also an essential addition to your retail store. It establishes your brand. Next to inventory, this cost will be the bulk of your spending.

Make sure your first day of operations is as smooth as possible. Thus, a complete retail store will have the necessary and equipment to run the business.

For example, you’re starting a clothing retail store. What do you need?

  • Hangers, display racks, mannequins
  • Cashier counter, barcode scanner, POS terminal
  • Dressing room, mirrors, and some chairs
  • Stock room, storage racks, packaging materials, and boxes

The costs for these items may range from a few to a thousand dollars.

Marketing Costs

Advertising, signage, and announcements are part of your marketing costs. You want many people to know that you’re opening a retail store on a particular date. However, marketing costs should only be 3% to 5% of your total capital investment. If your conservative, a 1% allocation is enough.

Besides, there are other ways to advertise without depleting your capital investment. One word-of-mouth is the cheapest and the most effective way of advertising. It’ll cost you zero dollars to tell your friends, relatives, and colleagues about your opening date.

Two, use social media to spread the word. Ask your relatives and friend to spread the news.

Security Costs

Business security should also be one of your priorities from day 1. One way to secure your business is the installation of security cameras within your retail store. A simple surveillance system is enough for the first year of doing business.

If you have an additional budget, you can upgrade and add more business security cameras to ensure security in your store. A four-camera system costs around $1000. The quality of the camera is high definition. Other security costs you might want to include are alarm systems, locks, and merchandise security systems.

Administrative Costs

These costs include services you will avail off to start the business. These services are professional services of a lawyer or an accountant and janitorial services. You will need the lawyer to set up the formation of the business and help you with legalities.

You will need an accountant who will set up your books and discuss the essential internal controls. This accountant may file your tax return, or compute your payroll.

The compensation of your employees will be the most significant chunk of your administrative costs.

stock cost

Expenses to Start Operation

Most probably, you’ll rent the building where you will start your retail store. The ideal capital is at least two years. You must prepare a deposit and pay advanced rent for a few months.

Other costs to start operation are a license to operate and permit fees. Your business will need a tax identification number for tax.

Borrowing Costs

In starting up a business, you either save up or borrow money for capital. In most cases, borrowing money is your alternative way of completing the capital you need. This happens when your savings aren’t enough to cover some startup costs.

When you plan on borrowing for capital, make sure it’s less than 50% of your total capital. Otherwise, borrowing costs will eat up your profit. You’ll have a hard time to break-even.

Insurance Premiums

Protect your startup business against losses with insurance coverage. The best policies to avail are worker’s compensation and property insurance. You may also consider getting insurance against employee theft.

Since it’s a startup business, internal controls and procedures will still be at infancy, and insurance coverage will help you minimize the impact of employee theft on your budding business.

IT Costs

Web hosting and website is the least priority if you’re setting up a brick and mortar retail store. However, if you’re opening an online retail store. This cost will be your priority.

Key Takeaways

So, how many does it cost to open a retail store? It depends on the detail you’re starting. Most likely, the costs will include rent, equipment, and building renovations.

Marketing costs are also necessary but shouldn’t be the bulk of your spending. For startups, you can use the most affordable advertising there is the word-of-mouth strategy. This is effective.

Insurance premiums and security measures are your third priority because these costs will minimize losses you will encounter during the first year of operation.

One final tip: always start a business plan so you can identify pitfalls, strengths and weaknesses, and opportunities. When you estimate, the best route is to over-estimate your expenses.

Wayne Delvalle
Hi, my name is Wayne A. Delvalle, and from all of us at Admit One Security — welcome!About ten years ago, I was running a retail store here in Philadelphia and had spent almost every waking hour worrying about it. I was terrified that it would get robbed, that someone would steal my merchandise, or worse.To help my peace of mind, I decided to install some security cameras all around the store. At first, I had no idea what I was doing or how to buy a system that was right for me.So I spent months researching and finally found some excellent products and installed them myself.After that, I realized that I had a huge passion for camera systems and wanted to share it with others.Now, I spend all of my time researching, testing, and writing about security cameras.
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