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How to Run a Clothing Business in Australia

Having a knack for fashion can be turned into a profitable business, but there’s a lot to keep in mind.

Running a clothing business is not as simple as buying a shop and moving in. As times change, online shopping has become the new normal, so there are a lot of variables to consider. This article is dedicated to business owners who want to run their clothing business successfully.

First things first - improvement

According to a report, 5.9 million households purchased online from fashion & apparel retailers in 2020. This is a glowing example of how the fashion industry is accelerating its shift from brick-and-mortar stores to e-commerce.

Businesses in Australia - especially those operating in clothing retail - should consider online shopping as a prerequisite for future success, especially if you currently only work in a store.

The report indicates a growth of 45.5% in online shopping each year, with the top online purchasing volume going to Victoria, Tasmania, and Queensland.

Not taking full advantage of this post-pandemic trend is something that can leave you behind. There are online platforms that can host your store effectively, like Etsy, Shopify, Instagram or Facebook Marketplace. You can read more about the importance of cross-channel innovation in our recent article.

Do your research

Conducting market research is invaluable for your business as it gives you a snapshot of your industry.

Overall, this research will give you a structured way of understanding the competition. For example, Business Victoria recommends the IBISWorld industry database as a useful resource to keep up with industry trends.

The database indicates that market growth for online men’s clothing sales is expected to increase by 32.1% this year. This is invaluable knowledge which can help you tap into new audiences.

Keeping up with equipment and inventory management

If you’re running a clothing retail business, in addition to all your sewing and designing tools, you’ll need other equipment specific to your niche.

For online boutiques, this can include mailers, postage and packaging, tags, and a system to keep track of your spending and sales. For those who have brick and mortar stores, you’re going to need space, and a point of sales (POS) system. There will be different systems for each unique business, from those that are inventory rich, to those that are keeping a close eye on their budget.

These systems can help you keep track of sales, and record and manage your inventory; something that will be crucial when you decide to value your business and eventually sell it.

Your premises. To lease or to buy?

If you’re running your clothing store online, you’ll need to make sure your app or website is efficient, accessible and your metrics are recorded. Likewise, your strategy for distribution should be effective.

If you’re considering a storefront, you’ll have to research a few variables. These include the location, the grade of the building, supply and demand issues and the population. If you want to operate in a CBD, like Sydney, be prepared to pay. CBD leasing has increased to 8.2%.

Average commercial rent in Australia can vary. For example, net face rent per square metre per annum in Sydney CBD is $1025, Melbourne CBD is $698 and Brisbane CBD is $670.

You’ll need to consider whether you want to buy a commercial property, or lease it. Both have their benefits and risks.

Setting Smart Goals

Motivating your growth through goals should be a consistent strategy you implement when running a clothing business. We suggest having long-term goals like becoming one of the most innovative boutiques, or setting specific short-term goals, like increasing profits by 5% in the next few months.

Marketing Your Business

Only 47% of Australian small businesses are on social media as of 2019. There is huge potential in digital marketing, enabling you to reach a local, national and international audience if executed correctly. While this is done through common social media channels, there are more nuanced and effective ways to accelerate your digital marketing.

For example, Australian entrepreneur Gemma Crowe launched Infamous Swim in 2018, focusing on a specific target audience of mothers looking for mature swimwear. Swimming is a popular activity in Australia, especially for children, so she adapted her brand strategy to include matching swimwear for mothers and children. She utilised Facebook and Instagram through competition incentives. Her business is now worth millions.

It’s obvious that fashion brands should utilise this age of digital marketing, especially with platforms such as Instagram integrating new shopping features as of 2021.

Financing Your Business

In Australia, the most used loan for businesses is a Small Business Loan. To do this, you will need a cash flow statement that outlines your current income, net profit, expenses, and future projections.

Another consideration that may be a footnote for most business owners is the reality of bushfires. New South Wales and Victoria are areas that are impacted significantly by this common disaster, and it has a huge economic impact, especially on small businesses.

Bushfires have covered over 10 million hectares of Australia, and a report from Commonwealth Australia states that businesses in these areas are considered high risk. This may result in higher insurance fees, and you may find it challenging to apply for finance or insurance coverage.

Employee considerations

When it comes to hiring new employees, the key is to know what you want and sell yourself as a great place to work.

The Australian Government states that all employees need to make minimum wage ($20.33 per hour) and adhere to the NES or the National Employment standards that must be afforded to all employees.

You may also need to withhold tax from payments (this helps payees meet tax liabilities), adhere to parental leave needs and allow for religious holidays.

Exit Strategy

Selling a business is a common decision amongst business owners, and it could be related to multiple reasons. Luckily, people will always need clothing, so clothing businesses will always be a common purchasing target, especially if you have innovative value propositions.

There are strategies you can research to do it effectively, and ensure you receive an accurate and fair price for your hard work. Apart from valuing it correctly, selecting suitable buyers and negotiating your sale, there are legal considerations you’ll need to remember. A post-sale strategy would also be wise.

Small business capital gains tax (CGT) concessions can allow you to reduce or defer some of the capital gain made from active assets. You can read more information on this on the government website.



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