How to Start a Clothing Business Online

If you have a love of design or an entrepreneurial streak, starting a clothing business online can be a fun and fulfilling source of extra income.

Opening a business online can be easier and cheaper than opening a brick-and-mortar store. There are also more and more customers shopping online all the time. This gives you a large marketplace of potential customers to target.

But online businesses also come with some legal issues that are a little different than physical stores. You will need to keep those in mind before opening your online clothing store.

We make business formation EASY. Learn about our DIY business formation services here.

Ten Steps To Opening Your Online Clothing Business

If you long to be your own boss in the clothing industry, opening an online clothing business might be for you. By starting an online business rather than a physical store, you may be able to avoid hiring employees and managing a retail space. These advantages can save you money and time, which are at a premium for a small business.

Creating a successful business can require you to do a little market research. The clothing industry is very competitive, so you may need to learn about rival fashion brands. This will help you understand if there is a market for the products you want to sell. It might also be a good idea to carve out a niche for yourself. You may see an opportunity others have missed, or you know that you could improve a product in an innovative way.

Before you open your online business, there are also some legal issues to think about. By considering these issues ahead of time, you can avoid time-consuming administrative hassles down the line.

The following steps can help you prepare for potential legal issues and simplify the process of opening your clothing business online.

1. Decide on Your Business Model

If you are most interested in design, creativity, and control of your product, you might want to pursue a custom cut and sew business model. However, this model can be more expensive and time consuming than others. Other options include dropshipping and print on demand. You might prefer these options if you would rather be hands-off in your startup business's manufacturing process.

2. Choose Your Clothing Designs and Materials

This is where you can let your creativity shine. If you choose to design your own clothing, make sure your designs and logos are original creations.

It is important not to use any copyrighted or trademarked images in your designs. Doing so could open you up to liability. Originality is also important to help you remain competitive with other clothing manufacturers. Another option is to sell vintage clothing if you have access to flea markets or estate sales.

3. Secure Your Business License

It might seem surprising, but even if you are working out of your home, you may still need to get a business license. You may also need to seek permission from your homeowner's association (HOA).

The requirements for licensing vary by state, and you can often apply for a license online. For more information about your local licensing requirements, visit the U.S. Small Business Administration.

4. Check Your Insurance and Regulatory Requirements

If you open your own manufacturing facility, there will be some unique legal issues to consider. You might need workers' compensation insurance, property insurance, and others. You could also be subject to OSHA regulations.

5. Decide on Your Business's Legal Structure

If you choose to incorporate or form a limited liability company, it can help to shield your personal assets from liability. There are also potential tax advantages.

6. Fund Your Business

Depending on your business model, you may need some startup funds. One option is a business loan. If a loan is difficult to secure, you could seek investors. Friends and family may also be interested in investing.

7. Write a Business Plan

A business plan can help you figure out your objectives, how to be profitable, what your vision is, and more. A good business plan also helps investors see why they should invest their money into your business.

8. Learn About Your Tax Obligations

Even though you sell your products online, you still need to collect sales taxes. The 2018 case of South Dakota v. Wayfair was pivotal on this issue. In it, the U.S. Supreme Court ruled that states can require out-of-state businesses to collect sales tax even if they have no physical business in the state. If you are not sure whether you do enough business in a state to require you to collect sales taxes, you should check with the tax office there. As a business owner, you will also need to pay federal income tax and other business taxes.

9. Create a Marketing Strategy

To help make your target market aware of your products, you will probably have to put in a little extra marketing effort. This might include social media marketing and even paid advertising. Word-of-mouth referrals can also be very effective. You could offer discounts to existing customers for their referrals.

If you choose to advertise, make sure your advertising is truthful and accurate. There are consumer protection statutes in every state. You could risk legal action if you inaccurately promote your products.

10. Think About Your E-Commerce Platform

Your e-commerce platform is another area where there are different options to suit your needs. One option is to sell directly to potential customers through your own website.

This option may be a good fit if you already have an existing customer base or have a large following on a social media platform. If you link your clothing website to your existing online presence, you could have a large market to draw from. If you choose this option, you must comply with certain standards to protect online credit card transactions from fraud.

It will also be important to make sure you have a seamless checkout process. This is a key aspect of customer satisfaction.

If you think you need some extra help with your e-commerce platform, you might consider an online store builder. There are several online store builders on the internet which cater to clothing sales.

Online store builders can help with marketing, inventory, payment processing, and more. But they may require you to sign a contract which allows them to charge fees or collect percentages of your sales. Depending on your needs and expertise, it might be worthwhile to get the extra help that an online store builder offers.

Which Business Model Is Right for You?

Business models in the online fashion industry range widely. The upfront costs and the amount of hands-on work vary among them.

Dropshipping

You might choose dropshipping if you are more interested in the entrepreneurial side of the clothing business. With dropshipping, you act as a retailer for a supplier's products. Customers order a product through your website, and then the order is sent to the supplier. The supplier then sends the product to the customer.

One benefit of dropshipping is that it is usually inexpensive. Another upside is that it does not require you to store inventory. However, the profit margins on this type of business are low. Most of the profit goes to the actual supplier of the clothing items.

Custom Cut and Sew

When many people think of a clothing business, they think of cutting and stitching their designs together themselves. This is what is known as "custom cut and sew. " This type of clothing maker designs and sells its own products.

Some custom cut and sew businesses team up with manufacturers. The manufacturer can take the seller's designs and produce them more efficiently on a mass scale. If you start a custom cut and sew business, you may need to lease a space to work out of.

Otherwise, you may need to reach out to a manufacturer who can implement your designs and reduce your production costs. If you go with a manufacturer, you should have a good contract with them. You may want the agreement to cover costs, quality expectations, timelines, intellectual property, and more. It may also be a good idea to get the manufacturer to sign a nondisclosure agreement.

Print-on-Demand

As the name states, print-on-demand manufacturers print your designs onto clothing for a fee. They then ship the product to the consumer for you. This is a good way of entering into the apparel market if you have an original logo or funny slogan you would like to print on clothing. This can also be a good option if you own another business and would like to print your business's logo onto blank apparel.

Another benefit to this business model is that there is a low cost of entry. Like with dropshipping, you will not need to carry your own inventory.

If you go with a print-on-demand business model, you should make sure that your images, logos, or slogans are original. If they are not yours and are subject to copyright protection, you could face legal problems.

Making It Legal

It can be exciting and fulfilling to open your own clothing business online. But you should also be careful to follow licensing and regulatory guidelines. Consider using our trusted, simple-to-use online business formation tool. We'll walk you through the steps of creating your business and help you meet all the legal requirements.

If you have questions about licensing, taxes, business structures, or other legal issues, you should contact a local business attorney today.