The convenience that comes with online shopping has created a myriad of opportunities for entrepreneurs in the eCommerce industry.
How Profitable Is An Online Boutique Business?
With the apparel sector taking the lion’s share in eCommerce globally, it is no wonder why many entrepreneurs are setting up shop online to claim their stake in the market.
Fashion retail e-commerce revenue worldwide from 2019 to 2025, by region: Statista
The common question asked by many aspiring online boutique owners is: how much do online boutiques make?
This is a genuine question for any entrepreneur with clear business goals for getting into this type of business.
Online Boutique owners make an average of $6,013 per month according to ZipRecruiter.
This may look quite low but considering the fact that an online boutique is a non capital intensive business model, the figure represents a lucrative income margin.
Data published on RedPoints.com indicates that clothing boutiques make average profits between $23 751 and $140 935 depending on business model, company size, product types, location, expenses and target market. The same resource also indicates that an online boutique owner can make $51 000 per annum in profits.
What does it cost to Start an Online Boutique?
It is easy to create a typical online clothing store with minimal costs. Assuming you are going the drop shipping route, you basically have no inventory costs upfront to worry about. Going for an eCommerce platform as opposed to building your own stand alone online shopping website will cost about $25.50 per month with Shopify.
Registering and hosting a domain with Bluehost will only cost you about $9.50 per month. You can then raise a budget that you can afford for digital marketing and get started with your online boutique business.
If you are not going the drop shipping route, you will need to raise the budget for inventory. A study published by Lonca.com indicates that one can start an online boutique with $1000 – $2000 worth of take-off inventory.
Either way, the costs of starting an online boutique are a mere fraction of what you would pay to start a conventional physical brick and mortar boutique.
StepByStepBusiness.com demonstrates that the average costs for starting a conventional brick and mortar boutique is a whopping $84,375.
Calculating the Profit Margin of an Online Boutique
If you are keen on starting an online boutique it is crucial to master how to calculate the profit margin of an online boutique.
To calculate the profit margin you need two variables: costs (expenses) and revenue. Below is a formula for calculating profit margin:
Profit Margin = (Net Profit / Revenue) * 100
Let’s apply this formula on Fashion Frenzy, an imaginary online boutique.
1. Total Revenue: $100 000 in 2022
2. Expenses: $70 000 (expenses cover inventory procurements, marketing, shipping, online store maintenance, utilities, salaries, utilities, etc).
3. Net Profit:
With the two variables we can then move to calculate the Net Profit. To do so we need to less total expenses from total revenue as demonstrated below:
Net Profit = | Revenue – Expenses = $100,000 – $70,000 = $30,000 |
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4. Profit Margin
With the net profit figure we can proceed to calculate the profit margin as illustrated in the formula and working below:
Profit Margin = | (Net Profit / Revenue) * 100 = ($30,000 / $100,000) * 100 = 30% |
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Online Boutique Profit Margin Calculation
Remember that what a “good” profit margin is for an online boutique depends on a number of factors such as business model, operating expenses, target market and industry trends as well as norms.
The bottom line is to aim for a profit margin that will give you room to make a profit and invest in the growth of your business.
Understanding how to calculate profit margin puts you in a position to assess and plan the profitability of your online boutique business model. It also enables you to streamline your financial management and manage costs efficiently.
How to start an Online Boutique – A 10-Step Guide
If you are keen to start your own online boutique, you‘re in luck. Below is a compact 10 step guide on how to start your online boutique from a realistic footing.
1. Define your niche: Defining your niche is about scanning the existing market to determine what your specific focus (Niche) is going to be. In doing this you need to be clinical about what specific product types you want to focus on. make sure to answer questions such as:
- What is your target market?
- What are the demographics?
- Any specific gender you want to target or focus on?
- Where is your target market located?
- What would be the best pricing strategy for your market, etc.
2. Conduct market research: The purpose of conducting a market research is to map out gaps that exist in the current market. Look at the existing trends, explore the challenges and opportunities that you can plug to differentiate your online boutique.
To increase your prospects of success, you need a good grasp of the nuanced preferences of your target market.
3. Create a business plan: Many people ignore the step of creating a business plan because they think they have it all figured out. Creating a business plan is crucial for these reasons:
- Defining your brand identity
- Quantifying the viability (profitability) and feasibility (is it doable?) of your business idea
- Outline clear goals
- Projecting costs, revenue and profit
- Defining your pricing strategy
- Articulating your marketing strategy
- Securing funding
4. Source your inventory: The fourth step is to source inventory. To do this you need to build relationships with your prospective suppliers, manufacturers and designers. In order to source quality inventory, consider the following factors:
- Product Quality
- Pricing and affordability
- Shipping Lead times
- Quality of Customer Service
In assessing the quality of customer service of your prospective suppliers you need to explore sites like TrustPilot for ratings, reviews and testimonials of your potential suppliers.
5. Create your online store: While you can go the route of building your own stand alone ecommerce website, the best approach here is to leverage powerful ecommerce platforms like Shopify, BigCommerce and Squarespace that will offer you all the important features and functions off the shelf, at a fraction of the cost.
These platforms will enable you to create impressive online stores with searchable and browsable product catalogs plus a user friendly checkout experience. While creating your own stand alone ecommerce website may seem like a cheaper option upfront, this turns out to be more expensive and tricky to manage in the long run.
While ecommerce platforms like Shopify offer and the important features and functionalities off the shelf, with a stand alone ecommerce website you will need to hire developers to ensure you have a secure and high end online store integrated with a good number of online payment gateways.
On the other end,a plan of $25.50 per month with Shopify will give you access to all the features and functions you need plus over 100 payment gateway options.
When you also factor in the cost of maintaining a growing online store, it becomes cheaper and more elegant – from a business management point of view; to leave the technical aspects to the professionals (ecommerce platform),that specialize in that, pay a reasonable monthly fee for it and simply focus your energies on growing your online boutique.
6. Stock inventory and manage logistics: You do not have an online boutique if your online store is not integrated with a shipment and logistics service. Find a reputable shipping service provider.
When evaluating prospects, consider factors such as delivery lead times, explore ratings and reviews for customer service. Also streamline mechanisms for packaging and for handling returns.
7. Develop a marketing strategy: Putting together a solid omni-channel marketing strategy for your online store is the next important step to take. For your holistic marketing approach consider:
- Content marketing
- Search engine optimisation (SEO)
- Leveraging social media (social commerce and user generated content)
- Running cost per click (CPC) advertising campaigns
In addition to the above, also consider implementing mechanisms to build brand loyalty through maintaining efficient communication and incentivising repeat purchases.
8. Provide high quality customer service: Starting an online boutique is one thing, carrying it through until it is successful is another. What will give your business longevity and sustainability is a responsive, high quality customer service coupled with a transparent returns and exchanges policy.
Be intentional about creating positive shopping experiences for your customers. Also, be genuine about soliciting feedback and making use of it to improve your business. This will also help you to build trust and credibility.
9. Monitor and analyze performance: Robust ecommerce platforms like Shopify come with powerful sales and revenue traffic analytics. Make use of these to evaluate the performance of your online boutique. Key performance indicators to watch out for are:
- Sales volume and trends
- Website traffic
- Conversion rates
- Customer retention
Data on these metrics enables you to make informed, data driven decisions to take your business further. For example, you will be able to identify well performing product lines and therefore invest in these.
You can also identify poor performing lines and implement mechanisms to boost sales for these or to eliminate such products in the long run.
10. Evolve and adapt: The main objectives of continuous monitoring and evaluating the performance of your business is to evolve and adapt.
Revenue Streams for Online Boutiques
The online boutique business model has a potential of several revenue streams. The primary revenue source is direct sales through an online store.
This is sustained either by a solid standalone ecommerce website, or an ecommerce platform driven store with all key and crucial online store features that enable a seamless shopping and online payment capabilities.
Online boutiques can also earn income through collaborations and partnerships. Collaborations can be in the form of influencer collaborations and partnerships with other brands. You can also run sponsored content campaigns on your online boutique website as an additional revenue stream.
Affiliate Marketing is another revenue source for online boutiques. An online boutique can promote contextual affiliate products from different brands and retailers. For each sale made from these products the online boutique will earn a commission.
If your boutique has a huge clientele base you can consider opening up options of wholesale and bulk orders to your customers.
While wholesale prices will be lower than your typical retail prices, offering wholesale and bulk purchase options is a great way to bump up sales and ramp up your cash flows.
Diversifying revenue streams is a great way of growing the business and the revenue base.
Factors Influencing Online Boutique Revenue
There are various factors that influence the profitability of an online boutique:
These are:
- Product selection and pricing strategies
- Target audience and market demand
- Marketing and promotional efforts
- Customer retention and repeat purchases
Running a successful and thriving boutique demands that you pay particular attention to all these dimensions of your business to make sure you get maximum exposure for your brand, your products, and ultimately – it enables your business to rake in maximum profits.
Case Studies of Successful Online Boutiques
Overviews of two case studies presented below will yield insights on what it takes to run a successful online boutique. The case studies also help encourage an aspiring entrepreneur to know that running a successful business of this type is absolutely doable and that many have walked this journey successfully.
The case studies help to shed light on what is possible in the online apparels sector and what successful brands have done right to get to the top.
Overview of what we covered
Final Thoughts
I hope this guide has been helpful in not only answering the primary question of how much online boutiques earn, but also in demonstrating what goes into running a successful online boutiques and a realistic way to start one.
With dedication and consistence you can start your success story. Remember, a journey of a thousand miles begins with one step.
Now is the time to put all you have learnt from this guide into action.
Wishing you all the best in your entrepreneurial endeavor.
