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What Is the Cost of Starting a Retail Store?

Opening a retail store or boutique is no easy task. It is not easy, and t requires an upfront investment. To avoid sticker shock, you should understand the cost of starting a retail store.


cost of starting a retail store


Rent and utility costs

The cost of commercial space varies by location. In 2020, the average rent per square foot in New York City’s major retail areas was $688, translating to about 57 thousand dollars a month for 1,000 sq ft.

When you’re trying to test the viability of a new location, it’s best not to take on long-term lease commitments. Instead, try opening a pop-up shop in a temporary space where you can see if there is enough foot traffic before committing.

You will have to pay for utilities, which is more expensive in the U.S., costing $1.47 per square foot on average. You also have to pay for phone expenses, internet bills, water and sewer charges.


Getting licensing, permits, and insurance

Entity formation costs

Before opening your retail store, you’ll need to decide on the type of legal entity that will best suit your needs. The form of business is crucial because it affects both taxes and insurance.

Here are the types of entities to choose from:

United States

  • Limited Liability Company (LLC)
  • Limited Liability Partnership
  • S-Corporation 
  • C-Corporation
  • Partnership
  • Sole Proprietorship


  • Sole Proprietorship
  • Partnership
  • Corporation
  • Cooperative

The decision of which business entity to form is not an easy one. Fortunately, you can consult with a lawyer who will help guide your decisions and file the appropriate paperwork for you.


Licensing and permitting fees

To be sure you comply with the law, you may need to get proper licensing for your store. You’ll need the following:

  • For tax purposes, an Employer Identification Number or EIN (U.S.) or a Business number (Canada)
  • state or provincial and local licenses
  • Resale Certificate (if you won’t be selling exclusively independent products)
  • Seller’s Permit
  • Certificate of Occupancy for your retail space

The exact retail business licenses you need can vary based on your state or province. To find out the specific requirements, browse your state or provincial government’s website.

Legal fees

When you’re starting a business, it might be best to invest in the services of professionals such as lawyers and accountants. Click To Tweet

Attorneys can charge anywhere from $150 an hour to $325 per hour. Meanwhile, the typical hourly rate of a small business accountant is $40 per hour.

Insurance costs

Insurance is a necessity for any business, and there are many types that you may want to consider. Some insurance policies will be required by lenders or the government to obtain financing, while others help ensure continuity of operations.

  • Property insurance is a type of coverage that helps protect your assets if lost or damaged.
  • Liability insurance protects you from claims arising from mishaps on your premises.
  • Business Interruption Insurance is there to cover any unforeseen circumstances that might lead to a temporary closure. It can include natural disasters, like hurricanes or earthquakes.
  • Health Insurance is a way to offset the cost of medical bills, both for yourself and your employees.
  • Key Person Insurance is a policy that covers the cost of an owner’s or manager’s disability or death.
  • In many states, workers’ compensation insurance is needed. It protects workers who get sick or injured while performing their job.

The cost of a package policy for small businesses is usually around $600 – $1200 per year, but the price can vary depending on where you live. In addition to that, workers’ compensation insurance will run about an additional $1,070 per year.

Professional fees

The local Chamber of Commerce can be a great way to meet other small business owners, find networking opportunities, and get your company in the spotlight. Joining a Chamber of Commerce requires an annual fee of $300-$400 per year.


Hiring and managing staff

cost of starting a retail store

Running a retail store is more than one person can handle. You will need to find the right staff for your specific needs, but here are some of the most common positions and their average salaries:

Retail sales associate: $11.25 per hour (US), $14.19 (Canada)

Assistant store manager: $13.48 per hour. (U.S.), $16.93 per hour (Canada)

Manager: $26 to $35 per hour

When hiring sales associates, be realistic about how you plan to operate. You’ll need more than one associate if multiple registers are, open during a shift and make sure that all of your bases (positions) will be covered for the busiest hours.

Once you’ve hired your first employee, it’s a good idea to keep track of how they do on the job with management tools. You’ll be able to see when employees clock in and out as well as their sales performance. With automated data, you can determine the best workers for high-demand times.

Initial inventory costs

Part of starting a retail store is the initial inventory cost. The initial inventory is one of the most necessary expenses, although it’s not always easy to estimate what you will need.

It’s worthwhile to consider the following questions:

  • Which products are you going to stock?
  • How many items of each product will you need?
  • What is the manufacturer’s suggested retail price (MSRP) of each product?

When you’re looking for wholesalers and manufacturers, some may not be completely transparent about pricing until after a contract is signed. You can estimate the prices of items by considering your desired markup percentage to back out what wholesale rates will likely look like from distributors. 

cost of starting a retail store

For example, if sweaters usually retail for $20, you can deduce that with a 25% margin, you will be able to buy them from a manufacturer for $15.


Marketing costs

Marketing, promotion, and P.R. are three areas you should be prepared to spend money on when starting your business. You can expect these costs to change as the company grows.

Social media management

Social media is a great way to bring in new customers and increase your bottom line. You can post organic or “free” content, but if you don’t have the time, then consider outsourcing these tasks to a social media manager who will charge an average of $21 per hour (U.S.) and $27 per hour (Canada). You may also have to allocate a budget for paid ad campaigns.

In addition, to take advantage of Instagram’s built-in shopping features, we suggest looking for a retail POS system that can import product catalogs onto the platform.

Branding and logo design

It is essential to have a strong brand for any retail business, and there are many ways that this can be accomplished. For example, using professional logos and social media presence will strengthen your company’s awareness among customers who may not know about it.

A good logo design can cost anywhere from $300 to $1,000. Additional branding services such as positioning and messaging typically range between $1000 to $5000.


Once you have a well-designed logo, it’s time to find the perfect signage for your property.

The cost of a retail sign can vary depending on the size and material. It is also essential to remember that your store’s location might affect exterior signage, such as when all stores have identical signs for uniformity.

In-store experience

Beyond just paying for a logo and signage, you should also consider the cost of personalizing your company. Some of the things to consider are:

  • Will you require employees to wear uniforms?
  • Will you offer in-store amenities and complimentary goodies? Do you need to hire a consultant to train staff?

Business cards and flyers

I would recommend starting with business cards and flyers. They are a vital way to network locally, which will help you spread the word about your new retail store and get customers in the door.


Retail POS system

Another cost of starting a retail store is the POS system. As the retail industry evolves, a cloud-based POS is essential for success. Cloud computing provides retailers with advanced reporting and inventory management tools that will help them grow sales and manage their business more efficiently.

In today’s retail environment, a website is not enough. There are dozens of eCommerce platforms out there, and some may be designed specifically for retailers to use with their inventory system. Choosing an eCommerce platform that integrates with your POS system will sync online transactions in the store, making local deliveries easy.

cost of starting a retail store

Lastly, you will need a payment processor to make credit card payments. Payment processors typically charge an interchange fee for each transaction, but it’s worth signing up with them if the rate is lower than 2%.


Interior decor and equipment

If you want to rent a space for your business, it is unlikely that the property’s current condition will be satisfactory. You might have to paint walls and install shelving units to get an appealing look.

If you want to know how much paint you will need, consider the size of your store. A gallon can cover up to 800 square feet, and a good quality interior paint usually costs $30 to $45.

Depending on the size and material, retail shelving can range from $300 to $3,000.

Google Shopping showed that the price of cash wraps ranged from about $200 to over $5,000.

General contractors can be a good investment if you have larger projects that need to get done. The average cost of hiring one is $50 an hour, but this rate may vary depending on where you live.

Cleaning supplies and screen guards are expensive.

One of the best ways to keep your store clean and protect employees from getting sick is by surfactant wipes, gloves, masks, and screen guards. All this helps stop viruses like colds.


Financing costs

Financing for startup retailers can be challenging, especially when you don’t have much credit history. WhRegardingnterest rates and repayment schedules, some loans are better than others; do your research and speak with local lenders about the financing.

Alli Schultz, a vlogger and boutique owner, says that the average cost of starting a retail store (brick-and-mortar) is around $48,000. This doesn’t include the additional costs like your first month’s deposit or insurance.

Alli, a successful business owner with two brick-and-mortar storefronts of her own to show for it, says t that new entrepreneurs should not let the fact that they only have one location discourage them.

Anyone can start a business from the ground up, and anyone who has started their own company knows that it is possible to do so with limited funds. Schultz says she was able to open her first boutique in three years because of hard work and dedication.


Final Thoughts on the Cost of Starting a Retail Store

The retail industry is enormous, and with proper planning,g you can find success no matter what you’re selling or where your store will be located. Click To Tweet

When you start a small business, knowing the costs is essential. The average price of a  pricing store may not apply to everyone because of different factors like location and industry type. However, by researching beforehand what these costs will be for you specifically – which takes time and effort- there is less risk in starting up.