There is no fixed estimated cost for opening a sneaker store. You can open a sneaker store for as low as $3,000, or as much as $120,000. This is because certain factors influence the cost of opening a sneaker store, and that is what we will discuss in this article.
Good enough, there are several brands when it comes to sneakers, and also there are different approaches anyone who is looking towards starting a sneaker store can utilize.
This indeed has made the barrier for starting a sneaker store low, and any serious-minded person can open his or her own sneaker store based on his or her financial capacity and business strategy.
What Market Segment is your Sneaker Store Targeting?
It is important you know that the percentage of your startup capital you allocate to inventory purchase will vary based on market segment and demography. There are 4 different market segment for sneakers:
1. Budget-friendly Sneakers that sell for $40 to $60 per pair
These are mainly basic sneakers worn for everyday use by low level staff in restaurants, bars, factories, grocery stores, clinics, etc. Amateur athletes also start out with these type of sneakers.
2. Mid-range Sneakers that sell for $70 to $150 per pair
This type of sneakers are usually suitable for casual wears and serve a wide range of use ranging from sports to entertainment activities such as parties and events. Brands that offer such sneakers include:
- Adidas
- Nike
- Puma
- Reebook
- Converse
- Hoka
3. High-end of Premium Model Sneakers that sell for $150 to $300 per pair
This type of sneakers are usually limited editions or collaborations. Some of these sneakers come equipped with advanced technological devices such as fitness trackers, GPS, and sensors; and they can be synced with the wearer’s smartphones to serve many purposes.
4. Luxury Sneakers that sell for $300 to $1000 per pair
Luxury sneakers are usually designer models bought and worn simply to make a statement, define your taste or keep as a collection. Sneakers that fall into this category are those of luxury brands such as:
- Balenciaga
- Gucci
- Christian Louboutin
- Prada
- Versace
For the purpose of this cost analysis, we are assuming you want to open a sneaker store that sells budget-friendly sneakers or mid-range sneakers.
Estimated Cost Breakdown for Opening a Sneaker Store
- Lease Security Deposit and Rent: $10,000 – $20,000
- Renovations and Store Setup: $15,000 – $30,000
- Inventory Purchase: $30,000 – $50,000
- Costs for cash registers, credit card processing equipment, computers, and software for inventory and sales management: $2,000 – $5,000
- Licenses, Permits, and Insurance: $1,000 – $3,000
- Marketing and Advertising: $2,000 – $5,000
- Costs for setting up utilities (electricity, water, internet, phone) and ongoing services: $500 – $1,000
- Operating Cash: $20,000 – $30,000
- Fees for legal and accounting services, business formation and contract review: $2,000 – $5,000
- Website and E-commerce Platform Development: $1,500 – $5,000
- Miscellaneous and Contingency: $5,000 – $10,000
Total Startup Cost for a Sneaker Store = $120,000 (Approx.)
3-Year Sales Forecast and Breakeven Analysis
With an initial monthly sales revenue of $20,000 in the first year, a projected 15% annual increase due to rising brand recognition and cost of goods sold estimated at 55% of sales revenue given the relatively high cost of sneakers and other products.
- Fixed Costs (rent, salaries, insurance, etc.): $6,000 per month.
- Variable Costs (marketing, utilities, etc.): 8% of monthly sales.
Year 1:
- Monthly Revenue: $20,000
- Annual Revenue: $20,000 × 12 months = $240,000
- COGS: 55% of $240,000 = $132,000
- Variable Costs: 8% of $240,000 = $19,200
- Fixed Costs: $6,000 × 12 months = $72,000
- Total Costs: $132,000 (COGS) + $19,200 (variable) + $72,000 (fixed) = $223,200
- Profit: $240,000 – $223,200 = $16,800
Year 2:
- Annual Revenue: $240,000 + 15% = $276,000
- COGS: 55% of $276,000 = $151,800
- Variable Costs: 8% of $276,000 = $22,080
- Fixed Costs: $72,000
- Total Costs: $151,800 (COGS) + $22,080 (variable) + $72,000 (fixed) = $245,880
- Profit: $276,000 – $245,880 = $30,120
Year 3:
- Annual Revenue: $276,000 + 15% = $317,400
- COGS: 55% of $317,400 = $174,570
- Variable Costs: 8% of $317,400 = $25,392
- Fixed Costs: $72,000
- Total Costs: $174,570 (COGS) + $25,392 (variable) + $72,000 (fixed) = $271,962
- Profit: $317,400 – $271,962 = $45,438
Break-Even Point
Contribution Margin per Dollar of Revenue = 1 – Variable Cost Ratio – COGS Ratio
: 1 – 0.08 – 0.55 = 0.37 (37%).
Fixed Cost: $72,000 per year.
Break-Even Revenue = Fixed Cost ÷ Contribution Margin
: = 72,000 ÷ 0.37≈194,595
Break-Even Revenue = $194,595
From the figures above, your sneaker store needs to generate about $194,595 in annual revenue to break even. Based on the forecast, the store will comfortably exceed the break-even point in its first year and maintain profitability in subsequent years.
Factors That Influence the Cost of Opening a Sneaker Store
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The Type of Sneaker Store
When we talk of the type of sneaker stores, we are talking of either a brick-and-mortar sneaker store, or strictly online sneaker store, or both.
The truth is that if you choose to open a brick-and-mortar sneaker store that also sells sneakers online (that is with an e-commerce sneaker store), you are going to spend more money than what it will cost you to open just a brick-and-mortar sneaker store without an online presence.
So also, if you choose to open a strictly online sneaker store, you will spend far less than what it will cost you to open a strictly brick-and-mortar sneaker store.
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The Size of the Sneaker Store
If you choose to start a small sneaker store business from a small shipping container, you are going to spend far less than someone who chooses to start his or her sneaker store from a standard store facility in a shopping complex or a commercial area.
For example, the average size of a retail store in the U.S. typically ranges from around 1,000 to 2,500 square feet, and trust me they don’t come cheap especially stores that are strategically located.
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The Location of the Sneaker Store
Some locations attract high rental costs, and there are far cheaper locations. Apart from the fact that locations determine how much rent you will spend to rent or lease a store, the location you choose to start your sneaker store will also determine how much you will spend in transporting your goods, the amount you will spend in running the business, and of course, the amount you will spend in recruiting and paying your employees.
This is why you should not only be attracted to a location based on how cheap the rent is but a holistic view of how much it will cost you to set up and also run the business.
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The cost of Acquiring the Required Licenses and Permits
Interestingly, for a sneaker store, you don’t need to spend more on licenses and permits before you can get the business up and running.
But at least, you should have a budget for licenses and permits such as a business license, sales tax permit, zoning permit, sign permit, and music license (if playing music in the store).
Although these licenses and permits might not cost you much to obtain, but they will add up to your overall cost of starting your sneaker store.
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The Cost of Renovating and Furnishing Your Sneaker Store
The only reason why you may budget a very minimal amount for renovation and furnishing your sneaker store is if you are renting an already renovated and furnished sneaker store.
Apart from that, you should have a budget that will cover fixing and painting the sneaker store to look presentable, and also putting basic furniture such as:
Display Shelves, Benches or Seating Areas, Tables or Counters, Mirrors, Shoe Racks or Displays, and Cash Register Counter et al.
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The Cost of Insurance
Insurance is one aspect of a business that you must not ignore if you intend to start a new business. This is so because with the right insurance if anything goes wrong before the business breaks even, the insurance company will take care of such expenditures. This is why you must not fail to have a budget for insurance if you want to start a new sneaker store business.
Interestingly, in the United States and some developed countries of the world, you cannot start a business without having the needed insurance policy coverage for such a business. The law is put in place not only to protect the owners of businesses but also the customers.
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Your Cost of Marketing, and Promoting Your Sneaker Store
If you are looking to start a sneaker store business, you should have a budget for marketing and promoting your sneaker store. Interestingly, there are different approaches you can follow if you want to market and promote your sneaker store.
You may choose to host an open house party to launch your sneaker store with good music, drinks, and food, or you may choose to engage in a road show to inform the community that there is a new sneaker store in town, you may choose to create hype online targeting people in and around your target market area, and of course, you may choose to adopt all these marketing and promotion strategies and more.
Trust me, whatever you settle for, it will cost you money, and that will influence how much it will cost you to open your sneaker store.
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Miscellaneous
Lastly, there are other areas where you are expected to spend money when opening a sneaker store. Such costs can be captured under miscellaneous.
If you are planning to open a sneaker store, you will spend money on acquiring a POS, and receipt issuing machine, purchasing and branding your shopping or packaging bags, setting up a billboard or flex banner, and even paying for utilities et al.
10 Ways a Sneaker Store Owner Can Cut Cost Without Negatively Affecting the Store
Cutting costs in a bid to increase profit, without negatively affecting your sneaker store, requires a careful balance. Here are several cost-saving measures you can try out today:
1. Optimize your Inventory
A good way begin the process of cutting cost is to use data analytics to understand which sneaker models and sizes sell the most and adjust the quantity you purchase or restock, in order to reduce excess inventory.
2. You Can Start Buying Sneakers in Bulk
After determining your best-selling sneakers, you should proceed to purchase them in bulk. Doing this will help you achieve 2 things:
- You will get better prices from suppliers when you buy your sneakers in bulk.
- You will get to save money on logistics because the cost of transporting 50 sneakers from the suppliers location to your store is almost the same for 100 sneakers.
So instead of spreading your cost of logistics on 50 pairs of sneaker, you get to spread it on 100 pairs of sneaker, thereby reducing your cost per pair of sneakers. However, you must be very cautious to avoid overstocking on a slow-selling brand of sneakers..
3. Renegotiate with your Supplier
You can negotiate better delivery terms, more credit facilities with longer repayment time and lower prices especially for high-volume orders of sneakers.
4. Consider alternative suppliers
If tip 3 above does not work, then it is time to look for alternative suppliers that offer competitive prices for the same quality of sneakers.
5. Reduce Utility Costs
You should hire an electrician to help implement energy-efficient lighting, heating, and cooling systems in your sneaker store to lower utility bills.
Another way you can reduce energy cost in your sneaker store is to go green. You can achieve this by using energy-efficient appliances and lighting system.
6. Leverage Social Media
It is far cheaper and more effective to use social media platforms for marketing your sneaker store instead of more costly traditional advertising channels such as television, radio and billboards. All you need to do is create engaging content to attract customers at a lower cost.
8. Use Email Marketing
It is cheaper to sell to a return customer than to go chasing a new potential customer. This is the sole reason you should build and utilize an email list for direct marketing, offering promotions and updates to encourage repeat business.
9. Improve your Operational Efficiencies and Streamline Operations
You can achieve this by using software to streamline inventory management, sales, scheduling, accounting, customer relationship management and other operational processes to reduce labor costs.
10. Reduce Waste by Going Paperless
You can save cost in your sneaker store by eliminating the use of paper receipts, invoices and the likes. All paper issuance can be replaced by pdf and sent via email or phone.