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How To Start A Hat Store

How To Start A Hat Store

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How To Start A Hat Store

How To Start A Hat Store

Here’s to one of our favorite accessories – the hat!

What hat we wear is a practical decision – what it looks like is a very individual one. Whether it’s a baseball cap, a fedora, a beanie, a beret, or a cowboy hat, each one tells us a little about the person wearing it and the occasion.  

So if you decide to start your own hat store, one of the major decisions will be what kind of hats and caps you want to include in your range and what market segment you want to target.

Here, we will take you through the main points and considerations when starting your own hat business.

Business Description

In an industry that blends fashion, tradition, and personal expression, a hat store provides something unique for everyone. Whether catering to the local community with cultural favorites or embracing the world’s diverse tastes through an online platform, a hat store is more than a business; it’s a hub of style and identity. From sourcing quality materials to understanding customer needs, running a hat store requires a balance of artistic flair and practical business sense.  

This kind of operation lends itself to starting small, online. It is a business you can easily run from home until you have found your feet as a new business owner.  

Industry Summary

According to IBISWorld, the hat and cap store industry is a $1.6 billion industry that employs 14,510 people. With an expected increase in disposable income and a growing number of young adults entering the workforce, this industry is forecasted to expand its market size and profits by 2026. In the US, the demand for sports merchandise such as caps is one sector that is expected to increase substantially.

Its regulatory requirements are considered light. New entrants into this industry will generally encounter low entry barriers and a medium competition level.

In 2021, men’s hats and caps were by far the largest market segment, commanding 55% of the hat market, followed by woman’s and children’s hats and caps. 

The largest company, Fanzzlids Holdings, holds close to a quarter of the entire industry market share and most stores are owned by individuals.

Staying on top of trends helps your hat store remain relevant. Here’s what’s happening in the industry now:

  1. Sustainability: Eco-friendly materials and responsible manufacturing are getting attention.
  2. Customization: Offering personalized options can set your store apart.
  3. Online shopping: Traditional brick-and-mortar retailers have, in the past, suffered from strong online shopping competition. If you are considering entering the market now, offering a convenient online shopping experience should be seen as an opportunity rather than a threat. New tools like virtual fitting tools are enhancing the customer experience.

Target Market

You have several options here, and we strongly recommend you do a thorough market analysis to find gaps in supply, identify trends in demand, and find your niche.

You may want to target a specific age group, or you may simply divide your market into men’s, women’s, or children’s headwear. You may decide to offer high-end fashion or hand-made hats or go for casual caps and hats that will appeal to the streetwear and urban clothing market. You might target a specific group, such as gardeners, surfers, farmers or riders, people living in cold climates, or tourists and travelers. 

Or, you may decide to branch out into wedding hats, fascinators, fedoras, or ‘Great Gatsby’ wear.

By understanding your target, a hat store can tailor its inventory, marketing, and overall approach to meet the needs and desires of its potential customers. The target market isn’t just one group; it’s a mix of different people bound by a common interest in hats. Whether for function, fashion, or personal preference, there’s likely a hat for every head, and understanding this diverse target market is key to a successful hat store.

Checklist To Start A Hat Store

From choosing the right location to stocking your shelves with the latest styles, there is a lot to do before starting a hat store. So, before you take the plunge into opening your own hat store, be sure to read through this checklist!

Step 1: Research the Market

The essence of business, especially in a specialized field like a hat store, lies in knowing what your potential customers want. Making big decisions based on intuition can be risky, and investing time and money without proper research might lead to disappointments.

Before committing to a business idea, it’s pivotal to validate whether there’s genuine interest in what you plan to offer. While not a guarantee, the research process helps you minimize financial risks, identify gaps in the market that your store could fill, and customize your business strategy to what customers are really seeking.

Here are some accessible, cost-effective ways to investigate the potential demand for a hat store:

Online and offline surveys: Create short questionnaires asking about people’s preferences, needs, and current options for buying hats. Utilize free online survey tools or face-to-face interviews in places where potential customers gather.

Competitor analysis: Visit other hat stores or check their online platforms. Identify what they’re offering and see if there’s an unmet need. Take note of customer feedback on their products.

Social media and online trends: Use platforms like Instagram and Facebook to see what styles are popular. Google Trends can give you insights into what people are searching for in your area.

Temporary market testing: Experiment with a small-scale version of your store. You could rent a booth at a local market or start with an online store. This immediate feedback can be invaluable.

It’s not just about asking if there are enough customers; it’s about understanding who they are, what they want, and how you can serve them best. By taking these cost-effective research steps, you’re not just preparing to open a store; you’re preparing to open a store that has a waiting audience, ready to explore what you have to offer.

Step 2: Write a Business Plan

Writing a business plan for your hat store is like laying down the blueprint of a building; it gives structure and direction to your dreams and ideas. It’s more than a formal document that is taken to a bank or investor; it’s a guide for each stage of starting and managing your hat store and helps you stay focused on your goals and the strategies to achieve them.

While all of the sections of a business plan are necessary, there are a few sections to focus on:

Seasonality: If your hat store is impacted by seasonal trends, your business plan should reflect this. For example, summer might see a surge in sun hats, while winter may focus on warm and stylish options. Your sales projections should account for these fluctuations.

Marketing and customer engagement: Hats are often about expressing individuality. Your plan should include a robust marketing section detailing how you’ll reach your target audience and how you’ll encourage them to express themselves through your products.

Financial projections: Financial projections play a pivotal role in shaping the business plan for your hat store. They provide a forecast of your sales, expenses, and profits, which is what lenders and investors are most interested in, but they also help in assessing the feasibility of your business idea.

Related: How to write a business plan

Step 3: Secure Funding

Starting a hat store brings excitement, creativity, and of course, the need for funding. While the idea and the plan might be ready, arranging the financial resources is a step that can stop a lot of plans from moving forward.

Let’s dive into the details of what to expect when seeking funding and the types most common for a hat store.

Personal savings: Personal savings is often the first source of funding because there are no loan payments to budget for. This freedom can be a tremendous advantage in the early stages of a business.

Depending on the location and scale, the cost to start a hat store might be on the lower side, and many entrepreneurs could start using their own cash without seeking outside funding. However, If the cost to start your hat store exceeds what can be covered with personal savings, outside funding will likely be needed.

Business loans: Bank funding is a common way many businesses raise the funding to start their business. Lenders often require a borrower to invest at least 15% of their personal funds, have a credit score of above 650, and provide sufficient collateral. If a traditional bank loan is too risky for the lender to fund in-house, they might choose to use a Small Business Administration (SBA) loan guarantee to reduce their risk.

Microloans: If the funds needed are low or if credit isn’t available through a lender, a microloan could be a suitable option. Microloans are smaller, often easier to qualify for, and can be perfect for a small-scale hat store or for covering specific costs like inventory or initial marketing. These funds are often provided by local economic development agencies to provide funding to start and grow businesses.

Angel investors: Local individuals with higher net worth and an interest in your type of business may be an option for funding. Investment from angels can be hard to secure as most are looking for high growth and scalable businesses, and a hat store might not fit that profile.

Related: Finding the money to start a business

Step 4: Register the Business

Starting a hat store isn’t just about creativity and business savvy; it’s also about ensuring that the business is set up legally and structured to suit your specific needs. Every state is different, but here are some things to look out for to properly register the business:

Choose a business structure: The first thing you’ll need to decide is what business structure is best for your business. This could be a sole proprietorship, a partnership, a Limited Liability Company (LLC), or a corporation. Each of these structures has different implications for liability, taxes, and administrative complexity. Many hat store owners either opt for a sole proprietorship because of the cost and simplicity of formation, or the LLC because it provides personal liability protection.

Like choosing the right fabric and style for a hat, the right legal structure will be different for each person.

Related: Comparison of business structures

Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.

During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.

Related: Finding a domain name for your business

Obtain business licenses and permits: Depending on your location, there will likely be a variety of general licenses or permits needed before opening. This could include a business license, seller’s permit, and Employer Identification Number (EIN).

Related: State guides for general business licensing

Step 5: Choose a Location

Securing a location for your hat store, whether a physical storefront or an online store is an important step once the business registration and funding are out of the way. Whether setting up a physical store, going online, or combining both, the choices you make should align with your business goals and the preferences of your target audience.

Let’s explore the essential steps to prepare both a physical store and an online business:

Physical Storefront

Choosing the right location: Identify your target market and find a location that caters to their preferences. Visiting other similar businesses may provide insights into what works and what doesn’t. A busy pedestrian area or a shopping district with popular clothing stores would likely attract more foot traffic, leading to increased sales.

Whether it’s a trendy urban area or a quaint shopping district, the location should resonate with the hats you’re selling, so it may be helpful to consider the demographics of the area, as certain types of hats might appeal more to certain groups.

Reviewing lease agreements: Consider the lease terms carefully. Is there room for negotiation? Are there restrictions that might affect your hat store? A legal review might be helpful here to ensure that the contract aligns with your business plan.

Design the space: The store layout should allow customers to browse and try on different hats easily. Well-placed mirrors and good lighting can enhance the customer experience. Also, think about the equipment you’ll need. Display racks, shelves, and mannequin heads might be necessary to present the hats attractively. Investing in quality display equipment can give your store a professional look and help protect the merchandise.

Creating the right ambiance: The ambiance of a hat store should be inviting and reflect the personality of your brand. Whether it’s sophisticated and elegant or quirky and vibrant, the interior should be consistent with the image you want to project.

Comply with regulations: Make sure your location complies with all local zoning laws, signage permits, building codes, and accessibility requirements. This might require renovations or upgrades, and it’s vital to budget for these in both time and money.

Related: Choosing a business location

Online Store

Selecting a platform: Choose an e-commerce platform that suits your needs. Many platforms like Shopify are user-friendly and have a secure checkout process.

Design and user experience: Create an appealing online store that reflects your brand. High-quality images and detailed descriptions are essential. The site should also be easy to navigate and if possible, include a virtual try-on feature so customers can visualize what the hat looks like on them.

Payment and shipping: Set up secure payment gateways and reliable shipping options to ensure a smooth customer experience.

Step 6: Find Suppliers

Finding suppliers for your hat store business is an essential step, one that typically requires your business to be registered, and a location (either physical or online) to be established. Most suppliers won’t provide pricing or even set up accounts until these fundamental pieces are in place.

Finding suppliers for a hat store isn’t just about choosing products to stock. It’s about forming partnerships that will help your business thrive. Whether it’s unique handcrafted pieces from local artisans or fashionable finds from global suppliers, selecting the right partners requires careful consideration, negotiation, and relationship-building. By understanding the specific dynamics of the hat industry, you’ll be well-equipped to make decisions that complement your business’s character and appeal to your target market.

A few thoughts on sourcing suppliers:

Identify your needs: Determine the type of hats and related accessories you want to sell. Are you focusing on designer brands, handmade artisan hats, or a mix of various styles? This will guide your search for suppliers.

Research potential suppliers: Look for suppliers who specialize in the hat industry. Trade shows, industry publications, and online directories can be great resources. You can find suppliers offering a range of products, from high-end designer pieces to more affordable fashion hats.

Evaluate suppliers: Check their reputation, terms, and conditions, minimum order requirements, and shipping policies. In the hat industry, flexibility might be vital if you want to offer a diverse range.

Establish relationships: Once you’ve found suppliers that align with your vision, reach out to them. Explain your business and your goals. Building a relationship with suppliers in the hat industry often leads to better pricing, terms, and support, not to mention help in stocking the right items.

Consider local artisans: If your hat store will feature unique or handcrafted items, consider partnering with local artisans. This could give your store a unique flair and support local talent.

Test samples: Before committing to large orders, it’s a good idea to order samples. This ensures that the quality aligns with your store’s standards.

Step 7: Create a Marketing Plan

When it comes to the marketing of a hat store, the sky’s the limit for creativity. First and foremost, consider what sets your store apart from other hat retailers. Is it your specialized collection of vintage hats? Your custom embroidery options? Whatever it may be, make sure to highlight this unique aspect in all marketing materials.

Whether incorporated with a retail store or by itself, operating an online store is a great way to expand your reach. Creating a strong social media presence through platforms like Instagram and Facebook allows you to showcase your unique hats, highlight special offers, and engage with customers. Additionally, running targeted online advertisements can help attract potential buyers searching for specific hat styles or brands. Also, claiming your Google Business Profile and other online business directories is essential to enhance visibility online. These free resources help customers find your store on search engines and maps, reinforcing your online presence.

And don’t forget about the power of word-of-mouth advertising – incentivize customers to leave reviews and spread the word about your store.

Depending on your audience, you can collaborate with local fashion boutiques or influencers to showcase your hat selection on their platforms. Also, participating in local community events, trade shows, and fashion expos can provide face-to-face interaction with potential customers.

By considering different marketing strategies, both online and offline, you can effectively market your hat store and attract new customers.

Related: Low-cost ideas to market a new business

Step 8: Hire Employees

Some hat stores are solely operated by the owner, while others will hire employees. If hiring employees is a part of your business plan, you don’t only need to make sure to hire individuals who are outgoing and enthusiastic, but there are some legal requirements for a new employer to be aware of.

A few of these include registering for an Employer Identification Number (EIN), state registration, complying with federal and state labor laws, and more.

Related: State guides for hiring your first employee

Step 9: Prepare to Open!

Starting a hat store involves many details and preparations to get everything just right. While we have gone over the most common steps, the needs for everyone will be different. Before opening, there are likely some remaining tasks to check off. A few of these may include:

Business insurance: With the exception of worker’s compensation insurance, if you have employees, insurance is typically optional. Even so, protecting your investment with the right insurance is a good idea. Depending on your situation, you may want to consider liability insurance and property insurance. Insurance is usually recommended even if operating as an online, home-based business, as most homeowners’ or renters’ insurance won’t cover business assets.

We recommend getting at least three insurance quotes, including local insurance agents and online providers like Coverwallet or Hiscox to get the best coverage and price.

Bookkeeping: Setting up a solid bookkeeping system is key. Whether you hire a professional accountant or use software like Wave Accounting (FREE) or Quickbooks, managing your finances properly will keep you on track.

Banking: Opening a separate bank account for your business will help you keep your personal and business finances separate and organized.

Credit card processing: Being able to accept credit cards is almost a given for most businesses. Setting up a system with a provider like Square or Stripe is typically straightforward.

Grand opening preparation: Planning a successful grand opening event can create a buzz and attract initial customers. From decorations to promotions, this is your chance to make a strong first impression.

This material is property of StartingYourBusiness.com

Greg’s Tip: When starting a hat store, one of the most common mistakes is overinvesting in the wrong inventory that may not resonate with your target customers.

Rather than investing heavily in a wide range of inventory from the get-go, consider starting with a more limited selection. Test different styles and price points to see what resonates with your customers.

Greg's Business Tip

Common Questions When Starting A Hat Store

How much does it cost to start a hat store?

Starting a hat store can be rewarding, but understanding the initial costs involved is crucial for planning and success.

The total costs to start a hat store can vary widely, ranging from $2,000 for a small online boutique to upwards of $100,000 for a well-located physical storefront with a wide selection of inventory. Here’s a breakdown of the key expenses to consider:

Business registration and legal fees: Expect to pay between $100 to $800 for registering your business, including fees for entity formation.

Lease or rental costs (If applicable): Physical store locations can cost anywhere from $1,000 to $5,000 per month, depending on the location and size of the space.

Inventory: Initial inventory costs can range from $2,000 to $20,000, depending on the variety and quality of hats you plan to offer.

Store build-out and design (If applicable): Creating an appealing in-store experience can run between $5,000 to $30,000, including fixtures, furnishings, and signage.

Equipment and supplies: This includes point of sale (POS) systems, shelving, hangers, etc., and can cost between $1,000 to $5,000.

Website and e-commerce platform: Setting up an online store may cost anywhere from $500 to $5,000, based on the complexity and features required.

Initial insurance costs: Expect to pay around $500 to $2,000 for the first year of liability insurance and other relevant coverages.

Initial marketing costs: Your launch marketing efforts might range from $500 to $5,000, including both online and traditional methods.

Licensing and permits: Specific costs can vary by location but anticipate spending between $100 to $1,000.

Miscellaneous costs: These could include utility deposits, office supplies, or other unexpected expenses, ranging from $500 to $2,000.

Considering the above, it becomes clear that the costs can add up quickly, and it’s essential to plan and budget carefully. By fully understanding these costs and planning ahead, you’ll position your hat company for a strong start and a thriving future.

How profitable is a hat store?

The profit potential for a hat store can vary widely based on factors such as location, target market, pricing strategy, and inventory selection. However, let’s break down a general estimate using some industry norms:

Assuming an average selling price of $30 per hat, with a cost of goods sold (COGS) at $12 per hat (40%), the gross margin would be $18 per hat. If a store sells 100 hats per week, the weekly revenue would be $3,000, and the gross profit would be $1,800.

Now, let’s consider operational expenses, such as wages, rent, utilities, marketing, etc. might run around $1,000 per week.

So, the total weekly profit would be $800 ($3,000 – $1,800 – $1,000).

Annually, this would translate to a net profit of approximately $41,600. Of course, this is a generalized example, and individual results can vary significantly based on the specific dynamics of a particular store, including location, competition, and market trends. It’s essential to consult with industry experts or business advisors who understand the hat store landscape in your area to gain a more accurate profit projection tailored to your specific situation.

What skills are needed to run a hat store?

Creativity and an entrepreneurial spirit: This is your chance to let your creativity go wild and work on your own unique headwear line. Even if you decide to simply onsell caps and hats, what range you offer, what sizes, colors, and shapes will come down to having a bit of an eye for what is on-trend. 

What will be crucial to the success of your business is finding your niche and your target market and setting up your processes and your online presence to attract and retain that customer segment.  

Excellent communication and marketing skills: How will your target market find you – how will you grow your customer base? We recommend investing in good imagery, developing a consistent, authentic communications and marketing strategy, and branding that speaks to your target market.

Make the most of social platforms. Consider getting influencers to wear your gear and promote it to their followers.  

In addition, an outstanding customer experience will ensure repeat business and help expand your brand through word of mouth. 

Business management skills: Business management skills are always valuable, even if you begin your hat store as a side gig. In addition, accounting and pricing skills will be handy, as is competency in using e-commerce platforms.

Are you going to sell your caps and hats wholesale or on demand? What will the cost structures look like for various options? You will need to be able to price your products, understand supply and demand, work out profit margins, and ensure your accounting is in line with tax regulations. 

What is the NAICS code for a hat store?

The NAICS code for a hat store is 315990, which is classified under Apparel Accessories and Other Apparel Manufacturing.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code?

How To Start A Hat Store

How To Start A Hat Store

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