How to Start a Garment Trading Business? [Detailed Guide]

Clothing or wearable is an essential and integral part of our lives; beyond the primary purpose of providing cover, garments are looked upon as a means of enhancing our appearance. Fashion and garments go hand-in-hand, and style is considered the biggest game-changer for the garment industry.

The style- trends change almost every day, creating new demand. For the trade, it is a never-ending process meeting the customer's desire for the latest varieties.

The garment trading business in India has two channels: The retail and the wholesale trade. Both categories have their relative advantages (and minuses too!), but both are successful business options for a new entrant.

The skills and the mindset required, however, are different for wholesale and retail. What are the skills or qualities needed for starting a business in garment trading? But before that, a recap on wholesale and retail trading business.

A wholesale business company, usually called the wholesale distributor in India, buys products in bulk from manufacturers; the products are then redistributed to retailers, who subsequently sell them to customers. In the digital marketing jargon, wholesalers are making B2B sales (business to business).

Manufacturers consider wholesalers an extended arm of their marketing; they (the wholesalers) are supposed to manage logistics efficiently so that the stocks are placed on the retailers' counters as fast as possible. In a vast country like India, making the products available throughout the country is a massive challenge for any garment manufacturer. A network of wholesalers performs this task.

A retailer is at the end of the supply chain and is responsible for selling the products to the customer (B2C).

The efficiency of the trade channel depends on two significant factors besides many others- a) distribution logistics (at the wholesale level) and b) customer feedback on design, style, quality, and price (at the retailer’s end).

How to start (a) garment trading business?

Starting a business is typically a three-stage activity.

1. Pre-plan:

You research a market or an industry in line with your idea - the existing market structure and practice in your chosen place of business; Wholesale or retail- Which is your preferred trade channel?

Which Product segment or niche to select, Men’s clothing, ladies, or children –or is it a particular category like sportswear? Which price segment to focus on?  What is the estimated variety-wise demand in the locality; the competitive scenario –how many garment shops in the area and the variety each one is selling.

2. Business Plan:

A business plan is the most valuable document for starting your business. The plan should document all relevant information along with the source of finance.

It ( plan) serves as a reference document for your business operations.

3. Plan implementation:

Execution is the actual process of setting up your business. Let us now find out some of the requirements of the execution stage.

A look at some of the skills first may help an individual in the garment trading business.

4. Skills for success

To be successful in any business, you require a combination of several skills, many of which complement each other. In the garment business, some of the important ones for a wholesaler:

5. Communication

An essential skill for most people in business, a good speaker enjoys the advantage of faster and precise information exchange.

6. Quick judgement and decision-making

It would help if you had logic and reasoning to understand specific situations and opportunities; prompt decision-making is required after considering all issues, selecting the best option.

On a typical day, a wholesaler has to interact with many retailers and several manufacturers, and instant decisions are critical to this business.

7. Negotiations

A primary skill necessary in any business.

8. Coordination

A wholesaler’s job requires effective coordination between various agencies, manufacturers, retailers, transporter, staff, banks, and more.

9. Time management

A wholesaler’s daily sales will depend on the number of retail points covered; therefore, managing time efficiently is a critical need.

10. Managing finance

Cash flows are crucial to wholesale business; success depends on rotating the capital as quickly as possible. Handling trade receivables (from retailers) and arranging payments (to manufacturers) are significant for a wholesaler.

A retailer too needs most of the above skills; besides, two of the unique requirements :

11. Persuasion

A retailer interacts with customers and has to convince them (customers) of the product benefits before closing the sale; having persuasive skills can be advantageous.

12. Technical understanding

Selling (to end-customers) involves explaining the utility and benefits of the product. Manufacturing companies usually have catalogue and product literature; a retailer needs to understand the specifications and advantages of a product clearly and use the information as a persuasion tool in dealing with the customer.

Executing your plan: Important points

1. Selecting a place

A retailer must consider several factors before finalising the shop's location - adequate floor space to arrange display and decoration; storage space for stocks. The Visibility from the road (or a prominent place in a shopping mall) and accesses the shop and parking options. Also required is the necessary permissions for putting up advertisements around the shop exterior.

A wholesaler’s choice will depend primarily on easy connectivity, transport availability and nearness to the warehouse ( if using one for stocks).

2. Business registration

The first move in the process is the firm’s formation (Proprietorship/partnership/company), followed by the opening of a bank account in the firm's name. Obtaining the necessary permits/licenses is the next priority – this will include, Trade license, shop & establishment license, Fire license, GST, PAN, PF and ESI and all others as applicable. It is best to remember that the rental/lease agreement of the premises/store is a critical document and will be required for various registrations.

3. Employees

The number will depend on the scale of your store/business. The job requirement for retail store staff and that of a wholesaler are different.

In a store, one has to deal with customers patiently to close the sale to satisfaction (of the customer). In a wholesale garment business, the emphasis is on managing the sales/logistics challenges of supplying to retailers.

Few Tips on garment trading

a. Providing regular customer feedbacks, wholesaler to the manufacturer (received through retailers) on style trends will help to stay ahead in the market

b. At the retail level, you must put slow-moving stocks on discount sale periodically.   Discount sales will help the cash flows of your business.

c. The store should do regular promotion (offline and online).

Using digital tools to identify a target audience and finalise the channels is a cost-effective measure today; presence in digital channels (social media included) will help build a connection with targeted customers.

d. A wholesaler should try to work out an exclusivity deal with a manufacturer for certain specific varieties; apart from generating additional sales, exclusive designs can fetch a better price.

e. Install software to manage systems; sales, stocks, orders receivables. Systems will improve the efficiency of operations and can provide updated information for analysis.

f. A retailer must select the store timings/holidays as per the convenience of customers and practise in the locality. It is best to remember that holidays bring most people out for shopping.

Conclusion

Starting a garment trading business is not difficult if you follow a few simple guidelines. The industry in India is vast and offers immense trading potential. Still, you have to master the salient points to stay ahead of the competition, like in any business.

Also Read:

1) How to Start a Crockery Business?
2) How to Start a Catering Business? Steps, investment & more
3) How to open Fertilisers and Seeds storage store?
4) OkCredit: All you need to know about OkCredit & how it works.

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FAQs

Q. How can I start a small garment trading business?

Ans. Understand the demand scenario in the town/locality you wish to start your store. Find out the general price range of garments customers prefer; decide on the type and variety (of garment). With limited resources, focus more on customer satisfaction for generating goodwill for your shop; recommend items from the customer's viewpoint. Keep track of fashion trends in the industry; understand the quality issues of fabric.

Q. How much investment is needed to start a retail business in garments?

Ans. Three critical factors for investment- location, decoration (of the store) and stocks; considering all three, a minimum of Rs. 6 to 10 Lakhs is required for an urban area other than a metro city.

Q. Is the garment business profitable?

Ans. Profits in a business depend on your ability to manage risks.  The criticality of the garment business is managing stocks as items can go out of fashion quickly. It is your ability and judgement of stock handling that can give you higher margins.