How to Start a Fashion Business

The domestic fashion industry in India is growing backed by strong consumer demand for fashionable clothing through online portals, mall stores and small boutiques. The fashion or clothing stores which used to be unorganized with small businesses is now becoming more organized with the rise of large fashion retail chains.  However, the demand still exists for small fashion boutiques due to the availability of certain lines of garment or styles. In this article, we look at the procedure for stating a fashion business in India.

Fashion Industry in India

The Indian fashion industry is one of the largest of the largest in the world as it provides clothing – a basic necessity for more than 1.2 billion people. The present domestic textile industry is estimated at US$ 33 billion and unstitched garments comprise US$ 8 billion. Textiles and clothing account for a phenomenal 14% of total industrial production.

Fashion Business Models

A fashion business can be setup under various models. The aspirations, experience and expertise of the promoters must be taken into consideration while deciding on the business model. The following are well known fashion related businesses:

• Fashion Designing
• Fashion designers design clothes that aesthetically fitting a client or an audience. Fashion designers are usually hired for creating dresses for special occasions.
• Stylists on the other hand, are those advice about the kind of garment to be worn in different situations.
• Fashion Boutique
• Fashion boutiques are small clothing stores selling a unique line of clothing from one or more fashion designers. Fashion boutiques typically cater to a niche audience, while a large clothing retail chain would cater to a wider audience.
• Online Fashion Retail
• Ecommerce is booming in India and consumers are becoming used to the idea of buying clothes online. The success of websites like Myntra, Jabong and YepMe are testaments to the success of online fashion retailers. Like fashion boutique thriving amongst the growth of large clothing retail chains, there still exists plenty of opportunity for nice online fashion retail websites.
• In addition to setting up a proprietary website, fashion entrepreneurs can also sell clothing through online portals like Flipkart, Snapdeal, Amazon India, PayTM and more. Know more from the following articles:
• How to sell on Flip kart
• How to sell on Snapdeal
• How to sell on PayTM
• How to sell on Amazon India

Setting up the Business

To start a fashion business, a business entity would have to be first setup and a bank account must be opened in the name of the business (optional). A fashion business can be started as a Proprietorship or Partnership or as a Limited Liability Partnership ( LLP) or Company.

Proprietorship is ideal for those starting a fashion designing or stylist business as a part-time job, wherein the annual sales turnover is not going to be more than Rs.10 lakhs in a year. For those wishing to setup a full-fledged fashion business or fashion boutique, a LLP or Private Limited Company would be ideal – as it allows the businesses to more easily scale, take on partners and get capital easily.

Loan or Equity Capital for Fashion Business

The seed capital for almost all businesses come from the promoters, family and friends. Similarly most of the fashion businesses are funded by the promoters. However, if significant amount of capital is required for setting up a clothing store then a bank loan can be obtained. Banks can provide term loan for any interior work to be done for the fashion boutique along with working capital financing to fund part of the stocks.

Private equity funding or angel funding is possible for those fashion businesses that can show fast growth, disruption or use of technology as a enabler. Some of the most famous fashion ventures that are private equity funded in India are Myntra, Jabong, Zivame and YepMe.

Tax Registrations

Those involved in the fashion business not selling clothing, i.e., stylists and fashion designers need not obtain GST REGISTRATION also would be required only for those providing taxable services of more than Rs.9 lakhs a year. Those selling clothing in India would however require VAT registration from the local sales tax office. However, unstitched garments are exempt from VAT and no VAT registration is required.

 

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