How much does it cost to open a retail store?

Retail store startup costs

Opening a new retail store requires an upfront investment in several key areas. These costs can vary depending on the size, location, and type of store you plan to open, but they all play a crucial role in setting up your business for success.

Type of cost	Cost
Business registration and permits	$50 to $550
Location costs	$20 to $50 per square foot annually
Store renovations and setup	$4,000 to $50,000
Security systems	$50 per month for a basic setup
Marketing and branding materials	$35 per hour for design services

1. Business registration and permits

Before you own a retail store, you’ll need to register your business and secure the necessary licenses and permits. These fees typically range from $50 to $550, depending on your location and industry requirements. Below are some common types of permits a new retail store need:

• Business license: Required to legally operate a business in your city, county, or state.
• Sales tax permit: It helps you to collect sales tax from customers and remit it to the government.
• Zoning permit: Confirms that your store complies with local zoning laws. This is especially important if you open a retail store in a residential zone.
• Health permit: If you plan to sell food, beverages, or other consumable items, you need this permit to ensure your store meets all hygiene and health safety regulations.
• Commercial sign permit: Required in many areas for installing outdoor signage to promote your store.

2. Retail space leasing costs

The cost of leasing a retail space varies depending on the city, neighborhood, and type of lease. In the United States on average, the retail space in a prime downtown location ranges from $20 to $50 per square foot annually. To calculate the monthly rent, you can use this formula: (Total square feet x Price per sq ft.) ÷ 12 (months).

For example, The monthly rent for a 1,500-square-foot retail space at $30 per square foot annually would be $45,000.

Store sizes depend on the type of business and the products they offer. Here’s a look at the average store sizes across different types of retail businesses:

• General retail shops: The average size is typically around 2,500 to 5,000 square feet. It provides enough space to display a mix of products.
• Big box stores: Big box retailers like Target and Home Depot often have store sizes averaging between 100,000 and 150,000 square feet, with some locations reaching up to 250,000 square feet.
• Convenience Stores: Convenience stores typically range from 1,500 to 4,000 square feet, designed for quick shopping trips and easy access.
• Specialty Retailers: Stores which focus on specific product categories, such as clothing or home goods, typically occupy 1,000 to 3,000 square feet, balancing intimacy with sufficient display space.

3. Store renovations and setup

Whether you’re transforming an empty commercial space or updating an existing one, costs for renovations, fixtures, shelving, and decor can add up. These expenses typically range between $4,000 and $50,000, depending on your store’s style and aesthetics.

Throughout the renovation process, you need several professionals to help you make your dream store come to life.

• The designer develops the layout, color scheme, lighting, and materials, creating mood boards, floor plans, or 3D models to bring your vision to life.
• The contractor manages construction and installation, sources materials, secures permits, and oversees subcontractors like electricians and painters.
• Engineer ensures structural integrity, safety, and compliance with building codes, focusing on load capacity, fire resistance, and energy efficiency.
• The manufacturer builds fixtures and decor to match your design specifications, ensuring everything aligns with your store’s style and functionality.
• Installers set up fixtures and decor, ensuring everything is installed safely and matches the design plan.

4. Security systems

The retail sector faces significant security challenges. Retail revenue loss from theft has increased 8.5% from $112.1 billion in 2022 to $121.6 billion in 2023. Security risks go beyond theft and shoplifting, including card skimming that puts customer payment information at risk. In just the first half of 2023, skimming incidents compromised 120,000 cards, a 77% increase from the previous year.

Protecting your store and your customers starts with investing in a solid security system. You can open a retail store with two cameras and an alarm system which costs about $50 per month. To prevent shoplifting, you can add security tags to high-value or frequently stolen items. Tag and detector systems start at around $1,000, depending on the number of tags and the sensitivity needed.

To reduce security costs, you can ask your landlord to contribute to or cover part of the security system installation as part of your rental agreement. Besides, if you set up your store in a supermarket, mall, or shared retail space, you can save money on a standalone system. These locations often provide guards, cameras, or patrols as part of the lease.

5. Marketing and branding materials

First impressions matter, and your branding plays a key role. A store that offers a visually engaging experience not only attracts customers but also fosters brand loyalty and encourages repeat visits.

Designing your logo and creating signage are the first essential steps.

• Your logo: This is the face of your business. A well-designed logo makes your brand memorable and recognizable across marketing materials, packaging, and online platforms.
• Signage: Store signage can attract foot traffic and communicate your brand’s message. Eye-catching signs convey credibility, while clear and inviting messaging helps customers understand what your store offers.

A designer’s services typically cost around $35 per hour. For small business owners who don't have a budget to hire a full-time designer, hiring a freelance designer on platforms like Fiverr or Upwork for assistance with specific projects is a great option. These platforms allow you to choose professionals based on their expertise, reviews, and rates, making it easy to find the right fit for your branding needs.

Initial inventory costs

Stocking your shelves is one of the biggest upfront investments for any retail store. We’ve separated this expense from general startup costs because it can be difficult to estimate, and we want to provide a dedicated, step-by-step guide for you.

Here’s a simple 2-step process to help you calculate your initial inventory costs:

• Step 1: Calculate your initial inventory quantity
• Step 2: Calculate your initial inventory costs

Step 1: How to calculate initial inventory quantities

Here are the 3 steps on how to calculate your starting inventory quantity, after discussing the definition, we will guide you through the example on how to calculate it.

1. Estimate display items: Determine how many items your display space can hold.
2. Estimate first-month sales: Predict how many customers will visit and buy during your first month.
3. Estimate safety stock: Add a buffer to cover unexpected demand or delays in restocking.
4. Calculate total initial inventory: Add together the numbers from the steps above.

Calculate initial inventory formula and example: you’re opening a boutique specializing in home decor.

1. Estimate display items: You have 15 shelving units that can each hold 80 items. Additionally, you have 10 racks for hanging products, each capable of holding 50 items. This gives you:

• Shelving capacity: 15 shelves × 80 items = 1,200 items
• Rack capacity: 10 racks × 50 items = 500 items
• Total display capacity: 1,700 items

Therefore, you’ll need at least 1,700 items to make the store look full, plus some extra stock for the backroom.

2. Estimate first-month sales: To estimate foot traffic, consider using local market research tools like SafeGraph, which provide accurate data on customer patterns in your area. For example, if you estimate 1,000 foot traffic per month and assume 20% of visitors make a purchase. Then, you take a conservative approach by estimating an average basket size of 2 items per customer, you can calculate your expected monthly sales: Total monthly items sold = monthly foot traffic × purchase conversion rate × items per purchase

So your total monthly items sold is 400 items in the first month (1,000 customers × 20% × 2)

3. Estimate safety stock: Add 20% to forecasted sales for a buffer. For 400 items, this means 80 extra units.

4. Calculate total initial inventory: Display items + first-month sales + safety stock = 1,700 + 400 + 80 = 2180 items.

Step 2: How to calculate your initial inventory costs

Your estimated total inventory quantity is 2,180 items based on your store’s size, expected sales, and safety stock. From Step 2, you estimated a need for 2,180 items. Here’s how your inventory might break down:

• High-demand items: Everyday essentials that are likely to sell quickly, such as decorative pillows and vases.
• Seasonal items: Products tied to specific seasons or holidays, like wreaths or holiday-themed decor.
• Niche items: Unique or specialty items that appeal to a smaller audience, such as artisanal candles or limited-edition pieces.

Decide how much of your inventory should go to each category. For example:

• High-demand items: 50% of total inventory (1,090 items)
• Seasonal items: 30% of total inventory (654 items)
• Niche items: 20% of total inventory (436 items)

Within each category, select individual products, assign costs, and calculate totals. Example:

• Decorative pillows: $20/item × 700 items = $14,000
• Vases: $15/item × 390 items = $5,850
• Holiday wreaths: $25/item × 400 items = $10,000
• Seasonal candles: $12/item × 254 items = $3,048
• Artisanal candles: $10/item × 300 items = $3,000
• Limited-edition wall art: $25/item × 136 items = $3,400

As a result, your total retail initial inventory cost will be $39,298

Retail POS system costs

Imagine a busy Saturday afternoon in your store—lines at the checkout, customers browsing, and inventory updates happening in real-time. That efficiency wouldn’t be possible without a reliable POS system, which combines hardware and software to process sales, manage inventory, and streamline operations.

Here’s a breakdown of retail POS system costs.

Type of cost	Cost
Retail POS software	Free (Helcim) or from $50/month (Others)
Payment terminal	$99 (card reader) or from $300 (smart terminal)
Receipt printers	$30 to $600
Cash drawers	$65 to $650
Barcode scanners	$50 to $200

1. Retail POS software

POS software connects your payment terminal and other hardware to a computer or tablet, allowing you to process transactions, manage staff, and track inventory. While many payment processors charge subscription fees ranging from $50 to $100 per month, Helcim offers a free POS software with all payment and operational features, giving you everything you need without extra costs.

2. Payment terminal

With debit and credit cards accounting for 63% of customer purchases, a reliable card terminal is essential. Basic models start at $99, while advanced machines with features like touchscreens, built-in receipt printers, and integrated POS software range from $300 to $500. Modern terminals support traditional swipe or chip methods, as well as contactless payments, mobile payments like Apple Pay and Google Pay.

Besides, with some providers you can also accept contactless payments using your iPhone with Tap to Pay on iPhone. This simple and free solution ensures you’re ready to meet customer expectations without investing in extra equipment.

Opening a retail store can be an exciting milestone, but it comes with many expenses. From the initial investment required to set up shop to the ongoing costs of keeping the business running, understanding where your money goes is key to long-term success. Whether you’re opening a brick and mortar store or expanding your existing retails business online, careful budgeting and planning are essential to ensure your business remains profitable.

How profitable is retail business?

Opening a retail store can be profitable, but success depends on your niche, pricing strategies, and operational efficiency. To understand retail profitability, it’s helpful to look at two key metrics:

• Average Gross Profit Margin: This measures how much profit is left after deducting the cost of goods sold (COGS) from your revenue.
• Average Net Profit Margin: This shows the percentage of revenue that remains as profit after deducting all business expenses, including COGS, overhead, taxes, and interest.

Retail net profit margins can vary a lot, ranging from 1.18% to 23%, depending on the type of business. High-margin sectors like building supplies and distributors have more room for profit, whereas grocery and food retailers rely heavily on high sales volume to offset their lower margins.

	Avg. Gross Profit Margin	Avg. Net Profit Margin
Automotive	21.88%	4.32%
Building Supply	34.17%	8.40%
Distributors	32.34%	7.55%
General	30.86%	3.09%
Grocery and Food	25.54%	1.18%
Real Estate Investment Trusts	77.63%	23.32%
Special Lines	29.88%	1.45%

Retail store startup costs

Opening a new retail store requires an upfront investment in several key areas. These costs can vary depending on the size, location, and type of store you plan to open, but they all play a crucial role in setting up your business for success.

Type of cost	Cost
Business registration and permits	$50 to $550
Location costs	$20 to $50 per square foot annually
Store renovations and setup	$4,000 to $50,000
Security systems	$50 per month for a basic setup
Marketing and branding materials	$35 per hour for design services

1. Business registration and permits

Before you own a retail store, you’ll need to register your business and secure the necessary licenses and permits. These fees typically range from $50 to $550, depending on your location and industry requirements. Below are some common types of permits a new retail store need:

• Business license: Required to legally operate a business in your city, county, or state.
• Sales tax permit: It helps you to collect sales tax from customers and remit it to the government.
• Zoning permit: Confirms that your store complies with local zoning laws. This is especially important if you open a retail store in a residential zone.
• Health permit: If you plan to sell food, beverages, or other consumable items, you need this permit to ensure your store meets all hygiene and health safety regulations.
• Commercial sign permit: Required in many areas for installing outdoor signage to promote your store.

2. Retail space leasing costs

The cost of leasing a retail space varies depending on the city, neighborhood, and type of lease. In the United States on average, the retail space in a prime downtown location ranges from $20 to $50 per square foot annually. To calculate the monthly rent, you can use this formula: (Total square feet x Price per sq ft.) ÷ 12 (months).

For example, The monthly rent for a 1,500-square-foot retail space at $30 per square foot annually would be $45,000.

Store sizes depend on the type of business and the products they offer. Here’s a look at the average store sizes across different types of retail businesses:

• General retail shops: The average size is typically around 2,500 to 5,000 square feet. It provides enough space to display a mix of products.
• Big box stores: Big box retailers like Target and Home Depot often have store sizes averaging between 100,000 and 150,000 square feet, with some locations reaching up to 250,000 square feet.
• Convenience Stores: Convenience stores typically range from 1,500 to 4,000 square feet, designed for quick shopping trips and easy access.
• Specialty Retailers: Stores which focus on specific product categories, such as clothing or home goods, typically occupy 1,000 to 3,000 square feet, balancing intimacy with sufficient display space.

3. Store renovations and setup

Whether you’re transforming an empty commercial space or updating an existing one, costs for renovations, fixtures, shelving, and decor can add up. These expenses typically range between $4,000 and $50,000, depending on your store’s style and aesthetics.

Throughout the renovation process, you need several professionals to help you make your dream store come to life.

• The designer develops the layout, color scheme, lighting, and materials, creating mood boards, floor plans, or 3D models to bring your vision to life.
• The contractor manages construction and installation, sources materials, secures permits, and oversees subcontractors like electricians and painters.
• Engineer ensures structural integrity, safety, and compliance with building codes, focusing on load capacity, fire resistance, and energy efficiency.
• The manufacturer builds fixtures and decor to match your design specifications, ensuring everything aligns with your store’s style and functionality.
• Installers set up fixtures and decor, ensuring everything is installed safely and matches the design plan.

4. Security systems

The retail sector faces significant security challenges. Retail revenue loss from theft has increased 8.5% from $112.1 billion in 2022 to $121.6 billion in 2023. Security risks go beyond theft and shoplifting, including card skimming that puts customer payment information at risk. In just the first half of 2023, skimming incidents compromised 120,000 cards, a 77% increase from the previous year.

Protecting your store and your customers starts with investing in a solid security system. You can open a retail store with two cameras and an alarm system which costs about $50 per month. To prevent shoplifting, you can add security tags to high-value or frequently stolen items. Tag and detector systems start at around $1,000, depending on the number of tags and the sensitivity needed.

To reduce security costs, you can ask your landlord to contribute to or cover part of the security system installation as part of your rental agreement. Besides, if you set up your store in a supermarket, mall, or shared retail space, you can save money on a standalone system. These locations often provide guards, cameras, or patrols as part of the lease.

5. Marketing and branding materials

First impressions matter, and your branding plays a key role. A store that offers a visually engaging experience not only attracts customers but also fosters brand loyalty and encourages repeat visits.

Designing your logo and creating signage are the first essential steps.

• Your logo: This is the face of your business. A well-designed logo makes your brand memorable and recognizable across marketing materials, packaging, and online platforms.
• Signage: Store signage can attract foot traffic and communicate your brand’s message. Eye-catching signs convey credibility, while clear and inviting messaging helps customers understand what your store offers.

A designer’s services typically cost around $35 per hour. For small business owners who don't have a budget to hire a full-time designer, hiring a freelance designer on platforms like Fiverr or Upwork for assistance with specific projects is a great option. These platforms allow you to choose professionals based on their expertise, reviews, and rates, making it easy to find the right fit for your branding needs.

Initial inventory costs

Stocking your shelves is one of the biggest upfront investments for any retail store. We’ve separated this expense from general startup costs because it can be difficult to estimate, and we want to provide a dedicated, step-by-step guide for you.

Here’s a simple 2-step process to help you calculate your initial inventory costs:

• Step 1: Calculate your initial inventory quantity
• Step 2: Calculate your initial inventory costs

Step 1: How to calculate initial inventory quantities

Here are the 3 steps on how to calculate your starting inventory quantity, after discussing the definition, we will guide you through the example on how to calculate it.

1. Estimate display items: Determine how many items your display space can hold.
2. Estimate first-month sales: Predict how many customers will visit and buy during your first month.
3. Estimate safety stock: Add a buffer to cover unexpected demand or delays in restocking.
4. Calculate total initial inventory: Add together the numbers from the steps above.

Calculate initial inventory formula and example: you’re opening a boutique specializing in home decor.

1. Estimate display items: You have 15 shelving units that can each hold 80 items. Additionally, you have 10 racks for hanging products, each capable of holding 50 items. This gives you:

• Shelving capacity: 15 shelves × 80 items = 1,200 items
• Rack capacity: 10 racks × 50 items = 500 items
• Total display capacity: 1,700 items

Therefore, you’ll need at least 1,700 items to make the store look full, plus some extra stock for the backroom.

2. Estimate first-month sales: To estimate foot traffic, consider using local market research tools like SafeGraph, which provide accurate data on customer patterns in your area. For example, if you estimate 1,000 foot traffic per month and assume 20% of visitors make a purchase. Then, you take a conservative approach by estimating an average basket size of 2 items per customer, you can calculate your expected monthly sales: Total monthly items sold = monthly foot traffic × purchase conversion rate × items per purchase

So your total monthly items sold is 400 items in the first month (1,000 customers × 20% × 2)

3. Estimate safety stock: Add 20% to forecasted sales for a buffer. For 400 items, this means 80 extra units.

4. Calculate total initial inventory: Display items + first-month sales + safety stock = 1,700 + 400 + 80 = 2180 items.

Step 2: How to calculate your initial inventory costs

Your estimated total inventory quantity is 2,180 items based on your store’s size, expected sales, and safety stock. From Step 2, you estimated a need for 2,180 items. Here’s how your inventory might break down:

• High-demand items: Everyday essentials that are likely to sell quickly, such as decorative pillows and vases.
• Seasonal items: Products tied to specific seasons or holidays, like wreaths or holiday-themed decor.
• Niche items: Unique or specialty items that appeal to a smaller audience, such as artisanal candles or limited-edition pieces.

Decide how much of your inventory should go to each category. For example:

• High-demand items: 50% of total inventory (1,090 items)
• Seasonal items: 30% of total inventory (654 items)
• Niche items: 20% of total inventory (436 items)

Within each category, select individual products, assign costs, and calculate totals. Example:

• Decorative pillows: $20/item × 700 items = $14,000
• Vases: $15/item × 390 items = $5,850
• Holiday wreaths: $25/item × 400 items = $10,000
• Seasonal candles: $12/item × 254 items = $3,048
• Artisanal candles: $10/item × 300 items = $3,000
• Limited-edition wall art: $25/item × 136 items = $3,400

As a result, your total retail initial inventory cost will be $39,298

Retail POS system costs

Imagine a busy Saturday afternoon in your store—lines at the checkout, customers browsing, and inventory updates happening in real-time. That efficiency wouldn’t be possible without a reliable POS system, which combines hardware and software to process sales, manage inventory, and streamline operations.

Here’s a breakdown of retail POS system costs.

Type of cost	Cost
Retail POS software	Free (Helcim) or from $50/month (Others)
Payment terminal	$99 (card reader) or from $300 (smart terminal)
Receipt printers	$30 to $600
Cash drawers	$65 to $650
Barcode scanners	$50 to $200

1. Retail POS software

POS software connects your payment terminal and other hardware to a computer or tablet, allowing you to process transactions, manage staff, and track inventory. While many payment processors charge subscription fees ranging from $50 to $100 per month, Helcim offers a free POS software with all payment and operational features, giving you everything you need without extra costs.

2. Payment terminal

With debit and credit cards accounting for 63% of customer purchases, a reliable card terminal is essential. Basic models start at $99, while advanced machines with features like touchscreens, built-in receipt printers, and integrated POS software range from $300 to $500. Modern terminals support traditional swipe or chip methods, as well as contactless payments, mobile payments like Apple Pay and Google Pay.

Besides, with some providers you can also accept contactless payments using your iPhone with Tap to Pay on iPhone. This simple and free solution ensures you’re ready to meet customer expectations without investing in extra equipment.