How Much Does It Cost to Open a Retail Store?
This article is part of a larger series on Retail Management.
The cost of opening a retail store varies greatly—you should budget anywhere from $10,000 to a few hundred thousand dollars. It all depends on where you’re located and what your vision is.
As retail continues its upward trajectory in a post-pandemic world, the time has never been better to start a retail business. Let’s break down the costs of opening a retail store by category to help you budget and make sure you’re getting good deals.
Typical Retail Store Cost Breakdown
What It Involves
$50–$2,000 startup; $100–$300/year thereafter
Sourcing materials, wholesalers, and/or manufacturers for your products.
Finding a retail space
Purchase retail space for $127–$300/square foot; rent for $22/square foot
Licenses, permits, and insurance
Operating costs and equipment
Upfront and ongoing costs for things like point of sale (POS), website, utilities, and cleaning.
Incorporating Your Business
- Business registration: $50–$2,000
- Small business attorney: $150–$1,000/hour
- Registered agent: $100–$300/year
Incorporating and registering your business is one of the first steps to making it official. The costs for business registration depend on your location, what business type you plan to incorporate as, and who is filing the paperwork for everything.
We have a breakdown of LLC vs S corp vs C corp to help you decide which business structure is best for you. Each state charges its own registration fee, ranging from $50 to $2,000. The image below shows how much it costs to register an LLC in each state:
You can file the paperwork to incorporate yourself or hire online legal services to help. According to UpCounsel, small business attorneys charge hourly rates of anywhere from $150 to more than $1,000. Most small business owners should be able to DIY this step and save some money, though larger or more complex organizations may benefit from third-party expertise.
Additionally, you might need to hire a registered agent (RA). An RA can receive important documents, mail, and other qualified receivables on your behalf. A registered agent costs $100–$300 per year.
Sourcing Products to Sell
Sourcing products is a massive expense for every retail business, regardless of the types of retail suppliers you work with. It’s difficult to devise an industry average for how much product sourcing costs because it varies greatly.
You might make your own products by hand, for example—in which case, you’d need to account for the cost of supplies and materials, equipment, and your time. When working with a manufacturer, the expense is a little more straightforward—they provide an estimated cost to bring products into production. And working with wholesale suppliers is even more specific and easier to plan, as they provide a single price for your bulk purchase.
Related: Best Retail Trade Shows for Product Sourcing
Though this may seem obvious, it’s important to remember that the cost to source each item must be less than the price you sell it for. Otherwise, you won’t make any profit.
Additionally, be sure to inquire about additional fees when working with suppliers. There may be additional shipping and taxes, order minimums, payment processing, and other hidden costs to account for—or negotiate out of your agreement.
Finding a Retail Space
- Purchase retail space: $127–$300/square foot
- Loan interest rate: 2.2%–18%
- Rent retail space: $22/square foot
There are many expenses associated with setting up and maintaining your physical retail space. If you plan to own your retail store, you may need capital to purchase the property. The commercial real estate market is worth $1.2 trillion in the US, so there’s plenty of space to be had.
You might opt to lease a retail space, in which case you’ll have monthly rent, plus potential upfront security deposits and other maintenance costs. If you choose to sell wholesale in other shops, this expense may not apply to you—though some shops may charge vendors for having a table or section in their store.
In the US, retail properties with “regular shops” sold for close to $300 per square foot, while shopping centers sold for about $127 per square foot. If you don’t have enough to make a cash offer, you can expect to take out a small business loan. According to ValuePenguin, average commercial real estate loan interest rates are 2.2% to 18%. For leasing, the average rent for retail space is approximately $22 per square foot, higher in Western states and much lower in the Midwest.
Finding your space is only half the battle. You also need to prep it to fit your needs and preferences. Some spaces are turnkey, whereas others need a little more heavy lifting. If you plan to renovate or make serious changes, you’ll want to estimate a healthy budget here. Paint, for example, is $20–$100 per gallon, and lighting installation will cost you $150–$225 per fixture—not to mention the cost of the lights themselves. Display cases cost anywhere from $50 to a few hundred dollars, even more for high-end, and your checkout area will be a few hundred dollars or more.
Related: Planning Your Retail Store Layout
You might also set up security systems and cameras, and other loss prevention features in your space, each with its own associated expense.
For example, Little Green Beans, a shop located in a strip mall in North Austin, Texas, spent about $4,000 to renovate and prep the space; $4,500 to purchase a cash counter, hangers, and displays; and an additional $250 on handyman help and miscellaneous supplies. If you need to hire a handyman, expect to pay $50–$80 per hour.
Related: Retail Expansion: Ultimate Guide to Opening a Second Location
Licenses, Permits & Insurance
- Business license: Varies
- Liability insurance: $790/year
- Workers’ comp: $540/year
While a business license isn’t required for every merchant, you’ll want to check with your local jurisdiction to see if this is something you need to file for your retail store. Some states require a business license for new retailers, and some also require you renew it regularly. As such, costs also vary depending on location and license type.
You may also need to pay for permits and licenses to operate and conduct business legally. Those permits and expenses may include:
- Building health permit: For new construction; typically between $50 and $1,000
- Resale license: So you don’t have to pay tax on wholesale purchases; free or minimal cost
- Sales tax/vendor license: If your state requires it; costs vary
- Food handlers license: For food-based businesses; expect to pay $5–$30
- Liquor license: For selling and/or serving alcoholic beverages; starts at $300 but can be tens of thousands of dollars depending on your location
Like business registration, business insurance isn’t a legal requirement—though some states require insurance of certain types of retailers or industries. Costs will also vary depending on the nature of your business and where you’re located. Little Green Beans, for example, pays $185 per quarter—or $740 each year—for liability insurance. This is just below the average $65/month or $790/year.
Also optional, you can choose to become a Better Business Bureau (BBB) Accredited retail store. Annual fees range from $510 to $1,225, depending on how many staff members you employ.
Workers’ comp insurance is required and sits at an average of $540 each year.
Operating Costs & Equipment
- POS: $300–$10,000
- Website build: $50–$20,000
- Website hosting: $1–$27/month
- Domain name: $9–$20/year
- Utilities: $2.10/square foot
- Internet: $64/month
- Cleaning: $200/cleaning
Operating costs outside of utilities and maintaining the space also apply. These line items include both upfront and ongoing expenses.
Computers & Equipment
Most retail stores have a computer or mobile device to help run the business. This command center can process transactions, track inventory, and provide analytics information. A computer or tablet for this purpose might cost you anywhere from a few hundred dollars up to a few thousand. You might also need label, barcode, or receipt printers, as well as any barcode scanners.
Related: How to Make a Barcode + Free Barcode Generator
To process payments, you’ll need to pay for the initial cost of a point-of-sale (POS) system, as well as any fees for transactions, subscriptions, etc. You can lease or buy a POS, though we usually recommend buying it outright—this usually makes the most financial sense. A POS system costs $300 to $10,000, plus payment processing. Payment processing fees are typically about 3% of the transaction value.
Website Fees & Digital Marketing Expenses
Even if you don’t plan to sell online, it’s a good idea to create a website for your retail store. This allows you to reach new audiences and give people a place to connect when they’re unable to visit your physical space. A website will cost $50 to $250 if you hire freelancers or $500 to $20,000+ if you hire an agency. You can also do it yourself with ecommerce platforms that have pricing plans from $1 to $27 per month.
You’ll also need to pay for your domain name—this consists of an annual subscription. The price is usually around $9 to $20 each year, unless you’re looking at getting a competitive domain name.
All in all, Little Green Beans spent $3,515 on website hosting, design and development, and domain registration. Each month, it pays $50 for self-hosted email and $100 for high-speed internet and phone services.
Utilities & More
Ongoing operating costs also abound. These include utilities, which vary depending on the location, size and layout of your space, and how you manage it overall. Your local climate is also a factor.
- Utilities: An average $2.10 per square foot; some companies may also require a deposit
- Internet: Americans pay an average of $64 per month
- Cleaning: A commercial cleaning is about $200
Little Green Beans spends about $4,889 each month for rent and operating expenses. If you have long store hours seven days a week, you’ll likely have higher operating costs than a shop that only opens on weekends.
When everything is calculated, paid for, and processed, you can generally expect to spend at least $10,000 to open a retail store. However, it can cost as much as a few hundred thousand if your store is large, complex, or in a highly desirable location. We know it’s a huge range, but that’s because there are opportunities for all kinds of entrepreneurs at all budgets.