If you are wondering how to start a handbag business, take a minute to consider why you want to start your own handbag business in the first place.
Do you have creative bag designs that you want to share and sell? Do you see that the women's bags and small bags niche is underserved in your target market? Do you have someone in your network who is great at bag design and wants to partner with you?
Whatever the reason is that you want to start your own small business, make sure that you should be able to outline it in a business plan from the beginning itself.
According to Statista, the global handbags market has approximately 56 billion USD opportunity. With an expected growth of over 7% annually, it is estimated that it will be a 75 billion USD market in the next couple of years. Thus if you do have an idea about handbags and believe that you can fill a gap in the market, it is a great business opportunity that you can cash in.
Additionally, the United States being one of the top revenue generating countries, now is a perfect time to start your own bag business.
But what exactly do you need to do to get your handbag business idea off the ground?
To help you prepare, we've created this six step guide on how to start a handbag business. Read on to learn everything you need to know.
Before you put wheels in motion for your business, the first thing that you need to decide on is the type of business model you want to pursue. This step is important because it will define the budget, target customer persona and marketing strategy. Let's look at the some of the options available to you:
Your own handbag line:
This option is valid if you are a designer yourself or have a business partner who can design stylish handbags. In this option, you will have to do all the heavy lifting yourself.
The entire product cycle will be in your hands. You will have to design, craft, distribute the handbags on your own.
Wholesaling other handbag brand products:
If you have an expertise in business to business sales & marketing, this option is an amazing business opportunity. You can partner with major brands and then sell the products to the retailers while pocketing a decent profit.
Retailing bags from other companies:
If a physical store or an online store is something that you have a passion for, then being a bag retailer is a great option for your business idea. You can get the bags from distributors and then sell them in your store at a decent margin.
Dropshipping:
One of the most popular options today is to start your own dropshipping store. In this type of store, you will be responsible for marketing the bags and every other aspect will be taken care of by the drop shipping supplier.
The biggest drawback from this option is that you won't have any exclusivity in the bag range and the same bags will be available from other stores as well. You will need to be an expert in marketing ( Especially social media marketing ) to generate enough sales to make your bag business worth the effort.
That said, it is also the lowest cost business model wherein you can start in less than 100 dollars.
Private label:
Getting your own private label is also an option that you can consider. In this business model, you will need to find a manufacturer who will be ready to brand the bags in your brand name.
To the consumer, the manufacturer name won't be available and it will be a product that is in your brand name.
Given that you won't have to have an infrastructure setup for manufacturing your bags, this is a great option as you can get your own designs crafted in the workshop or choose from the available options from the manufacturer.
Once you have identified your option, you will have a much better idea of how you want to sell your bags.
Tip: Start small and choose a business model that will help you test your business idea fast. You can always diversify your options later. But if you cannot find a product market fit, there won't be an opportunity for you to make a business out of it.
It may look simple, but this step is the hardest one to tackle. Majority of businesses don't get this step right and end up with a failed business.
To get an idea of the step involved, just think about one scenario. You work hard on setting up your business with a proper marketing plan, funding and all required compliances. With this setup you are getting visitors in your store, but they don't become customers by making a purchase.
Will you be happy with such a scenario for your handbag business?
We are sure that nobody would like to be in the above situation. A business without customers is no business at all.
That said, along with everything else the one thing that you must get spot-on is your handbag product offerings. You can pretty much change everything in your business, like tweaking marketing strategies and getting more funding or hiring help. But if your product foundation is shaky, it will be extremely difficult to make your handbag company a success.
You can consider the following product options for your handbag business:
- Designer bags
- Bowler bags
- Duffle bags
- Hobo bags
- Tote bags
- Satchels
- Backpacks
- Crossbody handbags
Depending on your decision of business model in step 1, you have a few things to consider. Let's look at some them below:
Your own handbag line
If you have decided to have your own handbags, remember one rule of thumb. Just because you like a design, doesn’t mean your potential customer will do too. There will be a lot of trial and error before you nail down a perfect product market fit for your handbag niche.
To avoid wasting your time and money, it will certainly help to do a proper research of the bags market in your target area. Start by answering at least the following questions:
- Who is your target customer?
- Where do they live?
- How do they shop? Online or in store?
- What price points are a sweet spot?
- How will your bag design be different from the others in the market?
- What is one major feature gap you can fill in your bags?
- What material sells the best? Canvas, Vegan, Leather ?
- Why will a customer buy a bag from you and not from the other stores?
- What's your story?
- Why will the customers tell their friends about your bags?
Once you have answered all these questions, you will be in a much better position to make decisions about many things you will encounter in your business. For example, as a part of your research, you may find out that your target customers prefer buying vegan leather bags and not the animal leather ones. Based on this finding, you can decide on the manufacturing as crafting a handbag using animal leather is completely different from crafting it using the vegan leather material. The vendors that you will need to partner with will also be different based on just this one decision itself.
To give you one more example, you may find out that $19 is a price point that you need to target for a certain design. With this number in mind, you will be able to make decisions on the raw material and accessories you need to select. At such a low price point, it may not make sense to use a YKK zipper and you can try a different zipper brand.
Tip: The more you research, the better the chances of success will be. Take this research as an insurance for your handbag business career.
Selling other brands product via wholesaling or retailing
When deciding to sell other company products, you need to perform research in many different aspects. As the design is not in your control, you will have to select products as per market performance.
You can gauge the success of a design from a particular brand by looking at online reviews, checking the inventory in online stores ( do they all show selling fast, sold out?). You can also visit the local stores and check with the salespeople about their opinion on that particular product.
Basically, you don’t want to get stuck with an inventory that is difficult to sell or isn’t doing that good in the market. Even if the wholesaler has a favorable return policy and is ready to take unsold inventory back, you do end up losing on the revenue that you could have made, if you had chosen another brand and product.
One more thing that you need to consider is that the product shouldn’t be available everywhere. Because if it is, the only way to get a paying customer is by offering the lowest price. Trust us, race to the bottom isn’t something that you want to compete in. You should stay away from it as much as you can. You will need to choose exclusive brands, if possible.
You can also plan to keep accessories such as handbag straps, handbag charms, handbag organization and protection solutions for an increase in revenues.
Depending on where you are located and the business model you decide, you may be legally required to obtain certain permits and licenses before you can start your own handbag business. This is an important step and you would want to make sure that all the things are covered and there won't be any problem in the future.
To begin with, you can get the information from the local chamber of commerce. Just a quick visit should get you on the right track.
Two things that you will need to consider are listed below:
Registering a business name
Once you have identified a name for your business and checked its availability, you will need to register it with the local secretary of state. If you are thinking of going really big with your business and see it going national in the future, you will need to get a trademark as soon as possible.
Tip: Hire a brand consultant to help you get creative and set you up for an outstanding business name.
Decide on a business entity
As an entrepreneur, you need to follow a certain organizational structure to be compliant with the regulations set by the government authorities. This structure affects tax, compliance and other legal requirements, it is an important step to tick when starting a business.
You need to plan ahead and choose from the following options:
- A sole proprietorship
- Limited liability company (LLC)
- General partnership
- Corporation
Generally, in the beginning a sole proprietorship is an obvious choice and a popular legal entity structure. It is the simplest and easiest way to get started. You can transition to another entity structure as your business grows.
Consider business insurance
It is a good idea to get insurance from the beginning itself. This way, you and your business will be protected from any legal claims arising from the functioning of your handbag business. Some of the insurances you can consider are following:
- Product liability insurance
- General liability insurance
- Workers compensation
- Unemployment and disability insurance
Tip: Consider consulting an attorney or a qualified professional for this step, as their experience will be extremely valuable. They will be able to help you with everything that you need to have to be compliant with everything.
You know already that launching and scaling your handbag business will involve spending a lot of money. To keep your business in good financial standing, understanding the type of costs is an essential part, when planning for your business.
You will need to understand what you will have to pay right away, what can wait and what will be a recurring expense. Once you know these costs, you will have a much better idea of your road to profitability and thus be able to secure loans and attract investment as required.
The different types of costs that you will need to consider are as following:
- Fixed costs: These costs remain the same, no matter how much you sell. They will remain constant and are easiest to account for.
- Variable costs: These costs go up or down depending on your sales volume and other business activity. If you wish you can adjust these costs as the need arises.
- Marginal costs: These are incremental costs that will be incurred when creating an additional unit of your handbags products.
- Sunk costs: These are the costs that have been incurred and can’t be recovered. Such as the cost of equipment or raw materials that can’t be returned back.
Once you have got the product ready and have your shop ( online, physical or both) all set to serve customers, the next step is to get the word out. The success of your business will now depend on how well you can do marketing for your business.
Before you can start writing your marketing plan, you need to get some marketing fundamentals sorted out first. These are also called as the four Ps of marketing:
- Product: Along with the bags, you will need to see the packaging and branding aspects. These components are value addons that the customer is not buying directly. But are very much responsible for the value perception and loyalty.
- Price: This will depend on the perceived value of your product in the eyes of the customer. If the perceived value is less than the selling price, you will have a lot of difficulty in selling your bags.
- Promotion: Consider where you will be promoting your handbags. Will it be just digital marketing? Will you also use out of home marketing channels?
- Place: You need to find out where the customers expect to find the bags that you have to sell. Do they expect to find them in stores and not purchase them online? Are they okay in buying them online?
Once you identify the place that they expect to find such bags, how will you make sure that your business is put in their consideration set.
After you have a clear understanding of the above fundamentals of marketing, you can start marketing your bag business. Here are some marketing channels to consider. Just remember to apply the 4Ps of marketing relevant to the specific channel, before you even start your marketing campaigns
- Email marketing
- PPC marketing such as Google Ads, Facebook Ads
- Instagram marketing
- Tiktok marketing
- SEO
- Local guides
- Online review platforms
All the hard work you put into the marketing, along with the meticulous planning you have done in setting up your business, will do wonders and you will surely be a proud owner of a thriving handbag business.
As you can see, starting a handbag business doesn’t need a huge investment and if you plan it well, it can be started with minimum setup costs. However, as in the case of any business, it is very easy to get lost in a trap and waste money.
Be vigilant and keep looking for any financial mistakes in your expenses. Don't get carried away by what the competitor is doing and follow them blindly. What Louis Vuitton offers as a value add on their $2000 bag isn’t something you can offer on a $29 bag in your store.
The real customers understand the difference and have their expectations calibrated as well. You just need to offer them the best product and service at that price point.
That said, there will always be a few investments that you will need to make for future success. These will not give returns right away and thus are possible only if you have money to spare. For example, when setting up a handbag store, you may need to invest in interior and other setup. These costs run in thousands of dollars and will take some time for you to recover.
Additionally, you will need to spend money on licensing, registration, professional fees, store rent and many other expenses. Your own business will start giving you revenues, once the business is set up and the customers are coming in. But until that happens, you will have to cushion these expenses on your own.
If you think that you will need help with the funds, you can consider the following options for your funding:
- Friends and family
- Business loans
- Business lines of credit
- Business credit cards
- Bootstrapping
- Debt financing
- Crowdfunding
- Angel investment
Starting a business may feel overwhelming to begin with. But, If you plan it well and complete each step carefully, it will become easier as you move to the next step.
Just make sure you never stop being on the learning curve. There will be a lot to learn from the customers, investors and your own trust network.
Make time to attend exhibitions, meetups and networking opportunities. It will help you in getting to know a lot of other entrepreneurs that you can reach out to.
We hope that the steps above will help you in your entrepreneurship journey. We wish you the best of luck and can’t wait to hear the stories of what you’ll build.
