How Much Does It Cost to Open a Retail Store? [Retail Store Startup Costs]

Retail Store Startup Costs

Many of us dream of opening our own retail store, but we may not realize that those dreams are not so far-fetched. Small business owners are the most optimistic they’ve been in 20 years, a recent survey by PNC Insights shows. The advent of incredible technologies to streamline operations, coupled with a growing economy and strong labor market, means success is within your reach with proper planning.

Whether you’re a first-time retailer or a serial entrepreneur, there’s one area everyone needs to master: startup costs. Running out of cash before reaching the one-year mark is the top reason why small businesses fail. Determining how much it will cost to open your store will put you on solid footing for the wild ride ahead.

For those looking to enter the dynamic world of retail, the burning question is: How much exactly will it cost me? Untangling all the startup expenses will be your first step. There will be obvious costs — like utilities, rent, and wages — and some not-so-obvious ones, such as marketing and interior design, which tend to add up quickly.

Expect a few curveballs as you figure it all out. But hopefully, armed with our cost breakdown, you can rest a little easier knowing you’re prepared for any surprises. 

If you’ve dreamed about owning a retail shop, here’s some advice about how much it costs — and how to do it well.

How Much Does It Cost to Open a Retail Store

We’ll get straight to it: The startup costs will be some of the highest expenses you’ll ever have to face, and figuring it out will feel like a crash course in business finance.

On average, small retailers spend $39,212 in their first full year, but as you can imagine, the cost varies wildly by industry, location, and number of employees. For instance, the top states for small business success are Massachusetts, Montana, California, and Louisiana. The fastest-growing retail stores are food and wine purveyors, with Mexican grocer Chedraui topping the National Retail Federation’s “Hot 25” list.

Though the signs are optimistic, consumers are still on the hunt for bargains and discounts after enduring unprecedented inflation. Loyalty programs are a massive area of growth right now, with many retailers employing AI technology to create personalized discounts and product suggestions targeted to individual customers. On the flip side, retailers have an opportunity to capture data on spending habits that can be used to fine-tune the product mix and create additional revenue. Another trend to watch is the resale boom, with many companies rolling out “preowned” categories.

Price Range: $12,000 - $400,000

Retail Store Opening Cost by Square Foot

Entrepreneurs are famous for their infectious enthusiasm. But you cannot build a business on positivity alone. Figuring out the cost per square foot is another way to give yourself a reality check. For retail shop owners, pinning down this number depends on specific factors. Are you launching an e-commerce business or opening a physical store?

With 25% of business conducted online, e-commerce operations are devising clever workarounds to save money on inventory storage. Dropshipping continues to grow in popularity. When a vendor ships products from a third party directly to the customers, it eliminates the upfront investment in storage and cuts down on spoilage of fresh items.

For retail operations with physical locations, small is indeed beautiful. A smaller location means lower overhead costs and allows business owners to move inventory quickly in and out of the store. You likely want to maximize the retail space with a floorplan tailored to your inventory — and have as little backroom storage space as possible.  

Price Range: $5 to $400 per square foot

Retail Store Startup Costs to Expect

When creating a lasting budget for your business, it’s important to differentiate between fixed and variable costs. A fixed expense is one that typically does not change from month to month, like rent. A variable expense goes up and down monthly, depending on your business's needs.

When starting out, do as much research as you can. You’ll want to plot out a long-distance course to know what to expect at every turn — and how you’ll pay for it.

Here are some of the most significant liquor store startup costs and expenses you can expect.

1. Utilities

Utilities such as gas, water, electricity, internet, and phones must be set up before you open your doors, and the costs can add up quickly. On average, expect to pay about $2.10 per square foot for commercial space in the U.S. Lighting and HVAC systems tend to be the biggest “energy hogs” for most small businesses. 

Price Range: Around $2 per square foot

2. Location 

Choosing your location is not to be decided on a whim. It’s one of the most important steps you will take — up there with developing your brand. While there are the usual options of shopping malls and strip malls, it’s not uncommon to see retail operations in more intriguing places, like converted gas stations, historic packing facilities, and former cottages. Of course, you may join the ranks of the 19 million small business owners in the U.S. who operate out of their homes.

It's worth looking at averages to understand what to expect. Retail rents in U.S. shopping centers have reached an average of $23.98 per square foot, according to Statista. Western states have the highest rents in the country, averaging $29.01 per square foot. The Midwest runs $18.26, making it the most affordable region.

Before you pass out from sticker shock, remember that rent will be by far the most expensive upfront cost of opening a retail store, especially since you should have more than a month — ideally two years — in accessible capital.

Price Range: $23.98 per square foot

3. Interior Design

You might be a financial stickler, negotiating the lowest rents and keeping your utilities in check. But when it comes to interior design, things can add up fast. Most interior designers charge for their services by the hour, ranging from $50 to $500 depending on their experience. On average, you can expect to pay $100 to $200 per hour.

You’ve probably heard the term “retail therapy.” It’s not just about the joy of buying items; it’s the entire shopping experience. Whether it’s a clothing boutique or a gourmet grocery, the right interior design can inspire customers to spend hours happily browsing and buying. A proper layout can easily control traffic flow and nudge customers to desired areas. The layout is equally important to your employees as it impacts worker productivity and overall happiness.

Price Range: $100 to $200 per hour

4. Finishes and Equipment

Even the smallest stores and e-commerce setups will require equipment to keep everything running smoothly. At a minimum, you’ll need tables, lights, shelving, storage, furniture, and a music system. However, the big-ticket items will likely be the specialized equipment. For instance, corner grocers require substantial cooling equipment and display shelves. A clothing boutique will need dressing rooms, mirrors, and racks. But don’t fear; there are ways to save money during the expensive startup phase, such as buying used equipment or leasing big-ticket items until you get your footing.

When it comes to décor, many retail stores have incorporated personal design touches like reclaimed wood, natural light, and indoor greenery to create a more upscale and welcoming feel.

Price Range: Renovating a retail store costs about $56 per square foot, but it largely depends on how swanky or bare-bones you want it to be.

5. Pre-Opening Expenses

The grand opening is an important opportunity to inform the public about your brilliant new retail concept, so you’ll need everything in place the minute you unlock the doors (or launch your website). It is your moment of truth, so plan on stocking extra inventory and ensuring everything is in tip-top shape, from your displays to your technology.

Your employees will be expected to know every last detail of your product line and to check out customers quickly using a POS system. Long before the official launch, you’ll want to invest in training your workers on all the essential technology.

6. Marketing and PR

Your brand identity is the cornerstone of your business and should be at the top of your to-do list. According to a recent Forbes article, a small business owner can expect to spend anywhere from $1,000 to $5,000 on startup branding. This includes everything from website design to logo creation and establishing a social media presence. All your future marketing and PR efforts will flow from your brand, so investing upfront is essential.

After establishing your business, ongoing marketing and public relations efforts will typically cost 5 to 10 percent of annual revenue but can go higher during times of growth, like if you expand to a second location. Things to consider: You may want to build an app, hire social media managers or influencers, create customer loyalty programs with product giveaways, circulate coupons and discounts, and purchase an email marketing service, such as Constant Contact.

7. Capital and Loans

There’s nothing wrong with having big dreams of instant success, but just like any new business, you must ensure your small business is backed up by capital and contingency funding. Data shows that 38% of small businesses fail because they exhaust their cash reserves or cannot secure additional capital, per Forbes.

Experts recommend keeping a six-month reserve of operational costs to help your small business through the initial startup phase while establishing your customer base. Think of this as protection against emergencies. For small business owners, this means balancing market demand while maintaining your business’s financial health — no easy task. Starting small is ok if that kind of money is not achievable just yet. As your small business grows, you can build up your emergency funds. Learn more about financing and loans here. 

Price Range: $20,000–$100,000

8. Exterior Finishes and Design

It’s easy to overlook the exterior of your building, but you may want to invest in sprucing it up, making it yours. Painting your logo, hanging custom signs, installing lighting, and adding light landscaping will attract customers and make the shopping experience a whole lot more pleasant. An exterior business sign alone can range from a few hundred dollars to a few thousand.

Price Range: 1,000 square feet of exterior renovations typically cost between $1,000 and $4,000, and based on national averages provided by Angi, painting the same-sized exterior space will run an additional $3,000.

9. Organizational and Development Costs

Most retail stores require some license to operate legally within a specific jurisdiction. If you’re in the food industry, additional licenses will be required to sell alcohol, tobacco, prepared food items, and meat products. Unless you plan to hire a consultant or lawyer to handle this, it’s a good idea to start your research pronto. You don’t want to be blindsided after the fact.

Price Range: $50 to $550 for a business license.

10. Professional Services

If this is your first retail rodeo, you might want a few professionals by your side through the tumultuous startup process. There is one professional that every entrepreneur knows they will need early on: an accountant. And now you can add two more into the mix: a lawyer and a retail business consultant.

A good attorney will assist in every aspect of your business, from permits and licensing to trademarking your logo and formally incorporating your business. A business consultant will guide you in improving your business, from branding development and market research to advising on point-of-sale and technology.

Business consultants typically charge $150 to $200 per hour. The average attorney rate in 2022 was $313.00, but it varies widely, from as low as $150 to $600 or more per hour.

Price Range: between $1,000 and $5,000

11. Technology and Point of Sale

Every retailer needs a point-of-sale system to run smoothly. Most small businesses require a robust system with technologies for inventory tracking management and customer loyalty rewards. Depending on your company's size, you may also need tools for employee scheduling and payroll.

Consumers love the convenience of online shopping. If you plan on adding an e-commerce component to your retail store, research a great digital ordering system as well. Self-checkout technology and tools that allow customers to scan and pay with their phones are growing in popularity and are also worth researching. 

Price Range: Get a Quote

12. Staffing and Management

While many small retail stores are owner-operated, you’ll likely need to hire at least a few employees to run smoothly. Retail workers are often cross-trained to perform multiple tasks for maximum flexibility. Be prepared to tap seasonal employees and student workers to ramp up during busy seasons or fill in the gaps for regular employees.

Retail salespeople are paid a mean hourly wage of $17.64, according to the Bureau of Labor Statistics, which recommends business owners factor in taxes and employee benefits — 1.25 to 1.4 times the salary — for the most accurate picture.

A retail store manager salary ranges from an average of $64,347 to $99,588, according to Salary.com, depending on education, certifications and work experience.

Price Range: $17.46 per hour for retail workers. $77,922 annual salary for a retail manager.

Industry averages can help you understand how much you can expect to spend when starting a retail store, but they don’t provide the whole picture. That’s up to you. As you build your customer base and grow your business, you’ll need to keep strategizing and researching to keep costs low and see returns on your investment.

Why Toast Retail is Perfect for Retail Store

In today's competitive retail landscape, selecting the right technology is essential for both new ventures and established businesses aiming for success. Solutions like Toast retail not only streamline operations, making them more efficient, but also provide invaluable insights to optimize the financial health of the business. 

By harnessing the power of point of sale technology, retailers can gain a competitive edge, improve customer satisfaction, and drive sustainable growth. Choosing the right technology sets the foundation for long-term success, empowering businesses to adapt to evolving market demands and thrive in an increasingly digital world.

The tech that redefined restaurants is now here to transform retail. Supercharge your store with the POS built for high volumes and complexity, offering everything you need to run your business on one platform. Toast's retail offering is a game-changer for businesses like convenience stores, liquor stores, and grocery stores, revolutionizing how they operate and interact with customers. Here's why Toast is the perfect fit for these retail environments.

1. Helps Modernize How You Sell

Toast's intuitive, cloud-based system simplifies daily operations. Its user-friendly interface makes staff training a breeze, ensuring seamless adoption across your team. Whether it's processing payments in-store or integrating with online sales channels, Toast ensures a smooth and consistent experience for your customers regardless of how they shop.

• Intuitive Cloud-Based System: Our intuitive, cloud-based system is easy to learn and easy to use. Say goodbye to complicated interfaces and hello to streamlined processes. Toast is designed to simplify your day-to-day operations, from staff training to consolidated operations, ensuring maximum efficiency and productivity.

• Seamless Payment Processing: Toast’s seamless payment processing easily integrates with online payments for smoother sales every time, no matter how your customers are shopping. This integration ensures a hassle-free experience for both customers and staff, leading to increased satisfaction and faster transactions.

• Flexible Order and Checkout Options: Offer flexible and efficient order and checkout options with reliable hardware including handhelds, kiosks, and guest-facing terminals. Adapt to the diverse needs of your customers and reduce wait times at checkout with Toast's versatile hardware solutions, enhancing the overall shopping experience.

2. Streamline Retail Management

Efficiency is key in retail, and Toast delivers with automated, mobile-first inventory management. Say goodbye to manual inventory tracking and hello to SmartScan, a feature that enables quick product scanning and shelf placement. Managing thousands of SKUs becomes effortless with Toast's intuitive product database and bulk update capabilities.

• Automated, Mobile-First Inventory: Experience the freedom of automated, mobile-first inventory management with Toast. Create and print barcodes in bulk, and take new products from scan to shelf in seconds with our SmartScan feature. Say goodbye to tedious manual inventory tasks and hello to streamlined operations.

• Efficient SKU Management: Easily manage thousands of SKUs with our intuitive product database and bulk updates feature. Modify, reprice, and import multiple products at once, saving valuable time and resources. With Toast, keeping track of your inventory has never been easier.

• Retail-Enhanced Dashboards: Stay on top of your business with retail-specific dashboards and cost-tracking reports. Monitor trends, maximize margins, and ensure your top-selling products are always stocked, empowering you to make data-driven decisions that drive profitability.

3. Tailor Your Customer Experience

Toast empowers you to tailor the customer experience to fit your unique retail concept. Whether you're considering adding food service or expanding your offerings, Toast's flexible platform accommodates creative expansion.

• Creative Expansion Opportunities: Thinking of adding food service to your retail concept? Including Kitchen Display Systems and Order Ready Boards, our flexible platform allows for creative expansion. Explore new revenue streams and enhance the overall customer experience with Toast's versatile features.

• Online Ordering and Delivery Integrations: Give your guests the option to order from home with Toast’s Online Ordering and our third-party delivery integrations. Meet your customers where they are and provide convenience that keeps them coming back, increasing customer loyalty and satisfaction.

• Loyalty Rewards and Personalized Offers: Be your neighborhood's favorite shop (and incentivize repeat visits) with loyalty rewards and personalized offers. Transform one-time shoppers into loyal patrons by engaging with your community and offering enticing rewards, making your store the go-to destination for your customers.

In conclusion, Toast's retail solution is more than just a point of sale system; it's a comprehensive toolkit designed to elevate your retail store to new heights. From modernizing sales processes to streamlining management and enhancing the customer experience, Toast empowers retail businesses to thrive in today's competitive market.

Related Resources

• Best Retail POS Systems
• Retail Store Business Plan
• How to Open a Retail Store
• Retail Store Equipment
• Retail POS Software
• Retail Store Marketing Ideas
• How to Design a Retail Store
• Retail Store Ideas and Concepts
• Retail Store Inventory Management
• How Much Do Retail Stores Make
• How to Run a Retail Store