How to Start a Souvenir Shop

Part 1 - How to start a Souvenir Shop business - Background

As the owner of a souvenir shop, you’ll stock your retail store, cart or kiosk with inventory of interest to tourists. Your offerings will reflect the demographics and socioeconomic strata of the market. For instance, if you’re at a vacation destination that draws young families, you might stock novelty trinkets, toys, t-shirts, candy, and gum. However, if you’ll attract more sophisticated travelers, you might sell pricier jewelry with a local slant — ie, designed with stones or gems found in the region.

Our guide is in 3 parts:

• Part 1 - How to start a Souvenir Shop business - Background
• Part 2 - Our planner tool to see if this idea is the right fit for you
• Part 3 - Action plan to get started

What are the costs involved in opening a souvenir shop?

That will be highly variable depending on your location, size of business, clientele and the merchandise you carry. But here are some cost breakdowns for illustration purposes. Lease — $5,000 to $20,000 or more. This is highly variable because there are so many different factors involved. First, location. It will certainly cost you more to rent a store on Time Square than outside of Cedar Point in Ohio. Also, you might rent anything from a small kiosk at $800 a month for summer months only, to a year-round thousand-square-foot shop. Utilities — Zero to $6,000 a year or more. If you go the kiosk route, you might pay nothing. But a year-round store could involve air conditioning in the summer months and heating in the winter. Inventory — A minimum of $4,000, generally. It really depends on what you’re selling.

Staffing — $20,000, plus. This includes the bare minimum you have on hand to support yourself as you get your business started. It might be a lower amount if you’re only open seasonally. This estimate includes no additional help. You’re likely to start alone, and add staff as the situation warrants.

Computer hardware and software and cash register — $2,500 or more. This includes the retail management software that will enable you to manage sales, inventory, invoicing, cash flow, and other critical tracking needs.

Promotion and marketing — $2,000, est. You won’t need much ongoing advertising and marketing if you’ve chosen your location wisely. That’s because the attraction itself, whether it’s an amusement part, a touristy part of town, a museum, or seaside destination, will draw foot traffic. But you’ll want to hire a graphic designer to design your logo, website, and signage. Decorating, remodeling and signage — $500 to $6,000 and up. It could range from a decorative umbrella with your logo to a full store makeover. But it’s important to decorate to draw the attention of the audience you want.

Licensing and permits — $200, est. This cost could be much higher in certain exclusively priced locations, such as Time Square. Consult the Small Business Association (SBA) website for valuable information on the licenses and permits you might need in your area.

This Inc. Magazine article gives a good breakdown of opening costs for a small retail store.

What are the ongoing expenses for a souvenir shop?

Your ongoing costs will include staffing, inventory, rent and utilities. This can be a pricey tally depending on your location, clientele, and type of business, and it reinforces the need to sell as briskly as possible.

Who is the target market?

If you’ve anchored your business in the right location and stocked your store with appropriate inventory, your customers will find merchandise they’ll want to remember their travels by. Vacationers are primed to spend premium rates while away from home because they consider it to be part of the experience. They’re sentimental impulse buyers looking for souvenirs that will connect them with their travels. Or perhaps they’re looking for small gifts for family members, friends, or co-workers who didn’t come along. Either way, they’re motivated to spend.

How does a souvenir shop make money?

Your sole route to profitability is to sell merchandise to enough people at costs that cover your rent, staffing, inventory and miscellaneous costs and yield an appropriate profit. You’ll have an advantage over conventional retailers in that you can stock your location with items they wouldn’t have necessarily bought under any other circumstance. For instance, an inexpensive keychain with the name of the travel destination is of value only at that point in time. Similarly, you won’t compete with the Internet, since the purchase is location-inspired.

How much can you charge customers?

That will depend on your merchandise. But you can charge higher markups than might be possible elsewhere since most of the items you carry can only be easily found in your location. Once a family of customers goes home to Germany, where are they going to find a My Heart’s in San Francisco t-shirt? And why would they buy it anytime except during their San Francisco vacation?

How much profit can a souvenir shop make?

According to figures that appeared in the Small Business Development Center Network (SBDC) National Information Clearinghouse, “Seventy-eight percent (78%) of America’s gift shops employ only one to four employees and 75% have less than $200,000 in annual sales.” But your own sales figures and profits will be determined primarily by your mix of merchandise and location.

How can you make your business more profitable?

Consider adding food or beverages to your product mix. Just remember, you must first obtain licensing from your local health department.

Day-to-Day and Growth

What happens during a typical day at a souvenir shop?

Your typical workday could consist of a range of activities, including the following:

• Opening and preparing your location for customer traffic

• Scheduling and supervising staff, if you have any

• Waiting on customers and helping them find appropriate souvenirs

• Handling vendors, arranging credit relationships, and ordering merchandise

• Keeping your store clean and merchandise appealingly displayed

• Networking with other sellers in your area, so they keep you in mind if customers ask for merchandise they don’t carry — and you’ll do the same for your neighboring sellers

• Staying in contact with landlords, local officials, and others who can impact your business operation

• Paying bills, maintaining financial records, and managing cash flow

What are some skills and experiences that will help you build a successful souvenir shop?

It’s incredibly important to start with a realistic business plan. This valuable start-up tool will help you identify your customer profile and stock up on merchandise that will sell. You must be able to accurately track sales to unveil trends and see what’s selling and what’s not. And finally, you should have a strong sales instinct, to turn shoppers into buyers.

What is the growth potential for a souvenir shop?

You’ll have fewer worries when the economy is humming and people are traveling (and spending). However, people vacation even in bad times, though they’ll stick closer to home and spend less on souvenirs. You can respond to the realities of the marketplace by adjusting your inventory to sell less pricey goods when budgets are tight.

What are some insider tips for jump starting a souvenir shop?

Find multiple sources for the inventory you want to carry. You can find most of that online, such as this wholesale site. Also consider attending gift fairs such as NY Now, which attracts numerous wholesale product exhibitors and retail buyers.

Unless you have a successful track record in business, it will likely be difficult to get bank loans. That might mean that you rely on savings, credit cards, or small loans from friends and family. With that in mind, it’s important that you try to earn credit with vendors and have strategies to turn over your inventory quickly.

How and when to build a team

If you’re starting your shop on a shoestring budget, you might try to go it alone. However, you’ll quickly find that the long hours and multiple responsibilities (hopefully including the long customer lines at the cash register) mean you need help. You can usually start by finding part-time help at or near minimum wage.

Part 2 - Is a Souvenir Shop business the right fit for you?

Part 3 - Action plan to launch your Souvenir Shop business in 90 days