The retail resale industry hit $38 billion in 2022, with projected growth to $82 billion by 2026 according to thredUP‘s 2022 Resale Report. With 40 million estimated buyers and sellers engaging in secondhand shopping yearly, consignment shops have proven recession-resilient, sustainable businesses.
However, effectively starting and managing a consignment shop still requires strategic planning and diligent effort to thrive. Here‘s your guide to capitalizing on this booming industry in 2023, with expert entrepreneurial advice for resale business success.
Choosing a Resale Niche
Rather than haphazardly picking inventory, savvy consignment shop owners carefully select a resale niche. Specializing allows you to curate unique offerings tailored to your local community and acquire industry expertise.
Apparel remains the most popular resale segment, comprising 31% of the market according to thredUP. Categories like women’s contemporary fashion, children’s clothing, plus-size styles, costumes, and formalwear present potential niches.
Outside clothing, books, furniture, toys, electronics, musical instruments, and sporting goods also perform profitably. Consider browsing your neighborhood to identify an underserved resale niche to dominate.
Crafting a Compelling Shop Vision & Brand
Clarifying your shop‘s vision and brand identity is crucial, guiding everything from your offerings to interior design to customer service approach.
Your brand mission might focus on sustainability, affordable style, catering to specific demographics like teens or brides-to-be, or encouraging community connections. This specialization then informs logo creation, social media messaging, types of consigners and inventory you accept, and systems enabling seamless transactions.
Consignment Shop Startup Cost Breakdown
While less capital-intensive than traditional retailers, successfully launching a consignment shop still requires an average $10,000-$15,000 upfront investment according to Small Business Trends.
Here‘s a realistic breakdown of expected startup costs:
Store rent & renovations: 10-20% of total budget
Operating supplies & equipment: 10-20% of total budget
Starting inventory purchases: $1000-5000+
POS systems & software: $50-$300+ per month
Payroll, insurance, licensing: Variable
Financing options include small business loans and grants, crowdfunding campaigns, personal investments from owners, and pre-launch consignor recruitment pushing initial inventory costs onto individuals.
Staffing Your Shop
While keeping payroll costs reasonable, consignment stores rely on savvy staffing to appraise, process, display, and sell items.
Owners themselves often initially handle buying/selling alongside daily operations management. Eventually they concentrate solely on overseeing finances, marketing, branding, and long-term vision.
Assistant store managers oversee staffing schedules, opening/closing procedures, loss prevention, merchandising, and reporting directly to owners. They may also fill buyer/seller roles.
Buyers meet and consult with consignors, evaluating items’ resale value based on brand, condition, and current trends. They determine what products your store accepts and acquires new inventory.
Cashiers process all register transactions. Cash handling experience proves vital.
Add sales associates as needed to handle floor interaction and keep displays neat and shopper-friendly.
Choosing a Location
While eCommerce expands access, in-person resale thrives thanks to hands-on inspection eliminating online’s sizing discrepancies and photo vs reality letdowns.
Experts recommend choosing a modestly sized retail space near your target demographic. Apparel shops fare best in well-populated downtowns/commercial zones allowing window display walk-bys. As your category niche specializes, identify high-traffic locations aligning with your focus.
Additionally, connectivity matters more than square footage. Convenience encourages spontaneous stop-ins so consider visibility, parking availability, and public transportation access.
Best Practices for Inventory Management
Maintaining sufficient on-trend, quality inventory keeps purchase volume and profit margins high while preventing stagnant displays.
- Set clear category, brand, condition and pricing guidelines informing what you will/won‘t accept
- Install tracking systems linking items to consignors and monitoring time limits
- Pre-sort apparel by size, color, and style for easily shoppable displays
- Stage fresh finds up front awarding prime visibility to latest acquisitions
- Discount aging items to incentive fast purchase
- Remove stale merchandise keeping selection fresh
Pricing for Profit
When acquiring items, offer consignors 30-50% of the resale price you anticipate. This ensures you profit while keeping payouts enticing.
When pricing for purchase, research current resale rates for brands/styles on platforms like eBay, Poshmark and thredUP. Consider category-specific pricing tips too:
- Clothing: Price at 1/3 of original retail on average
- Books: Check Amazon rankings and apply $4-$25 based on collectibility
- Furniture: Evaluate style trends & refinishing needs before attaching 35-70% of initial price
- Musical instruments/gear: Consult Reverb’s price guide averaging 50% of new cost
Marketing Your Shop
While word-of-mouth referrals prove powerful after opening, for launch promotion experts recommend dedicating 10-20% of your startup budget to marketing.
Pre-launch efforts should focus on website and social media channel creation highlighting your niche and driving consignor connections. Consider digital ads, flyers, custom swag and a Grand Opening event too.
Post-launch, build community goodwill by supporting local schools, charities and shelters. Foster brand loyalty via newsletters and loyalty perks like referral bonuses and birthday coupons.
Year-round, optimize your online visibility across directory listings and search results. Run occasional sales balancing margins against fast inventory turnover for consignors.
By determining your specialty and passion, crafting systems facilitating seamless transactions, maintaining sufficient stylish inventory, and delivering exceptional service, your consignment shop can thrive while keeping resale circulating.