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How to Start a Consignment Shop Business
How to Start a Consignment Shop is an excellent illustrated color guide for learning how to start and run a consignment/resale/thrift business... It includes samples of gift certificates, forms, agreements, coupons, even sales invoices. It covers subjects start-up candidates might not think of like location, personality, software/hardware, (free) advertising, employee relationships, presentation of consignments, taxes, forms of business (corporation, partnership, etc.), and many 'how to tips'. ISBN: 978-0-615-25134-9
Excerpts
In consignment, everybody wins. The buyer gets something practically new (and certainly new to them) for a fraction of the retail cost, the seller disposes of an unwanted item and recoups a portion of his/her original cost, and the consignment shop owner gets a percentage of the resale price for bringing these two people together in one convenient location. There’s the added bonus of knowing that you’re all doing something for the environment – recycling!
To own and operate any business, you must have self-discipline, the willingness and ability to make sacrifices, and a strong desire to succeed. You must motivate yourself to work hard and you must demand of yourself that you “work smart” – prioritizing tasks and devoting your best effort to completing each task effectively. Enthusiasm, discipline and intelligent decision-making are key elements to making any business succeed.
Let’s assume for a moment that you were genetically engineered to run a retail operation. Having the right skills and personality traits is only half the battle – if you’re really going to succeed, you must develop both a Business Plan and a Sales Plan. A Business Plan focuses on what your business is, where you want it to go, and measures how well it’s going (and why). A great guide to writing a comprehensive and manageable Business Plan can be found at http://www.business-plan-help.com/. A Sales Plan will outline where your sales will originate, the volume of sales you expect, and how much is needed. For more information, please refer to http://www.bcentral.ca/archive/marketing_sales/sales_success.asp.
When starting a business, you must choose which form of legal structure to use. The most common forms of business are the sole proprietorship, corporation, S corporation and Limited Liability Company. Each type provides different organizational options for applicable personal situations affecting taxes and liability. Following are some of the basic characteristics of each of these structures, but you should seek professional legal and accounting assistance when choosing the type of setup for your business.
It is fairly common for a small consignment store to get started with as little as $350 or less. The store can be stocked essentially for free, taking in consignment items, adding your own items, getting donations from friends and relatives, absorbing unsold items that consignors donate to the shop after a period of time. Stepping up a bit, a little money might be spent on wholesale merchandise and picking up things cheaply at garage sales and places like The Salvation Army. We had garage sales every weekend for several weeks in a row. Instead of just attempting to sell our unwanted items, we purchased things like gold chains and screwdriver sets and sold them as well at 300-500% markup. That’s getting off the path a bit so back to financing.
Successful sales techniques will play a large part in your success. You must be effective in bringing your shop to consignors’ and buyers’ attention then once they are in the door, they must find congruency between the representations you made to get them there and the findings in your store: you, the type and quality of merchandise and its pricing – all meeting or exceeding the expectations you helped them create in your advertising. Honesty is the best policy so if there’s any difference between your ads and your reality, let them be pleasantly surprised to discover that you have understated quality and value.
Above all, your shop should be clean, neat and uncluttered. This means having ample racks, shelves and space to display everything without it being all crammed together. You don’t want to portray a thrift-store or junk shop image. These stores are often messy, disorganized and offer low quality or abused/damaged goods. Your customers know that, and will expect the same if your store looks junky.
Be absolutely sure – this is very important – that your merchandise is clean. Not just free from spots and stains. It should also be lint and pet hair free, and smell clean. Some shop owners require their consignors to launder, dry-clean, press and/or hang the merchandise before bringing it to the shop. Others charge the consignors a fee to do it for them (see the next section on pricing and setting store policy).
Clothing should be free from worn spots, fraying or tears and all zippers, hooks, buttons, etc. should be intact and functional. Accept only seasonal merchandise – sandals won’t sell in December, and sweaters won’t sell in May! Out-of-date fashions are usually not a good idea either, unless you plan for at least part of your venue to be vintage clothing. Use caution when it comes to lingerie, wigs and bathing suits. Check with your local health department for regulations and suggestions on retail handling of these items.
Pricing of consigned clothing is usually 25-40% of retail (based on manufacturer, age, wear and demand), so you will need to be knowledgeable in retail fashion – brand/designer labels and their retail prices. In addition to knowing your merchandise, you must know your customers. If they don’t know what an Armani is, and/or they can’t afford even 25-40% of the retail value of one, you’ll have to adjust your pricing and inventory accordingly.
In no time at all, you’ll learn what sells well in your shop and what doesn’t. You’ll also get a better feel for pricing the merchandise. You may find it necessary to make an adjustment between what you think things are worth and how much your customers will be willing to pay for it. Be careful not to over price your stock. And always remember that you are not obligated to accept every item a consignor brings to your shop. From your market research and experience, you will have a pretty good idea of what will sell. Accept only items that fit your clientele.
At first blush it might seem that the concept of discounting is disadvantageous to the store owner because buyers would naturally sit back and wait for the deepest discount before purchasing an item. This is one reason why it is important to only accept items that will sell quickly, even at the full original price, so waiting for discounts might more often work against procrastinators and opportunists – “Wait too long and the item won’t be here when you return.” Good salesmanship will make this suggestion in the spirit of ‘telling it like it is’ rather than appear to be using a situation (the practice of discounting) as a manipulative sales tactic.
Computerization
Computers definitely provide the best possible means of storing, organizing, manipulating, analyzing and using information about consignors, inventory, pricing, taxes, contact information and so on. Records of your consignors, inventory and sales must be kept and all that is made simple with a computer and a software program designed for consignment shops. Even if you’ve never owned or used a computer before, you can easily learn what to do in a day’s time. Don’t be intimidated by computers. If you can operate the microwave or the remote control to the TV, you can command a computer!
The basic functions of the computer are to run programs, store and manipulate data, and operate peripherals (printers, scanners, etc.). In order for the computer to know what it is supposed to do, it must be supplied with a set of instructions coded in the computer program. The program is used to run the computer. “Save this information. Recall this information. Change this information. Find a consignor’s contact information.” Right – a computer processes information, makes it easy for you to access it and to manipulate it into forms like reports, words and numbers printed on tags and labels, and so on.
By design, computers are very easy to use, once the procedures are known. There’s really not much to have to ‘figure out’. Using a computer is mostly just knowing which key to press next or which mouse click to make. In many ways, a computer does exactly what pen, paper and filing cabinets do, but with much greater ease, speed and correctness. On paper, adding 40 rows of numbers could take a long time and the probability of a wrong answer is high. A computer could add a million rows of numbers in a heartbeat and always produce the correct answer (given correct data input and correct functions/formulas).
The point is: a consignment shop operator deals with hundreds if not thousands of items of inventory, labels, tags, buyers, and sellers. True, somehow they managed before computers came along, but in those days, they probably also worked many more hours, made many more mistakes and knew much less about their own business operation than someone today who can view every detail instantly with the push of a button.
How Consignment Works
Here’s how it works: a consignment shop, in effect, acts as a selling agent for people who have things to sell but not a good way to sell them (anyone can have a garage sale, but that’s not the best way to get the most money for the things you’re selling). In exchange for providing a shop where the merchandise can be properly displayed and marketed, the consignor (the person with an item to sell) pays the shop owner a fee (usually a percentage of the item’s selling price).
Consignment Software Starting at $159
Best Consignment Shop Software has grown rapidly in popularity for very important reasons: It costs far less than other programs with similar features, there are no ongoing usage fees, and users own the software, so they can resell it and recover a good bit of their investment.
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How to Consign at Consignment Sales and Shops
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