Consignment stores sell goods for consignors, with the store taking a commission for each sale. To successfully manage a shop, you need retail knowledge and sufficient funding. Consigning provides benefits such as extra cash, easy decluttering, and effortless inventory management, leading to low-stress income from unwanted items.
The Economics of Consigning
The U.S. resale industry is significant, with $17 billion generated in 2018. Profit for a consignment store is calculated as revenue minus expenses. Sellers typically concede 25-60% in fees to the shop. If items don’t sell within a certain period, they return to the owner.
Location is critical to the success of consignment shops, with poor choices leading to failure. Conversely, well-run online shops in high-traffic areas can be very profitable, selling items for roughly a third of the retail price and keeping 60% of the profit. Starting an online shop has a lower overhead cost, around $2,500, compared to an in-person shop, which can cost about $13,000. The average owner salary is $42,000, but location can significantly impact earnings. Online shops have strategies to encourage impulse buys and offer unlimited income potential.
Pricing and Selling Strategies
To price resale items, near-new items should be sold at 50% of retail, slightly used at 30%, and well-worn at 10%. Goods should be consigned for predefined periods, displayed neatly, and be easy to view online, as these factors are crucial in converting traffic into sales.
With the right retail experience and passion, consignment stores present an attractive small business opportunity. The keys to success include converting traffic into sales, achieving quick inventory turnover, securing quality consignments, and keeping expenses under control. With adequate revenue and profit margins, income from consignment shops can rival other resale models.