Is Consigning Profitable?
Have you ever wondered if diving into the world of consignment stores is a profitable endeavor? Let’s break down the business model, examine the pros and cons, and explore what influences profitability.
Overall, a consignment store can be profitable if well-executed. The keys are converting high traffic to sales, quick turnover of inventory, quality consignments, and controlling expenses. For entrepreneurs with retail experience and a passion for finding hidden gems, a consignment store is an appealing small business opportunity.
Consignment stores sell items from consignors, who are usually individuals, for a share of the profits of the sale. A consignment store owner is responsible for attracting consignors to do business with, evaluating and pricing the items from consignors, attracting customers to purchase the items, then dividing the profit and paying the consignor.
However, with the right strategies and tactics, running a profitable consignment store is definitely not a pipe dream. In fact, the consignment industry is growing, presenting opportunities that entrepreneurs can take advantage of.
The average salary for a consignment store owner is $42,000 according to Simply Hired.
Starting a Consignment Business
How much does it cost to start a consignment shop business? A growing number of players in the online consignment store market are creating greater competition. Starting an online consignment shop will cost about $2,500. Starting a brick-and-mortar consignment shop will cost about $13,000.
While all stores are unique, the top local consignment shops are known for providing a friendly and engaging selling experience. These include Plato’s Closet, Once Upon a Child, Play It Again Sports, Guitar Center, Buffalo Exchange, The Wasteland, Style Encore, Music Go Round, Awoke Vintage, and Crossroads Trading.
Start a consignment shop. First, make a plan. Outline goals, strategy, and projections. Second, research the market. Know customers, competition, and trends. Third, choose your shop type. Match interests and product demand. Then, find an optimal site with foot traffic and access that impacts success.
For consigned items, take up to 60% of the selling price per agreement. Margins depend on costs. Inventory comes from selling through your store. Accept pieces you can likely sell at a profit.
Quick Tips for Consignment Success
Here are several quick tips on how to ensure you turn a profit from your consignment shop finds:
- Do Your Research. The first step in starting any business is to do your research.
- What is a fair price for consignment? The rule of thumb is to price the item at 25-40% of what you originally paid for the item, taking into account the brand and condition of the item.
- To sell through consignment, choose a shop with demand for your goods that displays neatly. Quality display conveys value.
Profit made at a consignment store is determined after subtracting expenses from the sales revenue. Revenue from consignment shops vary greatly and depends on many things. According to industry reports, bigger resale stores like Goodwill Industries generated $5.37 billion from their stores in 2014.
Can you make money owning a consignment shop? Yes, but to successfully manage a consignment shop, you need to possess extensive retail knowledge and adequate funding.