Understanding Consignment Shops
Consignment stores sell goods for consignors, who pay a fee to the shop owner to sell their goods. The shops may sell specific items or a range from furniture to clothing. To start and manage a consignment shop, one needs retail knowledge and adequate funding.
Revenue and Profitability
Consignment shops can be quite profitable, with the U.S. resale and consignment industry generating $17 billion in 2018. In 2014, Goodwill Industries alone generated $5.37 billion from its 2,000 stores. Profit for the consignor depends on the final sale price minus fees, which can range from 25-60%.
When you bring items to a consignment shop, they are put on display and sold with a typical 50-50 split on proceeds. However, consignors are only paid when their items sell. Benefits include extra cash, easy decluttering, and effortless inventory management, making consigning a low-stress way to make money from unwanted items.
Business Considerations
While considering opening a consignment shop, the location is critical. Poor location has caused many shops to fail, so it’s important to consider rent, overhead, demographics, work habits, and traffic patterns. Online consignment shops in high-traffic areas can be especially profitable, often keeping 60% of the sale and giving 40% to the original owner.
The cost of starting an online shop averages about $2,500, while a brick-and-mortar location is about $13,000. Owners can expect an average salary of $42,000, varying by location and shop success.
Sales and Marketing
Sales at consignment shops can take time and usually offer long-term profits rather than quick cash. Policies on platforms like ThredUp and The RealReal should be considered for online sales. To price resale items, a rule of thumb is to price near-new items at 50% of retail, slightly used at 30%, and well-worn at 10%.
Items should be consigned for set periods, with popular items typically selling quickly. High traffic can translate into sales when goods are displayed neatly and made easily viewable online.
Having passion and retail experience can make a consignment store an appealing small business opportunity. The keys to success are traffic conversion, quick inventory turnover, quality consignments, and controlled expenses, which can allow income to rival that of other resale models.
Consignment Shop Commission Rates
Typically, consignment shops do a 50-50 split on proceeds. However, this can vary, with sellers sometimes conceding 25-60% of the sale price in fees.
Factors for Success
With sufficient revenue and the right approach to margins, income from consignment stores can rival other retail and resale business models. Quality consignments, rapid stock turnover, and cost control are crucial elements for a successful consignment business.