How to Open a Resale Shop

Resale shops are doing very well in an economy that seems to get tougher every day. According to a press release from the National Association of Resale & Thrift Shops (NARTS) in August of 2011, the number of resale shops has grown by 7% since last year. Prior years' typical growth was 5%.

Not only are there more resale shops, but they are generally all going better. A 2009 NARTS survey of resale shops showed 64% of them had increased sales from 2008, with the average increase being a whopping 31%. That's some very unusual growth for any industry in the last few years.



We need to make some clarification on what a "resale" store is before we get too far ahead of ourselves. Resale shops are places that sell used or previously purchased clothing. They are not "retail" stores in the sense that they sell new items from distributors, but you do sometimes find "new" items at resale shops because the items were bought and then put right into someone's closet, sometimes with the tags still on. When, for whatever reason, the person decides to clear their closet out, they find some things with tags on and bring them to the resale shop as is.

There are two kinds of resale shops: consignment shops, and thrift shops. Consignment shops work as dealers for the people who bring their clothes in to be sold. The people bringing their clothes in are called consignors. The consignor and the store owner make a deal that the store will carry the item for a set period of time. If the item sells within that time, the consignor and the store owner will split the value of the sale between them. If the item does not sell within that period of time, the consignor must come by to pick up the item and take it home.

Thrift shops work very differently. There are no consignors at thrift shops. The clothes that are brought in are donated outright; the people who drop their clothes off get no money in return. Once the clothes are dropped off, the store owns them, and sells them at very low prices. All profits of a thrift store are typically given to a charity. Many hospitals have thrift stores, as do a lot of humane societies and churches. In order to open a thrift store, you must partner with a charity. Depending on how controlling the board of directors of the charity is, you could be able to run "your" thrift store any way you choose, or you might have board members giving you all sorts of "feedback" about how to manage the store.

Now that we've covered the two types of resale shops, you should know that people use the term "resale store" pretty loosely. If you are having a serious conversation about your potential business with someone, make sure you are both on the same page with your understanding of what a resale store is. The term "secondhand store" also comes up a lot. This often means a thrift store, (because when people are referring to a consignment store, they say (consignment store") but it is always a good idea to check.

To start any of these different kinds of stores, you would do well to write a business plan. Some people like to skip this step, but it is critical if you really want to succeed. Writing a business plan will make you spell out every assumption about your business you have been making, and will then make you defend it. After writing the plan you will have a level of clarity about the how and why of your store that you simply can not have by just keeping it all up in your head. And if you want a business loan to open your resale shop, you must have a business plan.

With business plan in hand, you can now

1) Choose a name for your store
2) Start to gather inventory before your store opens
3) Begin looking for good retail spaces that fit the budget you made in your business plan
4) Start getting your business permit, business checking account, and any other permits or licenses your state and county require. Some of these will have to wait until you get a location, and then you will get to apply for parking spaces, a sign permit, sidewalk permits (to put merchandise out on the sidewalk), building improvment permits, fire department permits, and all the other red tape people have to go through to be legal. Your town hall clerk will give you the list of what you'll need; every business and every town is a little bit different.

When your location is legal, you can start taking donations or consignment to build up inventory. Try to start building inventory at least a month before your grand opening. Remember, you only get one chance to make a first impression, so your inventory needs to be really compelling for people to want to come back to your store. Stick with your business plan through this and buy things that will appeal to your target clientele.

For advertising, you should buy a small, bold listing in the phonebook, and about a quarter or an eigth of a page size ad in the local newspaper or entertainment magazine (whichever is more read by your target clientele). Buy the ad for at least six months, and start advertising a month before your grand opening.

After the word is out, you still get to layout your store, buy equipment like tag guns and jewelry cases and mannequins, and get your resale store software set up. Do not forget to do some window dressing... if you got a retail location with good foot traffic, you should use that window to get in all the customers you can.

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