How to start a consignment shop: step-by-step guide for 2023
A consignment shop is a great way to earn extra income or make a living. But how do you start one? Can it even compete with the behemoth shops that dominate the consignment space?
In this guide, we’ll go over:
- How to start a consignment shop
- Which type of store to open
- How to find the perfect location
- How to create a business plan
- How to acquire merchandise
- And how to hire and train employees
With a little planning and some focused effort (and some funding), you can have your very own consignment shop up and running in no time!
What is a consignment shop?
A consignment shop is a store that sells used or secondhand goods on behalf of its owners. The merchandise owner receives a portion of the sales price when the item is sold, and the consignment shop keeps the rest.
There are many consignment shops, including those specializing in clothing, furniture, art, and more. Some consignment shops only accept high-end merchandise, while others will take just about anything.
Some consignment shops are completely online, while others have brick-and-mortar locations. And some consignment shops are managed by individuals, while others are part of larger chain stores.
The following are some examples of consignment shops you’ve likely encountered before:
Clothing consignment shops: These stores sell used clothing and accessories. The most popular items sold in clothing consignment shops are designer labels and vintage pieces. Examples include Buffalo Exchange and Beacon’s Closet.
Furniture consignment shops: These stores sell used furniture and home decor. The most popular items sold in furniture consignment shops are mid-century modern pieces and antique furniture. Examples include Crate & Barrel and Ikea.
Art consignment shops: These stores sell used or secondhand art. The most popular items sold in art consignment shops are paintings and sculptures. Examples include Sotheby’s and Christie’s.
The benefits of starting a consignment shop
There are many reasons why you might want to start a consignment shop. Perhaps you’re looking for a way to earn some extra income. Or maybe you’re passionate about a particular type of merchandise and want to share that passion with others.
Whatever your motivation, there are many benefits to starting a consignment shop, including:
You can be your own boss: You’re in charge when you start a consignment shop. Up to you to decide how to run your business, what merchandise to sell, and how to market your store.
You can make a difference: Consignment shops are a great way to recycle and reuse goods that would otherwise end up in landfills. By selling secondhand items, you’re helping to reduce waste and preserve resources.
You can earn a profit: If you run your consignment shop well, you can make a decent profit. The key is to find the right mix of merchandise and customers.
You can start an online consignment shop inexpensively: If you’re looking to start a consignment shop on a shoestring budget, an online store may be the way to go. You can list your items for sale on platforms like eBay and Craigslist or create your own website.
The different types of consignment shops
The example shops listed above are big-name brands with brick-and-mortar and online shops. However, there are many different types of consignment shops, from small mom-and-pop stores to online marketplaces.
Here are some of the most common types of consignment shops:
Brick-and-mortar store: This is the most traditional type of consignment shop. A brick-and-mortar store has a physical location where customers can come to browse and purchase merchandise.
Online marketplace: An online marketplace is a consignment shop that exists solely online. Customers browse and purchase merchandise through an online marketplace, such as eBay or Etsy, or a website powered by an ecommerce platform like Shopify or WooCommerce.
Pop-up shop: A pop-up shop is a temporary brick-and-mortar store. Pop-up shops are typically open for a few days or weeks. They’re popular among online retailers who want to test the brick-and-mortar waters without making a long-term commitment.
Mobile shop: A mobile shop is a consignment shop on wheels. Mobile shops typically sell clothing, jewelry, and other small items. They’re often found at farmers’ markets, fairs, and festivals.
What you’ll need to start a consignment shop
Now that you know the different types of consignment shops, it’s time to start planning your own. The first step is to decide what type of store you want to open.
Once you’ve decided on the type of store you want to open, you’ll need a few key things to get started. Let’s go through them in detail.
A business plan
A business plan is a document that outlines your business goals, strategies, and how you plan to achieve them. If you’re seeking funding from investors or lenders, you’ll need to include a business plan with your loan application.
How to create a business plan for a consignment shop
There’s no one-size-fits-all template for creating a business plan, but there are some key components you’ll want to include, such as:
An executive summary: This is a brief overview of your business, including your goals and how you plan to achieve them.
A description of your business: Include an overview of your consignment shop, including what type of merchandise you’ll sell and your target market.
Your marketing strategy: Describe how you plan to market your consignment shop, including online and offline marketing tactics.
Your financial projections: Include a 12-month profit and loss statement, as well as a balance sheet. If you’re seeking funding, you’ll also need to include your loan amount and how you plan to repay it.
Your management team: Introduce the members of your management team, including their experience and qualifications.
A business plan is a living document that should be updated as your business grows and changes. Review your business plan regularly, and make changes as needed.
Here’s an example business plan template for consignment shops.
Funding
The next thing you’ll need to get started is funding. If you’re not using your savings to finance your consignment shop, you’ll need to apply for a business loan or seek investment from angel investors or venture capitalists.
How to find capital to start a consignment shop
There are a few different ways to finance your consignment shop, including:
Business loans: Business loans can be used to finance the start-up costs of your consignment shop, such as leasehold improvements, inventory, and marketing expenses. You can find business loans through banks, credit unions, and online lenders.
Angel investors: Angel investors are high-net-worth individuals who invest their money in businesses they believe in. They typically invest smaller sums of money than venture capitalists, but they don’t always require a stake in the company.
Venture capitalists: Venture capitalists are firms that invest money in businesses with high growth potential. They typically invest larger sums of money than angel investors, but they also require a company stake.
Once you’ve secured the funding you need to get started, you can start looking for a storefront.
Picking a storefront for your consignment shop
The next step in starting your consignment shop is to find the perfect storefront. Here are a few things to keep in mind when you’re searching for a retail space:
Location: The location of your store is important for two reasons. First, you want to ensure your store is in a high-traffic area so you can get as much foot traffic as possible. Second, you want to make sure your store is in a safe neighborhood so you can avoid any security issues.
Size: The size of your storefront will be determined by the type of merchandise you plan to sell. You’ll need a larger space if you’re planning on selling larger items, such as furniture. However, if you’re planning on selling smaller items, such as clothing, you can get away with a smaller space.
Layout: The layout of your store is important for two reasons. First, you want to ensure your store is easy to navigate so customers can find what they’re looking for. Second, you want to make sure your store is aesthetically pleasing so customers will enjoy shopping there.
How to find a storefront for your consignment shop
Here are a few tips for finding the perfect storefront for your consignment shop:
- Start by searching online listings
- Drive around town and look for vacant storefronts
- Ask family and friends if they know of any available retail spaces
- Contact a commercial real estate broker to help you find a space
- Once you’ve found a few potential storefronts, schedule tours so you can see the space in person
How to acquire merchandise for your consignment shop
Now that you have a storefront, it’s time to start thinking about inventory. The first step is deciding what type of merchandise you want. Once you’ve decided on the type of merchandise, you need to figure out how you’re going to acquire it.
There are a few different ways to do this:
Buy from wholesalers: Wholesalers are companies selling bulk products at a discounted price. You can find wholesalers online or through trade magazines.
Some examples of online wholesalers are:
- Alibaba.com
- WorldwideBrands.com
- The Wholesaler UK
Join the Association of Resale Professionals: The Association of Resale Professionals is a trade association for the resale industry. They offer a directory of manufacturers that sell to resellers.
Attend trade shows: Trade shows are events where manufacturers showcase their products to potential buyers. You can find a list of trade shows in your industry by searching online.
Create your own products: Creating your own products is a great way to differentiate your consignment shop from the competition.
Buy from liquidators: Liquidators are companies that sell products that have been returned or damaged. You can find liquidators online or through trade magazines.
Some examples of online liquidators are:
- B-Stock Solutions
- Liquidation.com
- Direct Liquidation
Consign from individuals: Consigning is when people bring their unwanted items to your store and sell them on consignment. This is a great way to start because you don’t have to put any money down upfront.
Once you’ve decided how to acquire your merchandise, it’s time to start thinking about how you will price it.
Search online directories: A few online directories list companies that sell products to resellers. Some examples of these directories are:
- ResaleWorld.com
- The Wholesaler UK
Once you’ve found a few potential suppliers, reach out to them and see if they’re interested in working with you.
If they are, ask for samples of their products to decide if you want to carry them in your store.
You should also ask about their minimum order requirements, shipping costs, and payment terms.
Once you’ve decided on a few suppliers, place your first order and start stocking your shelves!
How to price merchandise for your consignment shop
There are a few different ways to price merchandise for your consignment shop:
Price by item: This is the most common way to price merchandise for a consignment shop. To do this, you’ll need to research how much similar items are selling for and price your items accordingly.
Price by category: Another way to price merchandise is by category. For example, you could price all clothing items at 50% off the retail price, all furniture items at 20% off the retail price, etc. This is a great way to simplify the pricing process.
Discounts and promotions: You can also offer discounts and promotions to attract customers to your store. For example, you could offer a 20% discount on all items for the first week of business or a 10% discount for customers who consign items.
Now that you have a price strategy, it’s time to start thinking about how you will promote your store.
How to promote your consignment shop
There are a few different ways to promote your consignment shop:
Create a website: A website is a great way to promote your store and reach a wider audience. You can use a platform like WordPress or Squarespace to create a professional-looking website without any coding knowledge.
Be sure to include information about your store, such as the address, hours, and type of merchandise you sell.
Use social media: Social media is a great way to connect with potential customers and promote your store. Create accounts on all the major platforms, such as Facebook, Twitter, and Instagram. Then, start posting interesting content encouraging people to visit your store.
Run ads: You can also run ads on social media or Google to promote your store. This is a great way to reach a larger audience, but it can be expensive.
Participate in local events: Another great, low-cost way to promote your store is by participating in local events. For example, you could set up a booth at a community garage sale or a table at a local farmer’s market. This is a great way to get your store’s name out there and attract potential customers.
Now that you know how to start a consignment shop, it’s time to start implementing your plan. Good luck!
FAQs
Starting a consignment shop requires several legal steps and permits. First, you need to register your business with your local government, which involves choosing a business structure (such as sole proprietorship, partnership, or LLC) and filing the necessary paperwork. You will also need to obtain a business license, which grants you permission to operate in your city or county. Depending on your location, you might need additional permits such as a sales tax permit, which allows you to collect sales tax from customers. If you plan to sell secondhand goods, some areas require a secondhand dealer license to regulate the resale of used items and prevent the sale of stolen goods.
You should also consider insurance for your business, including general liability insurance, which protects you from claims of bodily injury or property damage, and property insurance, which covers your inventory and physical shop against theft, fire, and other risks. Additionally, understanding and complying with local zoning laws is crucial. These laws dictate where you can operate your consignment shop and may involve obtaining a zoning permit. Consulting with a legal expert or business advisor can help ensure that you meet all legal requirements and avoid potential pitfalls.
Effective inventory management and tracking are vital for the success of a consignment shop, particularly when operating both online and in a physical store. Utilizing inventory management software is highly recommended. These systems can track inventory in real-time, update stock levels across all sales channels, and provide detailed reports on sales trends and inventory turnover. Popular software options include Shopify, Square, and Vend, which offer integrations for both online and offline sales, making it easier to manage inventory seamlessly.
Implementing a barcode system can streamline the process of tracking items. Each consignment item can be assigned a unique barcode, which simplifies check-in and check-out procedures, making it easier to monitor inventory levels accurately. Regular audits of your inventory are also essential. Conducting physical counts periodically ensures that your recorded inventory matches the actual stock, helping to identify and address discrepancies promptly.
Communication with consignors is another key aspect of inventory management. Establishing clear agreements regarding inventory tracking, pricing, and sales reporting helps maintain transparency and trust. Providing consignors with regular updates on their items’ status can enhance their confidence in your management capabilities. Combining technology with consistent communication and regular audits will help ensure efficient inventory management in a consignment shop.
Building strong relationships with consignors is crucial for ensuring a steady supply of high-quality merchandise in your consignment shop. One effective strategy is to offer competitive and transparent consignment terms. Clearly outline the percentage split, payment schedules, and any fees involved. Transparency builds trust and encourages consignors to continue providing you with items.
Providing exceptional customer service to your consignors is another vital approach. This includes being responsive to their inquiries, offering flexible drop-off and pick-up times, and treating their items with care and respect. Creating a positive experience for consignors can lead to repeat business and referrals.
Marketing your consignment shop effectively can also attract high-quality consignors. Showcase success stories of items that sold well, and highlight the benefits of consigning with your shop, such as your marketing efforts, customer base, and store reputation. Utilizing social media and online platforms to reach a wider audience can bring in consignors who may not have been aware of your shop.
Hosting events and workshops can further strengthen consignor relationships. Invite consignors to exclusive previews, sales events, or workshops on topics like fashion trends or home decor. These events provide opportunities for consignors to engage with your business and feel more connected to your shop.
Finally, offering incentives such as referral bonuses or loyalty programs for consignors can encourage them to continue bringing in high-quality items and recommend your shop to others. By combining transparent terms, excellent service, effective marketing, and engagement strategies, you can build and maintain strong relationships with consignors.
Conclusion
Starting a consignment shop can be a great way to make money and declutter your home simultaneously. However, it’s important to do your research and create a solid business plan before getting started. Use the tips in this article to help you get started on the right foot.
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