How to Start a Consignment Shop

Written by Austin Chegini

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People are always looking for that new cool item. Often, they can’t find these unique goods in ordinary retail stores that carry everyday things. Instead, shoppers turn to places like consignment shops and thrift stores to browse the plethora of fascinating items. 

If you are looking into how to start a consignment shop, keep reading. We’ll break down why these stores are successful and how you can get your business off the ground.

Why start a consignment shop?

Have you always wanted to run a business? Maybe you enjoy sales but do not want to spend all day looking at the same items? Perhaps you want to work with people instead of large manufacturers and create a store that benefits the community. 

In addition to the cases above, opening a consignment shop can help you accomplish your goal and have fun in the process. These stores are anything but ordinary, often featuring new inventories every week. Also, shoppers do not have to pay retail prices in most cases.

Consignment works on a simple model. An individual or small retailer provides your store with an item. Once the item sells, you keep a portion of the return and give the rest to the seller. In this model, both of you benefit from the sale, and you only pay if the item sells. 

Many successful consignment shops also allow people to donate goods or sell items upfront. In these scenarios, you keep the entire return after the item sells and still help stimulate your local economy instead of paying large manufacturers for products.

Steps to start a consignment shop

Are you ready to make your business dream a reality? Get your store up and running by following this advice. 

Research your niche

Before you make any moves, you need to understand the economic landscape of your area. Failing to do the proper research can result in wasted money and disappointment. 

You should do some initial exploration to see if your business will even be sustainable in the market. This process does not have to be an extensive review or deep dive, but you should cover your bases before investing more time into the process.

To start, consider your interests. 

  • Do you want to sell specific items?
  • Is there anything that you would not want on your shelves?

Next, look to see what existing stores are in your area. 

  • Are there other consignment shops? 
  • If so, how many and what do they carry? 
  • If not, are there stores that carry similar items? 

Lastly, look at the demand and demographics of where you’ll be selling. 

  • How much do people earn, and how much do they spend? 
  • Are there enough buyers for you and your competitors to succeed? 
  • If not, what will you offer that makes your store superior? 

Create a business plan

After you determine the viability of your store, you need to create a formal business plan to outline how you will achieve your goals. 

SmartAsset identifies the following as the ten elements of a solid business plan:

  • Executive Summary: A basic statement of the goal of your business. It should include the type of consignment business you have, the products you will carry, and any industry experience.
  • Company Description: Take a deeper look at your store and outline what makes it unique, competitive, and desirable. Describe your target market and your immediate and long-term goals.
  • Market Analysis: Building upon the initial research you did above, you now outline your market and analyze the consumers in the area. You will want to detail everything from household spending and shopping habits to show that there will be sufficient demand for your consignment store.
  • Competitive Analysis: Show how your shop can go toe-to-toe with competitors. Highlight your strengths and explain how to overcome weaknesses. 
  • Description of Management and Organization: Explain if you will form an LLC or other business structure. Outline your leadership team and explain their job duties.
  • Breakdown of Your Products and Services: State how you will get your consignment items and explain your fee structure. Mention your specific niche and how you plan to satisfy demand.
  • Marketing Plan: Give an overview of your advertising channels and ongoing marketing budget.
  • Sales Strategy: This section should fully describe your sales goals, how many sales associates you need, your training approach, and anything else related to selling.
  • Request for Funding: Outline how much initial capital you need and where you will get funding from.
  • Financial Projections: List your expected revenue after 12 months, as well as projected annual earnings for the next five years. You can also outline loan repayment information to give context to your figures.

Get your legal affairs in order

As stated in the business plan, you need to form a legal business entity. For many small consignment shops, this will come in these forms:

  • Sole proprietorship: You are a single owner and will submit a Schedule C form with your normal tax filing. 
  • Partnership: If there are two or more owners, you can form these types of partnerships.
  • Limited liability company: Forming an LLC creates a separate business entity that shields owners from some liability.
  • S-corp: These entities are similar to LLCs but act as a pass-through when it comes to taxation.
  • Non-profit: if you are creating a store that does not intend to use profits for personal gain, it’s essential to have not 501(c)(3) status

Next, you will want to register for taxes and any other licenses needed in your area. For example, many states make you register for sales and use tax. For guidance on this, you may want to contact your local chamber of commerce or County Clerk’s office.

Once your legal status is in order, don’t forget to open a business bank account!

Determine your budget and find financing

Do you know how much it will cost to get your consignment shop ready for business? Many people underestimate startup costs and end up scrambling for funds shortly after opening. 

To avoid any issues, create a detailed estimate of all expenses. Make sure to include even the smallest of costs such as internet connection, cleaning services, and power/water.

Next, determine how much you will need to borrow. For many individual owners, a small business loan may be the best option. 

If you cannot qualify for a loan, you may need to bring on a partner or find private financing. Private loans will have different terms than bank financing, so be sure to do your due diligence before signing anything. 

Select a location

We all know location is the most important factor for many businesses. You need to find the ideal place that makes you accessible to the most customers but is affordable enough to stay profitable.

Some factors to consider include:

  • Storage: Does the storefront have enough shelf space? Do you need a stockroom to hold other items?
  • Design: Are you after a specific look, or will you settle for any style? Are you allowed to renovate the space?
  • Parking: Having a parking lot is a huge advantage. If no parking is available, ensure you are within walking distance of the public parking lot.
  • Foot traffic: Consignment shops are fun to visit on a whim. Having a location on a busy sidewalk can increase sales tremendously.

Find suppliers

Depending on your model, you will have a few options for getting inventory. 

Sometimes, people have valuable items but no way to sell them. They can sign a consignment agreement with your store to earn money without doing any heavy lifting. 

Likewise, stores can sell on your shelves to liquidate inventory or assess market conditions. For example, an out-of-state retailer might see how well their products sell in your city to determine if there is demand. 

In any event, it is important to make your shop known and to approach the right partners. To get a head start, you can see the National Association of Resale and Thrift Shops database.

Design your space 

The layout of your consignment shop might seem minor, but it is very important. Not only do you want to maximize space, but you also want to make shopping easier. 

If you want to fit the most items possible, use a grid layout. This floorplan will let you create aisles for customers to meander up and down while shopping. One downside, though, is that the grid makes shopping less of an experience and can make the store seem tight for space. 

If you want to create an experience, use a free flow layout that has no uniform structure. Shoppers can bounce between display cases and wander through the open floorplan to browse different sections. This structure is better if you have fewer items, especially if they are unrelated to each other.

Click here to learn more about these designs, as well as others.

Buy equipment

Since you will continually be bringing in new, unique inventory, you will need the right software and hardware to make management easy. Otherwise, you will need a large ledger to physically track all products. 

It’s vital to choose the right point of sale system to keep your business running. Not only do these devices track all sales and process payments, but they also track inventory and can manage your books. With a modern POS system, you can focus on your customers and let the machine do most of the heavy lifting for you. 

Likewise, you may need to invest in the following items:

  • Pricing gun and stickers
  • Office supplies
  • Packaging materials and bags
  • Retail displays
  • Clothing racks/shelves/hangers
  • Fitting rooms
  • Shopping baskets and carts

Hire your staff

Will you be an owner-operator, or will someone run the store for you? How many people will you need to ensure full coverage? 

During the interview process, make sure to assess personality and helpfulness. Since you won’t know that much about each consignment item, you will need staff members who can answer unexpected questions and think of their feet. When a shopper asks about a product, you want someone who can pivot and still offer value to the customer.

Market your business

Finally, start spreading the word throughout your community. Your marketing strategy should focus on your target demographic, but you also want to increase brand awareness in general. 

For most consignment shops, these marketing channels will work best:

  • Flyers: Place promotional material on coffee shop corkboards or other community areas. Likewise, hang flyers on lampposts, walls, and other public places.
  • Direct mail: Send postcards to homes and businesses in your area. Let them know you are buying and selling items.
  • Local newspapers: Depending on readership in your area, running a newspaper ad may be worthwhile.
  • Road signs and banners: If your store is along a street, consider putting a yard sign or flag by the road. 
  • Website + social media: Establishing a digital presence is crucial. At the very least, build a small website and social media accounts to connect with others.
  • Google My Business: Google offers businesses a free listing on their platform. Complete your GMB page so shoppers can learn more about you, leave reviews, and find you on Google Maps.
  • TikTok: Many businesses are finding success with TikTok. Create fun videos showing off your store and unique items to build buzz.

Start a consignment shop with Epos Now

Opening a store is a large task, and you need every tool available to gain a competitive edge. Epos Now POS systems come fully-loaded with the tools and capabilities to keep your store running smoothly. 

With Epos Now, you get:

  • Cloud access: All systems store data on remote servers, and you can log in from any device, anywhere.
  • Routine updates: We are always finding ways to improve our software, and we send regular updates to enrolled customers.
  • 100+ apps: Our massive app store gives you access to tools for accounting, marketing, and everything in between.
  • Omnichannel capabilities: Build an online consignment store with our e-commerce integrations, and sell on other channels like social media.

Learn more about Epos Now - speak with a consultant today.

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