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Consignment Shop Business Plan Template

Written by Dave Lavinsky

start a consignment shop

Consignment Shop Business Plan

Over the past 20+ years, we have helped over 1,000 entrepreneurs and business owners create business plans to start and grow their consignment shop companies. We have the experience, resources, and knowledge to help you create a great business plan.

In this article, you will learn some background information on why business planning is important. Then, you will learn how to write a consignment shop business plan step-by-step so you can create your plan today.

Download our Ultimate Business Plan Template here >

What Is a Business Plan?

A business plan provides a snapshot of your consignment shop as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategies for reaching them. It also includes market research to support your plans.

Why You Need a Business Plan

If you’re looking to start a consignment shop or grow your existing consignment shop, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your consignment shop to improve your chances of success. Your consignment shop business plan is a living document that should be updated annually as your company grows and changes.

Sources of Funding for Consignment Shop Businesses

With regards to funding, the main sources of funding for a consignment shop are personal savings, credit cards, bank loans, and angel investors. When it comes to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to ensure that your financials are reasonable, but they will also want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business. Personal savings and bank loans are the most common funding paths for consignment shops.

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How to write a business plan for a consignment shop business.

If you want to start a consignment shop or expand your current one, you need a business plan. The guide below details the necessary information for how to write each essential component of your consignment shop business plan.

Executive Summary

Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your executive summary is to quickly engage the reader. Explain to them the kind of consignment shop you are running and the status. For example, are you a startup, do you have a consignment shop that you would like to grow, or are you operating a chain of consignment shops?

Next, provide an overview of each of the subsequent sections of your plan.

  • Give a brief overv iew of the consignment shop industry.
  • Discuss the type of consignment shop you are operating.
  • Detail your direct competitors. Give an overview of your target customers.
  • Provide a snapshot of your marketing strategy. Identify the key members of your team.
  • Offer an overview of your financial plan.

Company Overview

In your company overview, you will detail the type of consignment shop you are operating.

For example, you m ight specialize in one of the following types of consignment shops:

  • Clothing : this type of consignment store primarily focuses on new or used clothing but some also sell jewelry, shoes, or accessories. General clothing consignment stores stock clothing for women, men, and children and accept both used and new pieces. Niche or boutique stores focus on a particular type of clothing.
  • Books: this type of consignment store buys and sells a variety of books. The inventory is hardback and paperback books from any genre. Some stores also carry specialty books, such as cookbooks or textbooks and also offer audio books, writing journals, and stationery supplies.
  • Music and Movies: this type of consignment store focuses on films, used and new copies of DVDs, and cassette tapes. They will also focus on music, selling used and new CDs, and records. Hybrid entertainment consignment stores sell both music and movies.
  • Furniture: this type of consignment shop carries a wide array of general furniture pieces, or focuses on a niche within the furniture industry. General furniture consignment stores carry used pieces, factory rejects, or unsold items from other furniture stores.

In addition to explaining the type of consignment shop you will operate, the company overview needs to provide background on the business.

Include answers to questions such as:

  • When and why did you start the business?
  • What milestones have you achieved to date? Milestones could include the number of customers served, the number of sales with positive reviews, reaching X number of pieces sold, etc.
  • Your legal business structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

Industry Analysis

In your industry or market analysis, you need to provide an overview of the consignment shop industry.

While this may seem unnecessary, it serves multiple purposes.

First, researching the consignment shop industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your marketing strategy, particularly if your analysis identifies market trends.

The third reason is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section of your consignment shop business plan:

  • How big is the consignment shop industry (in dollars)?
  • Is the market declining or increasing?
  • Who are the key competitors in the market?
  • Who are the key suppliers in the market?
  • What trends are affecting the industry?
  • What is the industry’s growth forecast over the next 5 – 10 years?
  • What is the relevant market size? That is, how big is the potential target market for your consignment shop? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.

Customer Analysis

The customer analysis section of your consignment shop business plan must detail the customers you serve and/or expect to serve.

The following are examples of customer segments: individuals such as young adults, college students, and families.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of consignment shop you operate. Clearly, families would respond to different marketing promotions than young adults, for example.

Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, including a discussion of the ages, genders, locations, and income levels of the potential customers you seek to serve.

Psychographic profiles explain the wants and needs of your target customers. The more you can recognize and define these needs, the better you will do in attracting and retaining your customers.

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Competitive Analysis

Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are othe r consignment shops.

Indirect competitors are other options that customers have to purchase from that aren’t directly competing with your product or service. This includes department stores, big box retailers, and garage/yard sales. You need to mention such competition as well.

For each such competitor, provide an overview of their business and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as

  • What types of customers do they serve?
  • What type of consignment shop are they?
  • What is their pricing (premium, low, etc.)?
  • What are they good at?
  • What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.

The final part of your competitive analysis section is to document your areas of competitive advantage. For example:

  • Will you provide better hours and is your store more visible?
  • Will you offer products or services that your competition doesn’t?
  • Will you provide better customer service?
  • Will you offer better pricing?

Think about ways you will outperform your competition and document them in this section of your plan.  

Marketing Plan

Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a consignment shop business plan, your marketing strategy should include the following:

Product : In the product section, you should reiterate the type o f consignment shop company that you documented in your company overview. Then, detail the specific products or services you will be offering. For example, will you provide an online presence, buyback programs, or purchase items not generally sold at your store?

Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of yo ur plan, yo u are presenting the products and/or services you offer and their prices.

Place : Place refers to the site of your consignment shop. Document where your shop is situated and mention how the site will impact your success. For example, is your consignment shop located in a busy retail district, a business district, a standalone location, or purely online? Discuss how your site might be the ideal location for your customers.

Promotions : The final part of your consignment shop marketing plan is where you will document how you will drive potential customers to your location(s). The following are some promotional methods you might consider:

  • Advertise in local papers, radio stations and/or magazines
  • Reach out to websites
  • Distribute flyers
  • Engage in email marketing
  • Advertise on social media platforms
  • Improve the SEO (search engine optimization) on your website for targeted keywords

Operations Plan

While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your consignment shop business, including taking daily inventory, customer interaction, purchasing used items and/or placing newly acquired items for sale, etc.

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to book your Xth session, or when you hope to reach $X in revenue. It could also be when you expect to expand your consignment shop to a new city.  

Management Team

To demonstrate your consignment shop’s potential to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.

Ideally, you and/or your team members have direct experience in managing consignment shops. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act as mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in managing a consignment shop or successfully running a small retail business.  

Financial Plan

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance s heet, and cash flow statements.

Income Statement

An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenue and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you buy and sell 5 items per day, and/or offer in-store coupons ? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.

Balance Sheets

Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your consignment shop, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a lender writes you a check for $50,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.

Cash Flow Statement

Your cash flow statement will help determine how much money you need to start or grow your business, and ensure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt.

When creating your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a consignment shop:

  • Cost of shop equipment and supplies
  • Payroll or salaries paid to staff
  • Business insurance
  • Other start-up expenses (if you’re a new business) like legal expenses, permits, computer software, and equipment

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your shop location lease or a list of products you plan to buy and sell.  

Writing a business plan for your consignment shop is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will understand the consignment shop industry, your competition, and your customers. You will develop a marketing strategy and will understand what it takes to launch and grow a successful consignment shop.  

Consignment Shop Business Plan Template FAQs

What is the easiest way to complete my consignment shop business plan.

Growthink's Ultimate Business Plan Template allows you to quickly and easily write your consignment shop business plan.

How Do You Start a Consignment Shop Business?

Starting a consignment shop business is easy with these 14 steps:

  • Choose the Name for Your Consignment Shop Business
  • Create Your Consignment Shop Business Plan
  • Choose the Legal Structure for Your Consignment Shop Business
  • Secure Startup Funding for Your Consignment Shop Business (If Needed)
  • Secure a Location for Your Business
  • Register Your Consignment Shop Business with the IRS
  • Open a Business Bank Account
  • Get a Business Credit Card
  • Get the Required Business Licenses and Permits
  • Get Business Insurance for Your Consignment Shop Business
  • Buy or Lease the Right Consignment Shop Business Equipment
  • Develop Your Consignment Shop Business Marketing Materials
  • Purchase and Setup the Software Needed to Run Your Consignment Shop Business
  • Open for Business

Learn more about how to start your own consignment shop business .

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Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.   Click here to see how Growthink’s business plan professional services can help you create a winning business.

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Consignment Store Business Plan Template

Written by Dave Lavinsky

Consignment Store Business Plan

You’ve come to the right place to create your Consignment Store business plan.

We have helped over 1,000 entrepreneurs and business owners create business plans and many have used them to start or grow their Consignment Store businesses.

Below is a template to help you create each section of your Consignment Store business plan.

Executive Summary

Business overview.

Casual Consignment is a startup consignment company located in Houston, Texas. The company is founded by Terri Cooper who has experience in both retail clothing sales and consignment sales Now, with the expertise of knowledge and business acumen, Terri has determined she can confidently start and effectively grow a successful consignment company. Terri believes her experience of strategic growth, marketing skills, financial capabilities, and wide and deep knowledge of consignment and retail sales practices will provide everything needed for long-term growth and profitability.

Casual Consignment will provide a comprehensive array of women’s clothing for a wide variety of clients. Casual Consignment will be the popular clothing store for all ages, providing services and products to each client while supporting the strategic goals of the company. Casual Consignment will be the ultimate choice in Houston for clients to ensure that every need of the customer is fully and completely met.

Product Offering

The following are the products and services that Casual Consignment will provide:

  • Curated clothing for resale of excellent quality.
  • Clothing that has been cleaned and ensured to be of high quality
  • A diverse range of clothing, including outerwear, sportswear, women’s casual, young teen, and children’s garments
  • Fair and transparent pricing, with original tags secured, if possible and markdowns clearly identified
  • Customer values in handbags, jewelry and accessories
  • Day to day excellent customer service
  • Private rooms to try on clothing, if desired

Customer Focus

Casual Consignment will target the adult women of all ages, teens, and children within the greater Houston region. The consignment store will also target retailers who are seeking to refresh inventories or add to offerings in their establishments.

Management Team

Casual Consignment is owned and operated by Terri Cooper. She recruited a former administrative assistant, Cary Brown, to be her store manager and help oversee the store and take on operational duties. She also recruited Manny Jaurez to be the general maintenance man and assistant in stocking and inventory.

Terri Cooper graduated from Houston Lyons High School in 2007 and began to pursue her concept to open a consignment store. She studied consignment sales at Pine Valley Community College while obtaining her associate of arts degree in business. She also worked for ten years within the consignment retail industry, where she became very well known and respected for finding the most appropriate and suitable clothing for a wide variety of women who needed business clothing or clothing for special occasions. Customers often wait to be assisted by Terri for this reason.

Cary Brown worked alongside Terri Cooper for five years after graduating from Houston Lyons High School. She held the role of retail assistant in an administrative position and also helped customers with questions and suggestions for wardrobe items. She will hold the role of store manager in the new store.

Manny Juarez, the former general maintenance man at the consignment store, will now be the manager and assistant in stocking of consignment items and inventory.

Success Factors

Casual Consignment will be able to achieve success by offering the following competitive advantages:

  • Friendly, knowledgeable, and highly-qualified team at Casual Consignment
  • Comprehensive and curated selection of clothing for all occasions, including formal and special occasions. Accessories, handbags and jewelry are also included.
  • Women’s clothing, young adult fashions, teen clothing, and children’s clothing are all included in inventory.
  • Inventory changes regularly on a one-month rotation to refresh customer choices and clothing availability.
  • Rigorous cleaning and clothing preparation takes place prior to inventory placement
  • Casual Consignment offers the best pricing in town. Their pricing structure is the most cost effective compared to the competition.

Financial Highlights

Casual Consignment is seeking $200,000 in debt financing to launch its Casual Consignment store. The funding will be dedicated toward securing the store space and purchasing store equipment and supplies. Funding will also be dedicated toward three months of overhead costs to include payroll of the staff, rent, and marketing costs for the print ads and marketing costs. The breakout of the funding is below:

  • Store space build-out: $20,000
  • Store equipment, supplies, and materials: $10,000
  • Three months of overhead expenses (payroll, rent, utilities): $150,000
  • Marketing costs: $10,000
  • Working capital: $10,000

The following graph outlines the financial projections for Casual Consignment.

Casual Consignment Pro Forma Projections

Company Overview

Who is casual consignment.

Casual Consignment is a newly established, full-service clothing consignment store in Houston, Texas. Casual Consignment will be the most stylish, on-trend and affordable choice for customers in Houston and the surrounding communities. Casual Consignment will provide a comprehensive selection of clothing for any customer to view and select for purchase. Their full-service approach includes a comprehensive array of curated clothing styles in excellent condition, reasonable pricing and convenient rooms for trying on clothing.

  Casual Consignment will be the favorite “go to” clothing store for all customers and will offer the best curated selection of clothing under the guidance of Terri Coopear. The team of professionals are highly qualified and experienced in Casual Consignment and are well-trained in assisting customers in every aspect of the buying process. Casual Consignment removes all headaches and issues of clothing shopping and ensures all expectations are well met while delivering the best customer service.

Casual Consignment History

Casual Consignment is owned and operated by Terri Cooper. Ms.Cooper graduated from Houston Lyons High School in 2007 and began to pursue her concept to open a consignment store. She studied consignment sales at Pine Valley Community College while obtaining her associate of arts degree in business. She also worked for ten years within the consignment retail industry, where she became very well known and respected for finding the most appropriate and suitable clothing for a wide variety of women who needed business clothing or clothing for special occasions. Customers often wait to be assisted by Terri for this reason.

Since incorporation, Casual Consignment has achieved the following milestones:

  • Registered Casual Consignment, LLC to transact business in the state of Texas.
  • Has a contract in place for a 10,000 square foot office at one of the largest retail buildings
  • Reached out to numerous contacts to include Casual Consignment while shopping.
  • Began recruiting a staff of three and three office personnel to work at Casual Consignment

Desert Sun Consignment Storeing Company Services

The following will be the services Casual Consignment will provide:

Industry Analysis

The clothing consignment industry is expected to grow over the next five years to over $70 billion. The growth will be driven by the desire by consumers to conserve clothing and wear clothing that has been sustained as a practice of reasonable use of the world’s environment. The shift in moving toward resale clothing items over new items will continue to grow as technology enables the advancement of cleaning, repairing and redesigning used clothing to produce wearable clothing that has been refashioned. In addition, software technology will move many of the routine processes to digital systems, relieving staff of the more time-consuming tasks in the retail store.

Costs will likely be reduced as technology becomes known and is used more and more freely. Costs will also be reduced by the recycling of clothing and accessories, to produce an overall savings or the purchase of new items. Costs will be reduced as more clothing stores adopt the recycle and reuse policies and fewer garments are thrown into landfills.

Customer Analysis

Demographic profile of target market.

Casual Consignment will target adult women in Houston, Texas of all ages, as well as teens, and children within the greater region. The consignment store will also target retailers who are seeking to refresh inventories or add to offerings in their establishments.

Customer Segmentation

Casual Consignment will primarily target the following customer profiles:

  • Adult women of all ages
  • Young adult women and teens
  • Children of all age groups
  • Clothing retailers looking to refresh or build inventory

Competitive Analysis

Direct and indirect competitors.

Casual Consignment will face competition from other companies with similar business profiles. A description of each competitor company is below.

Clothing On Trend

Established by Manny Buonao in 2001, Clothing On Trend is a clothing store focused on selling to young adult, teen, and pre-teen categories. The clothing sold is imported from Brazil and the pricing is comparable to consignment store pricing. While attractive and casually fun to wear, Clothing On Trend items are made of materials that are not long-lasting and many items much be dry cleaned with each use.

Manny Buonao worked in a retail clothing shop for twenty years and determined after that time to increase his inventory and build a company focused on the young women demographic. This has been profitable; however, the quality of the clothing remains and issue, as many items are returned for full value.

Everyday Consignment Shop

Everyday Consignment Shop was established in 1998 by Nancy and Tommy Gordon. The store inventory is made up of household items, decor, small furnishings, kitchen assortments, and reconditioned collectibles. Nancy and Tommy Gordon owned a retail store in Houston for over ten years before starting Everyday Consignment, where the inventory was directed to men’s clothing and children’s clothing, along with camping gear and outdoor sporting equipment.

After closing the Everyday Consignment shop, the Gordons opened the Everyday Consignment Shop, offering general household items and special holiday-themed retail items during major holidays. Some items are new and sold as overstocks; however, the bulk of the inventory are items that were preowned and lightly used. All inventory is sorted and inspected for usability and any breakage or signs of wear and tear before being placed into inventory.

24 Hour Stop n’ Shop

Although the 24 Hour Stop n’ Shop is primarily attached to a gas station in West Houston, the convenience store has expanded to include a wide variety of consignment items for sale and has proven to be very popular with customers who arrive to purchase gas and stay to peruse the racks of consignment items. Included in the store are household items, decor items, children’s toys, gardening and outdoor items, and kitchen utensils and linens. Some items are sold new as overstocks, while 95% of the items offered are lightly used. Mary and Harry Ragan own the 24 Hour Stop n’ Shop and have used the store as a means to offload many of their family collectibles and items no longer needed from their former ranch. The Ragans have build a sizable customer base and plan to expand the business to include prepared food items, including snacks and packaged meals, to complement the consignment shop and the convenience store items already in stock.

Competitive Advantage

Casual Consignment will be able to offer the following advantages over their competition:

  • Inventory changes regularly on a one-month rotation to refresh customer choices and clothing availability

Marketing Plan

Brand & value proposition.

Casual Consignment will offer the unique value proposition to its clientele:

  • Highly-qualified team of skilled employees who offer both excellent prices and assistance in service to customers.
  • A comprehensive, curated selection of cleaned clothing for customers
  • Affordable pricing on clothing that is sustainable and usable, saving the environment in the process

Promotions Strategy

The promotions strategy for Casual Consignment is as follows:

Word of Mouth/Referrals

Casual Consignment has built up an extensive list of contacts over the years by providing exceptional service and expertise to former clients. The contacts and clients will follow the employees to their new company and help spread the word of Casual Consignment.

Professional Associations and Networking

Retail associations will be joined and networking will be a priority during the first years of business in Houston. There are competitors, both direct and indirect, and the possibility exists for collaboration via associations.

Print Advertising

A direct mail piece will be sent to every Houston household offering a significant discount on clothing purchased during the first 90 days of business. This offer will be made to incentivize new customers to find and continue returning to the Casual Consignment Shop.

Website/SEO Marketing

Casual Consignment will fully utilize their website. The website will be well organized, informative, and list all the product types and services that Casual Consignment provides. The website will also list their contact information and list their holiday special inventory items, along with monthly discounts. The website will engage in SEO marketing tactics so that anytime someone types in the Google or Bing search engine “consignment company” or “clothing resale near me,” Casual Consignment will be listed at the top of the search results.

The pricing of Casual Consignment will be moderate and on par with competitors so customers feel they receive excellent value when purchasing their services.

Operations Plan

The following will be the operations plan for Casual Consignment. Operation Functions:

  • Terri Cooper will be the owner and president of the company. She will oversee all staff and manage client relations. Terri has spent the past year recruiting the following staff:
  • Cary Brown will become the store manager and help oversee the store and take on operational duties.Cary Brown worked alongside Terri Cooper for five years after graduating from Houston Lyons High School.
  • Manny Jaurez, also a former retail associate, will become the general maintenance man and assistant in stocking and inventory.

Milestones:

Casual Consignment will have the following milestones completed in the next six months.

  • 5/1/202X – Finalize contract to lease store space
  • 5/15/202X – Finalize personnel and staff employment contracts for Casual Consignment
  • 6/1/202X – Finalize contracts for Casual Consignment vendors
  • 6/15/202X – Begin networking at industry events
  • 6/22/202X – Begin moving into Casual Consignment store
  • 7/1/202X – Casual Consignment opens its doors for business

Financial Plan

Key revenue & costs.

The revenue drivers for Casual Consignment are the clothing fees they will charge to customers for their inventory items.

The cost drivers will be the overhead costs required in order to staff Casual Consignment. The expenses will be the payroll cost, rent, utilities, shop supplies, and marketing materials.

Funding Requirements and Use of Funds

Casual Consignment is seeking $200,000 in debt financing to launch its consignment store. The funding will be dedicated toward securing the store space and purchasing equipment and supplies. Funding will also be dedicated toward three months of overhead costs to include payroll of the staff, rent, and marketing costs for the print ads and association memberships. The breakout of the funding is below:

Key Assumptions

The following outlines the key assumptions required in order to achieve the revenue and cost numbers in the financials and in order to pay off the startup business loan.

  • Number of Customers Per Month: 400
  • Average Revenue per Month: $48,500
  • Office Lease per Year: $100,000

Financial Projections

Income statement, balance sheet, cash flow statement, consignment store business plan faqs, what is a consignment store business plan.

A consignment store business plan is a plan to start and/or grow your consignment store business. Among other things, it outlines your business concept, identifies your target customers, presents your marketing plan and details your financial projections.

You can easily complete your Consignment Store business plan using our Consignment Store Business Plan Template here .

What are the Main Types of Consignment Store Businesses?

There are a number of different kinds of consignment store businesses, some examples include: Clothing, Books, Music and Movies, and Furniture.

How Do You Get Funding for Your Consignment Store Business Plan?

Consignment Store businesses are often funded through small business loans. Personal savings, credit card financing and angel investors are also popular forms of funding.

What are the Steps To Start a Consignment Store Business?

Starting a consignment store business can be an exciting endeavor. Having a clear roadmap of the steps to start a business will help you stay focused on your goals and get started faster. 1. Develop A Consignment Store Business Plan - The first step in starting a business is to create a detailed consignment store business plan that outlines all aspects of the venture. This should include potential market size and target customers, the services or products you will offer, pricing strategies and a detailed financial forecast. 2. Choose Your Legal Structure - It's important to select an appropriate legal entity for your consignment store business. This could be a limited liability company (LLC), corporation, partnership, or sole proprietorship. Each type has its own benefits and drawbacks so it’s important to do research and choose wisely so that your consignment store business is in compliance with local laws. 3. Register Your Consignment Store Business - Once you have chosen a legal structure, the next step is to register your consignment store business with the government or state where you’re operating from. This includes obtaining licenses and permits as required by federal, state, and local laws. 4. Identify Financing Options - It’s likely that you’ll need some capital to start your consignment store business, so take some time to identify what financing options are available such as bank loans, investor funding, grants, or crowdfunding platforms. 5. Choose a Location - Whether you plan on operating out of a physical location or not, you should always have an idea of where you’ll be based should it become necessary in the future as well as what kind of space would be suitable for your operations. 6. Hire Employees - There are several ways to find qualified employees including job boards like LinkedIn or Indeed as well as hiring agencies if needed – depending on what type of employees you need it might also be more effective to reach out directly through networking events. 7. Acquire Necessary Consignment Store Equipment & Supplies - In order to start your consignment store business, you'll need to purchase all of the necessary equipment and supplies to run a successful operation. 8. Market & Promote Your Business - Once you have all the necessary pieces in place, it’s time to start promoting and marketing your consignment store business. This includes creating a website, utilizing social media platforms like Facebook or Twitter, and having an effective Search Engine Optimization (SEO) strategy. You should also consider traditional marketing techniques such as radio or print advertising.

Understanding The Consignment Business Model

Table of contents, get the latest e-commerce industry news, best practices, and product updates.

There are several business models that E-commerce businesses can use to sell goods. The consignment method is increasing in popularity as an option as it offers a lower-risk approach for more people to participate in the e-commerce business landscape.

In this article, we will explain what consignment is, discuss the pros and cons of consignment selling, and provide you with tips on how to get started.

What is consignment?

Consignment refers to a business model in which the Business Owner , referred to as the consignee, agrees to pay the Supplier , or consignor, a commission proportionate to the proceeds of a product when it is sold to a buyer. Most consignment shops tend to specialise in a particular type of consumer product, and receive products from several suppliers or consignors to sell.

The consignment model is effective for new business owners as you do not need to invest money up front; and you only need to pay when a sale is made. It can also be less time-consuming than sourcing and creating your own product or managing its production. Instead, you will simply act as a middleman between your customer and the supplier. As such, you can focus on other areas such as marketing or customer service.

Pros & Cons of the Consignment Model

Consignment arrangements.

Each consignment shop and consignor will ultimately create their own consignment arrangement. Contracts are put in place to benefit both parties and avoid any possible miscommunication in the future that can lead to unexpected losses. The contract will usually highlight the following:

  • Shipping policies, costs, and lead time
  • A mutually agreed upon sales commission rate of the consignment inventory arrangement.
  • A return policy for goods that are not sold within a time period

Tips for doing consignment for e-commerce businesses

1. identify your target market.

Before starting a consignment business, you must have a clear understanding of your target market and what kind of merchandise you will market to them. If you can define your niche, you can build your reputation more easily and earn both suppliers and buyers more easily.

2. Build a business plan

For a start, a business plan must detail your financial undertakings for running the business. This will include costs of running the consignment business as well as the sales and profit targets. This will give you more insight before selecting the merchandise you want to sell, as well as selecting a supplier with fair prices.

3. Select A Suitable E-commerce Storefront

As a seller of the consignment products, this is the most important step as you are responsible for ensuring that the products get delivered to your end customers. The right e-commerce storefront can help you simplify several day-to-day processes such as tracking of orders and inventory, as well as paying out commissions to the consignors. It is also important to think about a platform with various e-commerce logistics solutions such as one that is partnered with local fulfilment partners to cut down on shipping costs and lead time, resulting to customer satisfaction. 

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Starting a Business | How To

How to Start a Consignment Shop in 9 Steps

Published January 12, 2022

Published Jan 12, 2022

Meaghan Brophy

WRITTEN BY: Meaghan Brophy

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This article is part of a larger series on Starting a Business .

Starting A Business?

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  • 1 Choose the Right Type of Consignment Shop
  • 2 Create Your Budget
  • 3 Create a Business Plan
  • 4 Select a Storefront
  • 5 Acquire Merchandise
  • 6 Design & Outfit Your Store
  • 7 Advertise
  • 8 Hire & Train Employees
  • 9 Plan & Launch Your Grand Opening
  • 10 How to Start a Consignment Shop FAQs
  • 11 Bottom Line

To start a consignment shop, as with any business , you’ll need a prime storefront and a strategy for acquiring customers and merchandise. It involves choosing a niche, establishing a budget and business plan, finding merchandise and laying out your store, advertising, staffing up, and, finally, opening to the public.

Starting a consignment store can cost up to $10,000, according to a commonly reported figure from Entrepreneur, with average salaries for consignment shop owners ranging from $40,000 to $60,000. Here’s how to start a consignment shop―as a brick-and-mortar store―in nine steps.

1. Choose the Right Type of Consignment Shop

If you’re wondering how to start a consignment shop, the first step is to narrow down exactly what kind of store you want to open . The most successful stores cater to a specific audience and have a specialty or focus area that helps them stand out from other online or offline retail competitors. To make the most money with your new business, choose a product area that is in high demand and/or hard to find, to lure shoppers into your store.

Designer & Luxury Goods

The secondhand luxury and designer goods market was worth an estimated 33 billion euros in 2020 (about $37 billion), a figure expected to continue to rise. These are popular items because shoppers can purchase products that may otherwise be outside their budgets. People looking to get rid of gently worn designer products often opt to sell them to a consignment store rather than donating to get a partial return on their investment.

Popular designer goods to sell include watches, jewelry, sneakers and other footwear, handbags, wallets, jewelry, and apparel.

Showing different kinds of apparel.

The apparel resale market will hit $77 billion in the next five years , according to ThredUP.

LXR is an online consignment shop for luxury and designer handbags and accessories. The store focuses exclusively on authentic designer label goods. It also purchases used goods to sell on its site.

Apparel & Footwear

Clothing and shoes are popular secondhand items, even if they’re not expensive designer-label. More than three-quarters of people who’ve never done it would consider selling secondhand clothes. They’re relatively easy to source—more than 95% of the 36 billion tossed clothing items each year could be salvaged—and they’re items for which there will always be demand.

In fact, clothing is the most-purchased secondhand good . And as much as 7% of the average person’s wardrobe consisted of used items in 2019, a figure expected to hit 17% in 2029.

The largest target market for this type of consignment shop are Gen Z women, according to ThredUP. So keep those styles and trends in mind if you’re going after that audience.

Omnia is an excellent secondhand apparel and accessories shop to check out for inspiration. It sells a carefully curated selection of used vintage goods.

Showing an Omnia shop page.

Secondhand books are another popular consignment category. In addition to regular paperbacks and hardcover books, some used bookstores deal in rare books, such as antiques and signed copies, or specialty books like cookbooks and textbooks.

Popular websites like ThriftBooks and Better World Books are examples of online retailers that have found success swelling used books. Puerto Rico-based El Coquí Bookstore sells used books in-store only—shoppers have to visit the shop and explore the wide array of books in a variety of languages.

Children’s Wear

Clothing for children and babies is a popular and profitable type of consignment store. Since parents have to purchase clothes for growing children very often, many turn to secondhand stores as an affordable option. Plus, you’ll have a steady supply of parents looking to sell their children’s gently used clothes.

Once Upon A Child is an example of a secondhand shop that sells both children’s clothing and toys. The brand operates several retail shops as well as a full online presence.

Online Consignment Shop

During the past several years, online consignment stores have become very popular, especially for apparel and accessories. Starting an online consignment shop gives you a wider customer base than a local store.

Check out these resources to help you learn how to start selling online:

  • How to Start an Online Store
  • Best Ecommerce Platforms
  • How to Set up Click and Collect

One key thing to remember when starting an online consignment shop is that you’ll need to photograph each item individually. This can be time-consuming, so it’s important to weigh how much time it’ll take you against the opportunity for profit.

Pop-up Consignment Shop

If you’re not ready to commit to a full-time storefront, having a pop-up business is a great way to test products and locations before diving in. If you’re looking to start a consignment business as a part-time venture or side gig, having temporary stores is a good option as well.

Pop-up shops come with less commitment, so they’re a great way to get into retail without all the overhead of running a permanent storefront. This is exactly the approach that Grapevine Events takes with their secondhand goods pop-up shops. As a result, they’re also able to offer higher rates to consignors.

2. Create Your Consignment Shop’s Budget

Once you know what kind of store you want to open, the next step in how to start a consignment shop is setting a budget for your store . To set your budget, first consider your current income and savings. What can you save and set aside for your new business venture? How much outside funding will you be able to get from personal loans, business loans, business credit cards, and so on? Opening a consignment business requires a lot of upfront cash. Once you’re open, it will take time to build your sales volume.

Next, estimate your expenses for opening your store. Include how much you can spend on a storefront, outfitting the inside of your store, signs, and marketing, and your initial product purchase.

Now, estimate your monthly expenses for once you open. Include set bills like rent, phones, internet, payment processing, and so on. Also factor in advertising budgets, employee salaries, merchandise purchase orders, and other store supplies.

The hardest part of setting a budget for a business that is not yet open is predicting your monthly sales volume. This is especially hard for apparel and retail businesses as sales can fluctuate drastically, depending on the season, holiday, weather, economy, and consumer confidence. According to the Retail Owners Institute , used merchandise retailers had an average inventory turnover rate of 4.1 in 2021. That means they sold through and replaced all of their inventory about four times throughout the year.

Keep that number and your total inventory value in mind when estimating your monthly sales. Err on the side of caution, and plan for lower sales when you open, so that you have enough cash flow to cover expenses. Subtract your estimated monthly expenses from your estimated monthly sales, and that will give you an approximate monthly cash flow for when you open.

Pro tip : Retail is an extremely seasonal business. Most retail businesses bring in a ton of money around Christmas and the winter holidays. There are also spikes in revenue around back to school shopping, and spring holidays such as Mother’s Day and Father’s Day. Your monthly sales can vary, so always have extra cash on hand to cover slower months.

3. Create a Business Plan for Your Consignment Shop

Once you figure out what kind of consignment business you’d like to open, you’ll need a solid business plan to piece together all your ideas and form a strategy for making your store profitable. If you’re seeking outside or startup funding such as a bank loan, your business plan will be evaluated during the approval process.

Here are the nine elements found in a typical business plan :

  • Executive summary : An introductory paragraph outlining your consignment shop’s purpose, mission, and why it will be successful.
  • Business description : Describe what need or market hole your consignment store is filling in the community, who your customers will be, and the talent on your team.
  • Market analysis : Write an overall outlook on the consignment and resale industry including trends, what successful competitors are doing, and what your strengths will be.
  • Organization and management : Outline who will be running your business and the experience your team members have in retail, consignment, or your store’s area of specialty.
  • Product line : Outline what kinds of products you will sell, how you will sell them, and where your supply will come from. Include research on why you’re selecting those products, such as sales trend data.
  • Marketing and sales : Describe your general marketing strategy and your plan for attracting and retaining customers.
  • Funding requests : If you need outside funding, outline your needs and specify exactly how you will use the funds.
  • Financial projections : Detail how your business will become stable and profitable, including a projected financial timeline of at least five years. If you are borrowing funds, include a plan on how you will be able to repay the loan.
  • Appendix : Use this space for any supplemental documents, such as logo or branding designs, sketches of what your consignment shop will look like, credit histories, licenses, permits, etc.

When writing a business plan, use the format and software you’re most comfortable with. Many people use a traditional word processor like Microsoft Word or Google Docs. You can also create your business plan in a presentation format using PowerPoint or Google Slides. There are also business plan software programs that offer templates and guide you through the process.

Choose the Best Legal Structure

Choosing a legal structure for your consignment business is important because it dictates how you will collect and report taxes, your level of personal liability, and how you will get paid from your business. There are many types of legal structures, but the three most commonly found in retail are sole proprietorships, limited liability companies (LLCs), and corporations .

  • Sole Proprietorship
  • Limited Liability Company
  • Corporation or C-corp

If you don’t set up a legal structure for your business, this is the default. Operating under a sole proprietorship essentially means you’re doing business as an individual and, therefore, are not separated from your business in any way. Sole proprietorships are popular options for freelancers, business consultants, and other individuals conducting low-risk and low-visibility work by themselves.

With sole proprietorships, your business revenue is considered personal income. This means you will pay sole proprietorship taxes based on your personal income bracket. While you are subject to self-employment taxes, you do not have to pay any corporate taxes, which is a plus.

However, sole proprietorships also come with greater risk because you and your business are one and the same. Your personal assets, such as your house and car, are at risk if there is any kind of lawsuit against your business or if you declare bankruptcy.

LLCs are legal structures for small businesses that protect your personal assets, such as your house and car, in the case of lawsuits or business bankruptcy. This is the most popular legal structure for small retail businesses and the one we recommend if you are planning on maintaining a single consignment storefront.

If you’re the single owner of the LLC , you’ll likely still pay taxes the same way you would as a sole proprietorship but with the benefit of personal assets protection from liability. However, many states have separate LLC taxes, which may make it more expensive than operating as a sole proprietor. It’s always best to check with your local regulations.

To form an LLC, you need to choose an official name and file paperwork to establish your company, whereas a sole proprietorship doesn’t require any paperwork. Luckily, the paperwork isn’t overly extensive and can be filed easily in a few steps using a tool like LegalZoom .

Corporations are the most structured legal form for your consignment business. They have strict tax guidelines. When you create a corporation, it’s a completely new and separate entity in the eyes of the government and the IRS.

Corporations are an ideal structure for consignment businesses that want to expand into multiple storefronts, become a public company, or want to secure a lot of outside funding. Corporations provide you the most personal liability protection out of the three legal structures. However, you will need to pay federal corporate tax on top of personal income tax. Corporations are also expensive to form and require you to keep detailed business records.

Organize Your Finances

No matter which legal structure you choose, getting your finances in order is a crucial step. This involves opening a business checking account to separate your personal and business finances right from the beginning. Having two separate accounts makes it easier to monitor your business’ cash flow and track expenses accurately and will make the process of filing taxes much easier.

Chase is a great banking solution for retailers because it offers small business checking, business credit cards, and merchant services―payment processing―so business owners can manage all their cash flow in one place. Plus, Chase offers competitive rates and great customer service. Contact Chase to learn more about its small business retail solutions.

Learn more about the best small business checking accounts .

4. Select a Storefront

Choosing a storefront is a critical step that needs to be considered carefully. The location you select can all but make or break your business. The decision can seem overwhelming. So, start by narrowing down a geographic location. You’ll be spending long hours at your consignment shop nearly every day when you first open. Think about how far you are realistically willing to commute and choose areas that are accessible from your home easily.

Spend time in each area to become familiar with specific neighborhood demographics and preferences and scope out other local businesses. There are many factors that go into choosing the right location for your business, but it all comes down to picking the location that will attract the most customers.

A woman looking at a storefront.

Choose a storefront that gets a lot of foot traffic for increased sales and visibility.

Determining foot traffic can help you figure out how many walk-in customers you can expect in each location. In addition to staking out your prospective storefront locations, ask other local business owners questions about the traffic, shopper demographics, and neighborhood.

Additionally, consider details such as parking and signage. A Main Street location is ideal, but only if your customers can park near your store easily. Likewise, you’ll want a location that allows for a big storefront sign. Some locations have strict rules about the sizes and types of signage they allow.

Showing a map of used clothing store buffalo exchange locations across the US.

Used clothing store Buffalo Exchange has several locations across the US. Many of the stores have been strategically placed in college towns where they have a steady stream of supply and demand from students. (Source: Buffalo Exchange)

5. Acquire Merchandise

Finding merchandise to sell at your consignment shop is trickier than sourcing products for traditional retailers . You’ll want to have a buying strategy in place before you open to ensure a steady stream of products to sell. You’ll probably use a combination of tactics to keep your store stocked.

Popular secondhand product sourcing strategies include:

  • Joining the Association of Resale Professionals (NARTS) : This professional organization connects resale buyers with suppliers through its directory.
  • Advertising to potential consigners : Advertise in print and online (on social media too!) regularly that you’re purchasing gently used items. Many of your potential shoppers could also be suppliers.
  • Purchasing from flea and thrift shops : You can find some great deals on products to sell in your store by searching through flea markets and other thrift stores.
  • Finding an off-price supplier : Off-price products aren’t secondhand, but they’re deeply discounted products that are either overstock or slightly damaged. You can find them through trade shows.

6. Design & Outfit Your Consignment Store

After securing a storefront and finding product sources, it’s time to start strategically planning your store layout . Your store layout has a dramatic impact on in-store sales. A well-designed layout will welcome shoppers, make them feel comfortable, and direct them toward specific products.

The first thing you need to decide is what type of floor plan you want. Most retail stores fit into one of three basic layout categories:

  • Loop or racetrack : Best for specialty stores, showrooms, and retailers that want to lead shoppers on a specific path throughout the store.
  • Grid or straight : This floor plan is exactly what you would expect: straight, angular aisles that are typically found in grocery and box stores. A consignment bookstore may also follow this model.
  • Free flow plan : This is a popular plan for boutiques and allows for lots of creativity in the design process. Most apparel or decor consignment shops will follow this model.

Finally, you will need to position your checkout counter. A well-positioned checkout will open up floor space for displaying products and encourage shoppers to move through more of your store. As a rule of thumb, try to position your checkout on the left-hand side of your store.

Shoppers naturally veer toward the right side of a store, so that’s where you want to display your best products. Some department stores and larger mall retailers place their checkout counters at the back of the store. However, for smaller retailers, placing your checkout toward the front makes it easier for staff to attend the register and keep an eye on the entrance.

Select a POS System

Point-of-sale (POS) systems are cloud-based software programs that replace traditional cash registers and offer additional tools such as inventory management, sales reports, and customer data and marketing. Your POS system is the central hub for your business where you process all transactions. Look for a system that has all the features you need, including payment processing, for an affordable rate.

Showing Lightspeed Retail POS hardware.

Lightspeed Retail POS simplifies the process of running a retail store. (Source: Lightspeed Retail)

Some of the criteria we use to evaluate the best POS systems include:

  • Price : Most POS software programs charge a monthly fee, and some also charge extra for certain features.
  • Ease of use : Test out each POS with a free demo or trial to make sure the interface is easy to navigate, and also read user reviews.
  • Customer management tools : Almost all POS systems have a customer directory feature but, otherwise, they vary greatly in what loyalty, marketing, and customer feedback features are included.
  • Sales reports : Each type of POS solution will have some kind of reporting tools, but some offer more details and features to create custom reports.

For brick-and-mortar stores, we often recommend Lightspeed. It’s a small business POS with big-business functionality such as custom report builders, detailed inventory tracking, a loyalty program, and built-in payment processing. Plus, it has built-in capabilities to handle consignment products. Visit Lightspeed for a 14-day free trial.

Visit Lightspeed

7. Advertise Your Consignment Shop

Before opening your consignment shop, you’ll need to start advertising and marketing your retail shop . Because you’re on a budget, make sure your strategy is effective by choosing a combination of online and offline marketing efforts.

  • Social Media
  • Search Engine Optimization (SEO)

In order for customers to find your business, you’ll want to have a website. Creating your own website from scratch can be easy with the right tools. There are many easy ways to make a business website for little or no cost. You need a registered domain and a web hosting service.

Showing Olive My Stuff, a consignment shop page.

Olive My Stuff, a consignment shop in Connecticut, has a professional website with information on shopping and consigning.

Create social media accounts on channels like Facebook, Instagram, and TikTok to promote your brand and consignment items. You can even sell your secondhand goods on Facebook as well as sell them on Instagram directly. Run paid social ads targeting people who fit your target market in your local area.

Focusing on your SEO strategy is an excellent way to put your consignment shop in front of people who may not have otherwise heard about you. Local SEO , in particular, can help you increase your visibility for local searches. This is an excellent marketing tactic because users searching for “consignment shop near me” are likely high intent.

  • Store Signage
  • Window Displays
  • Customer Loyalty Program

The storefront signage is the first impression shoppers will get from the in-person experience with your consignment shop. Make sure the sign is easily visible and easy to read, while also being reflective of your brand. You want to stand out enough to make passersby curious about what’s inside, especially if you plan to rely heavily on foot traffic. Check out these business sign ideas for inspiration.

While your signage might make the first impression, your window displays have the potential to make the biggest impact. A well-designed storefront with captivating window displays can lure even the most hesitant shoppers into your consignment store. Here are some resources to help you get started:

  • Create a Stunning Store Window Display
  • Visual Merchandising Techniques

Once your consignment shop is up and running, loyalty programs are a great way to encourage repeat customers and higher transaction amounts. Simple punch cards can be effective. However, using a loyalty program that’s tied in with your POS system offers deeper insights like who is using the program and how effective it is. Lightspeed  offers a sophisticated loyalty program that you can add onto Lightspeed POS for a monthly fee.

8. Hire & Train Employees

Last but certainly not least, before opening your store to the public you need to bring on a stellar group of employees to serve as the front lines of your business. If you haven’t hired an employee before, navigating the process can be intimidating. Follow a new hire checklist that outlines all of the gritty steps you need to take such as obtaining an employer identification number (EIN), registering for state and local taxes, and so on.

As a consignment store owner, it’s likely you won’t have a dedicated human resources (HR) team member. Using an affordable solution like Homebase can save you plenty of time and stress by simplifying hiring, employee scheduling, time tracking, and payroll.

Visit Homebase

Training Your Employees

You’ll want your consignment store staff ready to provide top-notch customer service from the moment you open your business. Providing great customer service is a skill that requires practice. If you don’t start training your employees before you open, they’ll be practicing their service skills on your customers.

Instead, hold a weeklong training boot camp before you open. In addition to running through customer service scenarios and role-playing, teach employees about store policies and procedures, the items you’re selling, and any other pertinent information.

9. Plan & Launch Your Grand Opening

Hosting a grand opening celebration is a great way to kick off your new business venture while also gaining some press coverage. To have maximum attendance, recruit friends and family, draft a press release for local media and surrounding businesses, make a Facebook event, notify your local Chamber of Commerce, and take an advertisement out in the local paper.

“One mistake a lot of companies make is staying under the radar until launch. If no one knows what you’re doing and when you’re opening, then you have zero chance of making any sales. Start building some excitement at least six weeks before your launch. Get active on social channels. Interact with likely customers and get the conversation started. Build anticipation with enticing photos, and maybe even incentivize purchases in those early days.” ― Deanna Thompson, Blogger, Closet Full of Cash

Showing an open sign board.

Plan a grand opening to celebrate the launch of your new business.

How to Start a Consignment Shop Frequently Asked Questions (FAQs)

Opening and running a consignment shop can be a tricky business.

What is a consignment shop?

A consignment shop is a store that sells secondhand items, typically clothing and accessories. Consignment stores purchase gently used goods and resell them at a markup to make a profit.

How does a consignment shop work?

As the owner of the consignment shop, you will purchase secondhand goods from customers, professional suppliers, flea market vendors, and so on, and own those items until they are resold in your store for a higher price.

How much does it cost to open a consignment store?

The exact price can vary a lot depending on your location and local real estate prices. However, opening a consignment store will cost roughly $10,000.

Why do consignment stores fail?

Part of learning how to start a consignment shop is figuring out what not to do. There are many reasons a consignment shop could fail. Common reasons include choosing the wrong storefront location, not having in-demand products, too-small profit margins, and insufficient marketing.

Bottom Line

Consignment shops are a great business idea for making money in 2022. More than 20,000 US-based used merchandise stores have a combined annual revenue of $17.6 billion , according to First Research. And these numbers continue to grow, especially as the world becomes more aware of the environmental challenges consumerism brings.

Starting a consignment shop is an excellent way to promote sustainable consumerism while also making a profit. And with the market growing the way it is, there’s plenty of opportunity for consignment shops of all kinds. There’s never been a better time to start a consignment business of your own.

About the Author

Meaghan Brophy

Find Meaghan On LinkedIn Twitter

Meaghan Brophy

Meaghan Brophy is a Retail Expert at Fit Small Business focusing on small business retail and ecommerce content. Meaghan’s 10+ years of retail experience includes working at local book and dance supply stores, handcrafting gifts at an eco-friendly manufacturer, developing private label brands, and managing a team of more than 40 sales and service professionals at a local spa.

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Consignment Shop

Back to All Business Ideas

How to Start a Consignment Shop

Written by: Carolyn Young

Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.

Edited by: David Lepeska

David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.

Published on May 31, 2022 Updated on February 14, 2024

How to Start a Consignment Shop

Investment range

$2,550 - $13,100

Revenue potential

$156,000 - $468,000 p.a.

Time to build

0 – 3 months

Profit potential

$62,000 - $187,000 p.a.

Industry trend

It may be hard to believe, but second-hand clothing is one of the world’s fastest-growing industries. The market is expanding a stunning 25% each year, which means right now is a great time to start your own consignment shop and ride this train to success. 

But before you hang your “OPEN” sign, you’ll need to learn how to launch and run a business. Luckily, this step-by-step guide has you covered with all the information you’ll need to open your new consignment shop. 

Looking to register your business? A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple.

Form your business immediately using ZenBusiness LLC formation service or hire one of the Best LLC Services .

Step 1: Decide if the Business Is Right for You

Pros and cons.

In a nutshell, consignment shops get paid for selling other people’s stuff. People bring in unwanted shoes and clothing, antiques and household goods, and the shop sells them for an agreed-upon price and takes a commission, usually about 50%.

Still, starting a consignment shop has pros and cons to consider before deciding if it’s right for you.

  • Business Model Options – Choose a physical or online consignment shop
  • Good Margins – Pay nothing for inventory until it sells; get half the sale price
  • Hot Market – Demand for vintage and second-hand clothing is rising
  • Delayed Opening – Build up inventory before the store opens
  • Crowded Market – A hot market means lots of competition

Consignment industry trends

Industry size and growth.

  • Industry size and past growth – The global second-hand clothing industry is worth $119 billion, up 24% from 2021.(( https://www.thredup.com/resale/#size-and-impact ))
  • Growth forecast – The global second-hand clothing industry is projected to nearly double by 2026 to reach $218 billion. 

consignment industry size and growth

Trends and challenges

Trends in the consignment shop industry include:

  • Online clothing resale is the fastest-growing market segment, expected to quadruple by 2026.
  • In 2021, 244 million US consumers said they were open to buying second-hand clothing.

Challenges in the consignment shop industry include:

  • A growing number of players in the online consignment store market are creating greater competition.
  • Generally only brand name clothing is sold in consignment shops, which means shop owners have to watch out for knock-offs. 

consignment shop Trends and Challenges

How much does it cost to start a consignment shop business?

Starting an online consignment shop will cost about $2,500. Your costs will be for a website and marketing costs. Starting a brick-and-mortar consignment shop will cost about $13,000.

How much can you earn from a consignment shop business?

Prices for consignment items will vary. Since you’ll be looking for high-end items to sell, these calculations will assume an average item price of $300, of which you’ll get 50%. If you’re running an online consignment store, your profit margin after marketing costs and paying the consignor will be about 40%. 

In your first year or two, you could sell 10 items a week, bringing in $156,000 in annual revenue. This would mean $62,000 in profit, assuming that 40% margin. As your website gets more traffic, sales could climb to 30 items a week. With annual revenue of $468,000, you’d make an outstanding profit of $187,000.

consignment shop earnings forecast

What barriers to entry are there?

The only barrier to entry for a consignment shop is the competition you’ll face.

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Step 2: hone your idea.

Now that you know what’s involved in starting a consignment shop, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an opportunity

Research consignment shops in your area and online to examine their products, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the market is missing a consignment store that sells furniture and household items.

consignment store business model

You might consider targeting a niche market by specializing in a certain aspect of your industry, such as luxury brands or high-end accessories.

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products

You’ll need to determine if you want to specialize in clothing or some other type of merchandise. In addition to consignment items, you could also operate in part as a thrift store or online thrift store and sell donated items or items you find at garage sales. You could also have a retail store in your shop where you sell items that you’ve purchased wholesale. 

How much should you charge for consignment items?

Prices will vary based on the item and its retail price. For an online store, after the cost of paying consignors and marketing, you should aim for a profit margin of about 40%.

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will be broad, so you should spread out your marketing to include sites like TikTok, Instagram, and Facebook. 

Where? Choose your consignment shop location

Choosing the right location for your consignment shop is crucial for attracting customers and ensuring its success. Look for a spot in a high-traffic area with good visibility, such as a popular shopping district or a busy downtown area.

Consider accessibility and convenience, ensuring that the location is easily reachable by public transportation and has ample parking. Additionally, assess the local demographics and aim to select a location that caters to a wide range of customers. You can find commercial space to rent in your area on sites such as Craigslist , Crexi , and Instant Offices .

When choosing a commercial space, you may want to follow these rules of thumb:

  • Central location accessible via public transport
  • Ventilated and spacious, with good natural light
  • Flexible lease that can be extended as your business grows
  • Ready-to-use space with no major renovations or repairs needed

consignment shop idea rating

Step 3: Brainstorm a Consignment Shop Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

  • Short, unique, and catchy names tend to stand out
  • Names that are easy to say and spell tend to do better 
  • Name should be relevant to your product or service offerings
  • Ask around — family, friends, colleagues, social media — for suggestions
  • Including keywords, such as “consignment shop”, boosts SEO
  • Name should allow for expansion, for ex: “Renewed Treasures” over “Sports Gear Consignment Shop”
  • Avoid location-based names that might hinder future expansion

Discover over 260 unique consignment shop name ideas here . If you want your business name to include specific keywords, you can also use our consignment shop business name generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Find a Domain

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Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Consignment Shop Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

  • Executive Summary: A brief overview of your consignment shop business, highlighting key points such as the business concept, goals, and potential for success.
  • Business Overview: Detailed information about your consignment shop, including its mission, vision, location, legal structure, and any notable achievements or milestones.
  • Product and Services: Description of the items your consignment shop will accept and sell, emphasizing the quality, uniqueness, and appeal of the products.
  • Market Analysis: Examination of the target market for your consignment shop, including demographics, trends, and potential growth opportunities.
  • Competitive Analysis: Evaluation of other consignment shops or similar businesses in the area, identifying strengths and weaknesses to position your shop effectively.
  • Sales and Marketing: Strategies for promoting your consignment shop, attracting customers, and driving sales, encompassing both online and offline channels.
  • Management Team: Introduction of key individuals involved in running the consignment shop, highlighting their expertise and roles.
  • Operations Plan: Details on the day-to-day operations of your consignment shop, covering aspects such as inventory management, staffing, and customer service.
  • Financial Plan: Projections and analyses of the financial aspects of your consignment shop, including startup costs, revenue forecasts, and break-even analysis.
  • Appendix: Additional supporting documents, such as resumes of key team members, detailed market research data, and any other supplementary information relevant to the business plan.

what to include in a business plan

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to consignment shops. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your consignment shop will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

  • Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
  • General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
  • Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
  • C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
  • S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC , which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

types of business structures

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization , and answer any questions you might have.

Form Your LLC

Choose Your State

We recommend ZenBusiness as the Best LLC Service for 2023

consignment store business model

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number , or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

consignment store business model

The IRS website also offers a tax-payers checklist , and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

  • Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
  • SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan .
  • Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
  • Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
  • Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
  • Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a consignment shop business. You might also try crowdfunding if you have an innovative concept. 

types of business financing

Step 8: Apply for Consignment Shop Business Licenses and Permits

Starting a consignment shop business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration ( OSHA ), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package . They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account .

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your consignment shop business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

  • General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
  • Business Property: Provides coverage for your equipment and supplies.
  • Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
  • Worker’s compensation: Provides compensation to employees injured on the job.
  • Property: Covers your physical space, whether it is a cart, storefront, or office.
  • Commercial auto: Protection for your company-owned vehicle.
  • Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
  • Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

types of business insurance

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks. 

You may want to use industry-specific software, such as ConsignPro , resaleworld , or SimpleConsign , to manage your inventory, billing, and payments. 

  • Popular web-based accounting programs for smaller businesses include Quickbooks , Freshbooks , and Xero . 
  • If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using website builders . This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

They are unlikely to find your website, however, unless you follow Search Engine Optimization ( SEO ) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

For your consignment shop, the strategy should focus on highlighting the unique, ever-changing selection of items you offer, the affordability and sustainability of shopping second-hand, and the personalized shopping experience. Here are some powerful marketing strategies for your future business:

Kickstart Marketing

  • Professional Branding : Your branding should reflect the eclectic, unique nature of your shop, conveying a sense of discovery and sustainability. This could be reflected in everything from your logo and storefront to your online presence.
  • Direct Outreach : Connect with local communities, fashion bloggers, and sustainability advocates to increase awareness about your shop.

Digital Presence and Online Marketing

  • Professional Website and SEO : Create an engaging website showcasing your latest finds, store events, and customer testimonials. Implement SEO best practices to optimize your site for local consignment, thrift shopping, and sustainable fashion searches.
  • Social Media Engagement : Use platforms like Instagram, Facebook, and Pinterest to regularly post about new arrivals, fashion inspiration, and sustainable shopping tips.

Content Marketing and Engagement

  • Fashion and Sustainability Blog : Share blog posts about fashion trends, upcycling tips, and the benefits of consignment shopping.
  • Customer Features and Success Stories : Highlight satisfied customers, especially those who found unique items or put together stylish outfits from your shop.
  • Style Guides and Lookbooks : Create seasonal lookbooks or style guides using items from your shop to inspire customers.

Experiential and In-Person Engagements

  • In-Store Events : Host themed shopping events, styling workshops, or local artist pop-ups to draw people into your store.
  • Participation in Community Events : Engage in local street fairs, fashion shows, or community markets to increase visibility and reach a wider audience.

Collaborations and Community

  • Partnerships with Local Designers and Artisans : Feature local designers or artisans in your shop, providing a platform for local talent and unique products for your customers.
  • Community Involvement : Participate in or sponsor local environmental and community events to align your shop with sustainability and community values.

Customer Relationship and Loyalty Programs

  • Loyalty Rewards : Implement a loyalty program that offers discounts or special privileges to repeat customers.
  • Consignment Incentives : Encourage more consignments by offering incentives or better terms to frequent consignors.

Promotions and Advertising

  • Targeted Local Advertising : Use local newspapers, community bulletin boards, and online platforms to reach potential customers in your area.
  • Email Marketing : Keep your customers engaged with regular newsletters featuring new inventory, fashion tips, and upcoming events.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your consignment shop meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your consignment shop business could be:

  • Luxury brands at non-luxury prices 
  • Top quality consignment and thrift items shipped fast!
  • Sell your unwanted collectibles and make good money

unique selling proposition

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a consignment shop business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in consignment shops for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in consignment shops. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a consignment shop business include:

  • Shop Clerks – make sales, customer service
  • General Manager – inventory management, accounting
  • Marketing Lead – SEO strategies, social media

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed , Glassdoor , or ZipRecruiter . Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Consignment Shop – Start Making Money!

The consignment market is heating up, with resale clothing and accessories experiencing boom times. Now is the perfect time to open your own consignment shop. If you have a great eye for fashion and a desire to provide customers with great products, you could build a lucrative consignment operation.

You’re done your business homework now, so it’s time to get the word out and launch your successful consignment shop. 

  • Consignment Shop Business FAQs

Yes, consignment can be a very profitable business. The market for resale clothing is growing rapidly, so demand for the items you sell should be high.

Consignment shops get a percentage of the sale price of the consigned items. The fee ranges from 40% to 60% for clothing and accessory sales. Fees can be higher for items like furniture.

The main risks are the items being damaged or stolen. Then you could be liable to the owners of the items.

You’ll need to train them on how to value consignment items. Then you’ll need to monitor the transactions they make to ensure that the prices are accurate.

You’ll need to create a strategic plan for how to market your shop, and how you’ll handle the business as your sales increase. 

The bottom line is most important. You need to be able to make enough profit to make a living.

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  • Decide if the Business Is Right for You
  • Hone Your Idea
  • Brainstorm a Consignment Shop Name
  • Create a Consignment Shop Business Plan
  • Register Your Business
  • Register for Taxes
  • Fund your Business
  • Apply for Consignment Shop Business Licenses and Permits
  • Open a Business Bank Account
  • Get Business Insurance
  • Prepare to Launch
  • Build Your Team
  • Run a Consignment Shop - Start Making Money!

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Home » General » Explanation of the Consignment Business Model

Explanation of the Consignment Business Model

Have you ever walked into a consignment store to shop? The consignment business model is a simple and straightforward process toward profitability for everyone involved. The shop provides a place for someone to sell their goods or services. In return for the sales space, the shop owner takes a percentage of the sales price. The remaining amount is then paid to the consignor at some point in time, usually at the end of the month.

The consignment business model has been used successfully by thrift stores for decades, but it is being used successfully online as well. A number of major websites use a variation of this business model right now as seen in major commerce sites such as eBay and Etsy, all structured on the consignment business model.

It’s About the Listings

For these successful ecommerce sites, the consignment model exists with only one slight variation, a fee is charged in advanced. These websites charge consignors for the privilege of listing their item on the website. In return, the listing can be indexed through search engines or directly accessed.

Although there are advance fees, when managed appropriately, it becomes easy to find profits. Because payment processing is handled by the site, consignors simply pay a percentage of the sale to cover these costs.

Instead of providing the item to the site, however, the consignor is responsible for shipping out the items that have been ordered. To keep consignors honest, a system of feedback is put into place so that customers can research a seller to determine if the rewards of ordering a specific item outweigh any risks that are associated with the online purchase.

For Others It’s About Representation

On many freelance and service style sites, professionals are connected with freelancers, requiring a slightly different approach. Instead of creating an advanced fee to provide services, they charge a commission on any services ordered instead. That commission is paid out of existing revenues that are generated, much like royalties are paid to artists.

Advantages for Consignors: With this type of business model, consignors do not have to manage the financial part of their business. The base site handles the cash to ensure the money clears and processes successfully. After a specific amount of time, such as 14 days, that money becomes available with a credit ard through an integrated payment system such as Paypal where it can be withdrawn by the freelancer.

What Is the Advantage of the Consignment Business Model?

The primary advantage of utilizing this particular business model is that the services being provided are salesmanship and space. Instead of securing inventory, consignors will provide it. Customers come because they have a need for the products that have been consigned. For selling the item in your space, you get to take a cut off the top. It doesn’t get much easier than that to make money.

A secondary advantage is that it becomes very easy to start a business using this particular model. As long as enough capital exists to create the structure for the business, then there will be a way to start earning some cash.

What Is the Disadvantage of the Consignment Business Model?

The disadvantage of this business model, however, is that a consignment business is at the mercy of the quality of merchandise or work being offered. If the quality is poor, customers don’t come back. For some sites they may promote their best sellers because this helps them obtain consistent revenues. The same is true with the ratings systems of other sites.

For the consignors, there is one immediate disadvantage with the payment for services not becoming immediately available. A freelancer would be required to work consistently for over two weeks before they can become eligible to take cash out. That is two weeks of not having cash to pay rent or other necessary living essentials. Once the payment system is established, payment schedules flow frequently.

The consignment business model is one of the easiest to implement, which is why it is seen so often today online and offline. It has some advantages and disadvantages, but when appropriately managed, can be a simple and easy way to bring in consistent revenues.

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Side Hustle Nation

How to Start a Consignment Business w/ Popup Events, Online Sales, or a Storefront

consignment store business model

The promise of the consignment business — is risk-free profit. After all, you’re getting paid to sell other people’s stuff.

To help school me on how it all works, I sat down with Megan Church from PineappleConsignment.com .

Megan started her consignment business with a popup event in October 2018. Her goal was to break even and to do something creative with her time.

Megan made around $250 from that first event, but more importantly, validated her business idea and had a lot of fun doing it.

She has since broadened her consignment business into online sales, estate sales, and now has her own storefront open to the public (by appointment only).

Tune in to The Side Hustle Show interview to hear:

  • how you can get started throwing popup consignment events right away
  • how Megan sources and manages her inventory
  • the creative ways she’s found to market and grow the business

What is a Consignment Business?

Starting a popup consignment business, running your first popup consignment event, sourcing inventory for your consignment business, getting customers in the door, pricing items and consignment fees, tracking consignment sales and payments, transitioning to online consignment sales, instagram growth strategies, transitioning to estate sales and a physical storefront, what’s next, megan’s #1 tip for side hustle nation, alternatives to starting a consignment business, consignment business: your turn.

A consignment business is one that sells physical products on behalf of another seller, and takes a percentage of the sale.

For example, there’s a second-hand sporting goods store in town that sells items on consignment. If you have an old pair of skis or a bike you no longer use, you can bring it in and let them sell it for you.

When it sells, the store takes a percentage and passes the rest on to you. They got some risk-free, no cost inventory , the customer got a product they wanted, and you got some money for that item you otherwise would have had to sell yourself or donate.

There may be as many as 25,000 consignment shops across the country, but you don’t even need any physical space to get started. If you can build an online following like Megan did, you can make sales without ever touching the inventory.

“I always did consignment events for clothing for my kids. Mostly just because kids grow out of stuff so quickly,” Megan told me.

She had experience buying and selling at consignment events, but not running one.

The inspiration for Megan starting a consignment business herself was because she couldn’t find a home décor consignment event to sell some of her own stuff at.

Megan spoke with some women who ran clothing consignment events and asked them, “Why aren’t there any home décor events?”

They couldn’t really think of a reason, and told her she should go for it if she wanted to run her own.

In fact, one of the women she spoke to said she was asked all the time if she could sell home décor items, but she didn’t have the space.

Megan said she thought to herself, “Well I’ll try one. I’ll throw one event and see if it works and if it’s fun.”

Megan threw her first consignment event in November 2018. Her total costs were $5,000, and her goal at the time was to break even.

That $5,000 paid for the venue, renting tables, buying computers, and some other items.

Megan told me that she did get a good price on the venue. She found a wedding venue that had recently been refurbished and was able to cut a deal with the owners.

Megan explained to them that she wanted to book the venue for a week and that she’d be bringing a load of people in that would see the new renovations.

Her schedule for the week looked like this:

  • Tuesday through Thursday – People dropped stuff off to be sold and it was tagged up.
  • Friday – Megan ran a “sip and see” day where people could pay to come and look at what’s for sale but not purchase anything.
  • Saturday and Sunday – She was open to the public.

Megan agreed with everyone who dropped stuff off that anything leftover at the end of the week would be donated to charity unless they picked it back up Sunday afternoon.

At the end of the week when Megan ran the numbers, she ended up with a profit of around $250.

Megan said this was a “major win,” as she more than broke even and it validated her business idea .

For the first event, Megan said a lot of the inventory came from friends and family.

Megan said she messaged everyone she knew asking if they had any furniture and other home décor items to sell and was surprised by the response.

Megan told me she also paid to advertise on other consignment sales websites to capitalize on their audiences.

For large items, Megan said she had people send her pictures first. She had around 3,000 square feet of space to fill and wanted to make sure the items were high quality.

Megan said she also started picking up items herself from moving sales and other places if she thought she could make a profit selling them.

For her first sale, Megan said she spent some of her own money to, “create a good shopping experience”—but didn’t do that again after the first event was behind her.

“I definitely pumped on social media for several months, and I got featured in the news,” Megan told me.

Megan sent some emails out to local bloggers and news stations to drum up some promotion. She also had a friend who worked for a news outlet reach out to her.

Although Megan spent months promoting her event on social media, she was still “just hoping people would show up.”

Originally, Megan did the “60/40 model.” This is where the seller gets 60% of the sale price and she gets 40%, which is fairly normal for popup consignment models.

Megan also allowed sellers to volunteer at the event, in exchange for an increase to 70% commission.

This was a win-win for Megan, as she needed help but didn’t want to hire staff.

For pricing, Megan allowed people to price their own items if they wanted to. However, she said that most people don’t want to price their own stuff, so Megan often has to do it.

This also works out better for Megan as she has built up a lot of knowledge and expertise over the years so she’s able to price products accurately.

For handling payments, Megan takes cash and uses Venmo and the QuickBooks Intuit Card Reader .

With a large number of sellers’ goods being sold, Megan needed software to help track which items sold and who she needed to pay out.

She started out using MyConsignmentManager , which is great for popup events

It costs $250 per event and enables sellers to login and type in all of their information, print out barcodes, and it tracks everything.

However, when the pandemic hit, Megan switched to selling items online and needed a different system.

Megan started scheduling sales on her Instagram account as she could build a following there. To do so, she was using the Instagram stories feature.

Megan said she would list furniture items at a set time every two weeks, and offered sellers a 70/30 split.

These online sales did really well, and Megan said they were the, “easiest, lowest-risk sales” she’s ever done.

The pandemic forced Megan to take her consignment business online.

At first, Megan said she just wanted to “stay relevant.” But her online sales ended up working out really well and it’s become an important part of her business.

The process Megan set up to sell online looks like this:

  • Sellers submit pictures and measurements of their furniture through a Google Form
  • Megan picks 30-50 of the best items for each sale
  • Megan creates a graphic using Canva with the pictures and measurements on
  • She then posts a “sneak peek” of each image to promote the items ahead of the sale
  • On sale day, Megan lists all the items for sale and operates on a first-come, first-served basis

When someone reserves an item, they send the full payment in advance via Venmo. Megan then holds the money and connects the seller with the buyer to arrange delivery.

It’s a bit labor-intensive replying to all the messages and keeping track of sale items on a spreadsheet, but it works well.

For the online sales, she takes 30% of the sales price and passes 70% on to the owner of the item.

Some companies have taken the online consignment model and made it into a multi-million-dollar operation, like TheRealReal .

Need storage for your consignment products? Take a look at Neighbor for affordable options near you.

Megan currently has around 6,500 followers on Instagram . That’s not huge in terms of Instagram celebrity, but it’s around 2-3% of the population of her city.

These are mostly local, highly-targeted people who know about Pineapple Consignment and are interested in either buying or selling.

Megan shared her top tips for growing her following on Instagram:

  • Consistency – Stay top-of-mind by posting updates and other bits of content in between running sales.
  • Giveaways – For example, she bought a nice set of furniture from a Facebook Marketplace for $500. Megan split up the items, and ran a giveaways for the most valuable piece. “Tag 2-3 friends and follow me for a chance to win,” kind of thing. She sold the rest of the set to recoup her costs.
  • Teaming up with other businesses – Megan has run cross-promotions with other local businesses of a similar size to hers.

As the pandemic restrictions eased, Megan started to hold estate sales. These involved her running a sale in the client’s home and using her online audience to sell the items.

Megan also held some sales from storage units and sold the items online using a similar process to her online sales.

A problem Megan kept running into was having the space to hold all of the inventory she was being offered.

Frustrated with having to turn items down that she knew would sell, she found a small warehouse space to solve this problem.

This now acts as a place to store large items and a storefront so people can pop in (by appointment only) and see items for themselves.

When we spoke, Megan said that opening the storefront had stretched her time and resources and was taking up most of her focus.

That said, Megan is interested in expanding into other nearby cities.

She has plans to start with some online sales for Nashville this year, as well as possibly expanding her warehouse space.

Big thanks to Austin L. Church for the intro!

“ Follow the fun .”

Links and Resources from this Episode

  • PineappleConsignment.com
  • PineappleConsignment on Instagram
  • QuickBooks Intuit Card Reader
  • MyConsignmentManager
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consignment store business model

If you like the idea of flipping items in a low-risk way, here are some other side hustles to consider.

Flea Market Flipping

Provided you do have some storage space available, the buy-low, sell-high business model is alive and well with thrift store finds and yard sale treasures. One inspiring case study is Stacy Gallego, who actually started her flipping journey with a $0.50 purchase, and has gone on to sell more than $100,000 worth of items.

Online Arbitrage

Online arbitrage is the process of buying inventory from one site to resell on another. It’s amazing to me that this is a thing, but it very much is.

When I sat down with Chris Grant, he described selling $75,000 worth of products in a typical month.

Print on Demand Products

Another model with zero upfront inventory cost is print-on-demand. In this business, you upload your clever and creative t-shirt (and other product) designs to sites like Merch by Amazon or Redbubble , and earn a small commission whenever they sell.

The companies handle all the product creation and fulfillment.

Facebook Marketplace Dropshipping

Andrey Kozlov reported earning hundreds of dollars a day drop shipping products on Facebook Marketplace . His system was to find popular products on eBay, Amazon, or Walmart, and simply relist them at a marked-up price on Marketplace.

Mattress Returns

“Reverse logistics” specialists pick up bed-in-a-box mattress returns when customers decide they didn’t really like them. From there, they clean up the items and list them for resale, only having to pay for the mattress once it sells. For your trouble, you can earn up to $250 per flip . 

Have you thought about starting a consignment business?

One easy way to get started would just to be advertise in your neighborhood for items people want to get rid of. Offer to come by and measure and photograph the item, set a floor price with the owner—the least they’d be willing to accept—and then list those on Facebook Marketplace or elsewhere.

I think this is a low-risk side hustle to get started with and hope you’ll stop by in the comments to let us know how it goes when you try it!

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Nick Loper

About the Author

Nick Loper is a side hustle expert who loves helping people earn more money and start businesses they care about. He hosts the award-winning Side Hustle Show, where he's interviewed over 500 successful entrepreneurs, and is the bestselling author of Buy Buttons , The Side Hustle , and $1,000 100 Ways .

His work has been featured in The New York Times, Entrepreneur, Forbes, TIME, Newsweek, Business Insider, MSN, Yahoo Finance, The Los Angeles Times, The San Francisco Chronicle, Hubspot, Ahrefs, Shopify, Investopedia, VICE, Vox, Mashable, ChooseFI, The Penny Hoarder, GoBankingRates, and more.

1 thought on “How to Start a Consignment Business w/ Popup Events, Online Sales, or a Storefront”

Really cool concept! I wonder why a consignor wouldn’t just sell the item themselves on FB marketplace or through other online platforms. Sure there is headache to selling online, as Megan experienced, but generally most selling experiences are quick and painless, at least in my experience. Perhaps is makes most sense as a consignor if you have lots of items to sell, rather than one or a few?

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consignment store business model

What is Consignment? Consignment Definition and Benefits

Are you tired of the typical business models that come with hefty startup costs and inventory risks? If so, have you considered consignment? In this brief guide, we’ll uncover the mystery of consignment and explore its benefits and drawbacks.

Whether you’re an entrepreneur simply curious about the inner workings of consignment shops or seeking a low-risk, high-reward business opportunity , we’ve got you covered. You’ll learn the basics of consignment, the opportunities associated with it, and some potential challenges you may face.

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What is consignment?

Consignment is a business arrangement between two parties: a consignee (usually a retailer), and a consignor, the seller. The consignee agrees to compensate the consignor for the goods sold, usually after the sale. 

Traditionally, consignment stores have been physical shops catering to a specific consumer need. However, there has been an increasing trend toward online consignment stores offering various goods.

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Consignment enables businesses to profit from goods that may have been discarded or overlooked. While consignors may not receive the full value of their goods, it provides an opportunity to earn cash from unused items.

So, how does consignment work? Businesses receive items from consignors and pay them when the goods sell. Common products sold on consignment include:

  • Athletic gear
  • Musical instruments
  • Baby accessories and furniture

Pros of consignment

The consignment model is popular for a reason among merchants and business owners. Let’s look at the pros for each party. 

Benefits to sellers:

  • Do not need to up a retail storefront or create listings on Amazon, Craigslist, or eBay.
  • No need to deliver or ship sold items.
  • Quickly get the item off hand and not stress over whether it will sell elsewhere.

Benefits to business owners:

  • No need to pay for inventory upfront, like most retail stores need to.
  • Can pay days or weeks after the product sells to improve cash flow.
  • Can return any products that don’t sell to consignors or dispose of them.
  • Can build a solid client base that regularly returns to scope out new merchandise.

Cons of consignment

The consignment model has some drawbacks, too. Below are the main ones to consider.

Drawbacks to sellers:

  • Earn less than you could earn by selling directly to buyers online.
  • Have to wait for payment based on the specific store’s consignment period.
  • Difficulty in knowing how much money the business left on the table.

Drawbacks to business owners:

  • Incur disposal fees if there is a lot of consignment inventory left over.
  • Dependence on sellers to provide a steady stream of merchandise.
  • Software package required to simplify tracking of merchandise.

Consignment agreement

Every consignment shop has its own consignment arrangement, but the split between the individual seller and the business usually ranges from 50/50 to 40/60 or 60/40. The success and reputation of the store often determines who gets the bulk of the proceeds. 

Consignment stores are often a staple of the local community, generating profits for both seller and retailer. Naturally, higher quality goods deliver more profits to each party, since they attract more customers than standard quality items.

Consignment trends indicate greater adoption

According to the Association of Resale Professionals , demand for consignment products is on the rise. With the recession starting to show its effects, many consignment shops have opened up as entrepreneurs look to earn more income. 

Although not suitable for everyone, the consignment business model can be an excellent option if you’re not looking to rely on creating or producing your own inventory. Many entrepreneurs have already jumped the bandwagon as indicated by the 7% annual growth in the number of new consignment shops. With the right strategy and approach, you can reap the benefits and minimize the limitations associated with consignment.

Consignment model FAQ

What’s the difference between resale and consignment.

The retail business model is where the merchant offers to buy a product upfront. With a consignment business model, the merchant will offer a percentage of the item’s sale.

What percentage of sales do consignment stores take?

The percentage of sales taken by consignment shops depends on multiple factors, including the season, type of item, and sales trends. Typically, stores divide consignment sales from a 50/50 split to 40/60 or 60/40.

How does a consignment store differ from a thrift shop? 

The key difference between a consignment store and a thrift shop is that the former is typically a for-profit organization, whereas the latter is generally non-profit or donation-based for a charity.

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How to Write a Business Plan for a Consignment Shop

  • Small Business
  • Business Planning & Strategy
  • Write a Business Plan
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  • How to Write a Business Plan for a Convenience Store
  • How to Start a Consignment Resale Shop Business

Starting your own business is one of the best ways to grow your wealth and achieve your dreams. Opening a consignment store can be an excellent business move for the right individual, but before you open your doors you need to know how to write a business plan for a consignment shop. The business plan defines the scope of your business, lays out how you are prepared to succeed and details the relevant experience you bring to the new venture.

Business Plan Template

Microsoft Office has some excellent templates available for free downloads. Other popular office suites also include templates that can be customized to create business plans. If you wish to complete your business plan the old-fashioned way, you can obtain business plan templates from your local Chamber of Commerce or from the Small Business Administration office in your area. Financial books at the library and bookstore are also good sources of business plan information and examples.

List Your Business Experience

Make a list of your experience in the retail business. You can make this list mentally, but it is often helpful to get it down on paper. Include all experience you have with buying and selling the type of items you plan to offer at your consignment store, including time spent as a sales clerk or buyer.

In order to be successful, the owner of a consignment clothing store, for example, needs to have a discerning eye and the ability to pick up on new trends in the fashion industry. Likewise, the owner of a consignment furniture or accessories store needs to be able to spot the trends and buy the furniture that is most likely to sell quickly.

Executive Summary and How to Differentiate the Business

This section should state the purpose of the business, including the proposed name of the operation. The section that follows should state how the store will differentiate itself from the competition, that is, what makes your consignment store different from the thrift store down the street. Offering types of products not normally found in the second-hand market can be a big help.

Marketing and Promotion Strategy

How will you advertise your consignment store? What techniques do you plan to use? It is important for lenders and others who review your business plan to see how you intend to market your business and introduce it to the community.

Organization and Management

Provide information about the ownership of the new business, including the names and titles of all business partners and officers. Also provide a brief but thorough overview of the start-up company. The overview should include details about the products the store will sell, where it will get its merchandise and where it will be located.

List your management experience, focusing on experience that is relevant to the consignment business world. List the number of years of management and relevant retail experience you bring to the new enterprise.

Service or Product Line

List the types of products the consignment store will offer. Many consignment retailers limit their product lines to high-end designer clothing and accessories, for example, in an effort to attract a wealthier and more discriminating clientele. Provide a brief overview of the products you already have in stock, as well as your plans for obtaining quality merchandise on consignment.

Market and Competitive Analysis

Include information on any market analysis you have completed, including details about any existing consignment stores. Compare your new business model to the stores that already exist in the community, and explain how your operation will improve on that model.

Financial Projections and Related Information

Provide relevant financial information for your start-up company, including any partnership arrangements you have entered into and any loans you have obtained. Attach statements from your CPA or accountant if applicable.

Things You Will Need

Computer (optional)

Business plan template

  • Bplans.com: Women's Clothing Boutique Sample Business Plan
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Based in Pennsylvania, Bonnie Conrad has been working as a professional freelance writer since 2003. Her work can be seen on Credit Factor, Constant Content and a number of other websites. Conrad also works full-time as a computer technician and loves to write about a number of technician topics. She studied computer technology and business administration at Harrisburg Area Community College.

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How To Create a Sustainable Fashion Consignment Store Business Plan

By henry sheykin, resources on sustainable fashion consignment store.

  • Financial Model
  • Business Plan
  • Value Proposition
  • One-Page Business Plan
  • SWOT Analysis

Welcome to our blog post on how to write a business plan for a sustainable fashion consignment store! With the fashion industry being one of the largest contributors to environmental pollution, there is a growing demand for affordable and ethically sourced clothing options. According to recent statistics, the global second-hand market is projected to reach $64 billion by 2024, with the sustainable fashion industry experiencing significant growth. By following these 9 steps, you can create a comprehensive plan to launch your own sustainable fashion consignment store and contribute to a more environmentally conscious future.

Conduct Market Research And Analyze The Target Audience

Before opening a sustainable fashion consignment store, it is crucial to thoroughly conduct market research and analyze your target audience. This step will provide valuable insights into the industry landscape, competition, and the preferences of your potential customers. By understanding these factors, you can tailor your business strategies and offerings to meet their needs and stand out in the market.

Tips for conducting market research and analyzing the target audience:

  • Identify the demographics and psychographics of your target audience, such as age, gender, lifestyle, and buying behaviors.
  • Gather data through surveys, interviews, focus groups, and online research to understand their preferences, needs, and pain points.
  • Analyze the current market trends in sustainable fashion and identify gaps or opportunities that your store can fulfill.
  • Examine the purchasing power of your target audience to determine price points and affordability.
  • Research local and global sustainable fashion consignment stores, both online and offline, to assess their strategies and offerings.
  • Stay updated on industry news, fashion events, and emerging sustainable fashion brands to stay relevant and informed.

By conducting thorough market research and analyzing your target audience, you will be equipped with the necessary information to make informed decisions regarding your business model, product selection, marketing efforts, and overall strategy. This step sets the foundation for the success of your sustainable fashion consignment store and ensures that you are catering to the needs of the conscious consumers in your local community.

Identify And Research Competitors In The Sustainable Fashion Consignment Industry

When starting a sustainable fashion consignment store, it is crucial to understand the competitive landscape of the industry. By identifying and researching competitors, you can gain valuable insights into their strategies, offerings, and target audience. This knowledge will help you differentiate your store and make informed decisions about your business.

One way to identify competitors is by conducting online research. Look for existing sustainable fashion consignment stores in your area or in similar markets. Visit their websites, explore their product offerings, and understand their pricing and business models. Pay attention to their customer reviews and social media presence to gauge customer satisfaction and engagement.

Additionally, attend local fashion events, trade shows, and pop-up markets to connect with other sustainable fashion consignment stores. Talk to their owners and staff, inquire about their experiences, and ask for recommendations or insights. Building relationships within the industry can provide you with valuable information and potential collaborations.

Once you have identified your competitors, research their strengths and weaknesses. Assess what sets them apart from others in terms of product selection, pricing, customer service, or sustainability practices. This information can help you identify gaps in the market that your store can fill.

Consider creating a SWOT analysis , which stands for Strengths, Weaknesses, Opportunities, and Threats. This analysis will allow you to compare your store against competitors and identify areas where you can excel or need improvement. It will help you understand potential challenges and opportunities in the market.

  • Look beyond your immediate location and explore online consignment stores that cater to sustainable fashion.
  • Consider visiting store locations in person to get a better understanding of their customer experience and visual merchandising techniques.
  • Subscribe to industry newsletters and follow blogs or social media accounts dedicated to sustainable fashion to stay updated on emerging trends and new competitors.

Determine The Store Location And Evaluate Potential Lease Options

Choosing the right location for your sustainable fashion consignment store is crucial for its success. It is important to consider factors such as the target market, foot traffic, accessibility, and competition in the area. Here are some important steps to guide you in determining the store location and evaluating potential lease options:

  • Conduct thorough market research to identify areas with a high demand for sustainable fashion and consignment stores. Look for neighborhoods or communities known for their eco-consciousness and interest in ethical fashion.
  • Consider the demographics and lifestyle of your target audience. Look for locations that align with their preferences and shopping habits. For example, if you are targeting young, trendy consumers, a location near universities or popular shopping districts might be ideal.
  • Visit potential locations and assess their suitability. Look for spaces that can accommodate your store's size requirements, layout, and design. Consider the visibility of the store from the street and the availability of parking for customers.
  • Evaluate potential lease options by carefully reviewing the terms and conditions of each agreement. Look for favorable lease terms, such as flexible lease lengths, reasonable rent, and options for renewal.
  • Consider the overall costs associated with the location, including utilities, maintenance, and any additional fees or taxes. Ensure that the lease agreement aligns with your budget and financial projections.
  • Take into account the proximity to complementary businesses. Look for locations near fashion boutiques, sustainable brands, or other businesses that cater to your target market. This can help increase foot traffic and attract potential customers.
  • Consider negotiating with the landlord to secure favorable lease terms, such as a rent reduction or provisions for tenant improvements.
  • Consult with a commercial real estate agent or broker who specializes in retail spaces to gain valuable insights and guidance in evaluating potential locations.

By carefully considering these factors and evaluating potential lease options, you can find the perfect location for your sustainable fashion consignment store, increasing its chances of success and fulfilling your mission of promoting sustainability in the fashion industry.

Develop A Comprehensive Business Model And Pricing Strategy

Developing a comprehensive business model and pricing strategy is crucial for the success of your sustainable fashion consignment store. A well-defined business model will outline how your store will generate revenue, attract customers, and create a sustainable competitive advantage in the market.

1. Determine your revenue streams: Consider the different sources of income for your consignment store. This may include sales of pre-owned clothing items, commissions on items sold, rental fees for event space or pop-up shops, or even offering customization or alteration services. Understanding your revenue streams will help you create a pricing strategy that aligns with your business goals.

2. Research the market and competition: Analyze the pricing strategies of other sustainable fashion consignment stores in your area. This will give you insights into the prevailing market rates for pre-owned clothing and help you determine a competitive pricing strategy that can attract customers while ensuring profitability. Consider the quality of the items, brand reputation, and uniqueness of your collection when setting prices.

3. Determine your pricing structure: Decide how you will price your items. Will you use a fixed pricing method, where each item has a set price, or a tiered pricing model, where items are categorized and priced accordingly? You may also consider implementing a markdown strategy to incentivize customers to purchase items that have been in the store for longer.

4. Consider additional revenue opportunities: Explore additional revenue streams that complement your consignment store's main offerings. This could include collaborations with local designers or offering personalized styling services for customers. These value-added services can differentiate your store from competitors and further contribute to your overall revenue.

  • Regularly review and adjust your pricing strategy based on market dynamics and customer feedback.
  • Offer discounts for customers who consistently bring in high-quality items for consignment.
  • Consider implementing a loyalty program to encourage repeat customers and referrals.
  • Monitor your competitors' pricing strategies and adjust yours accordingly to remain competitive.

Developing a comprehensive business model and pricing strategy requires careful consideration of your target market, competition, and revenue goals. Take the time to conduct thorough research, develop a pricing structure that aligns with your business objectives, and consider additional revenue opportunities that can enhance the overall customer experience at your sustainable fashion consignment store.

Create A Branding And Marketing Plan To Reach The Target Market

Branding and marketing are essential components of establishing and growing a successful sustainable fashion consignment store. Here are some crucial steps to take in creating a comprehensive branding and marketing plan:

  • Define the store's unique selling proposition: Determine what sets your sustainable fashion consignment store apart from competitors. Highlight the eco-friendly aspects, curated collection, and affordability to attract the target market of environmentally conscious and budget-minded customers.
  • Develop a compelling brand identity: Create a distinct and visually appealing brand logo, color scheme, and overall aesthetic that aligns with the store's values and appeals to the target market's preferences.
  • Establish an online presence: Build a professional and user-friendly website that showcases the store's mission, collection, and sustainability efforts. Utilize social media platforms and email marketing campaigns to engage with the target market, share exciting promotions, and update them on new arrivals.
  • Collaborate with influencers and sustainable fashion bloggers: Partner with influential individuals in the sustainability and fashion industry to endorse and promote your brand. This will increase visibility and credibility among your target audience.
  • Implement an effective SEO strategy: Optimize your website with relevant keywords, meta tags, and content to improve search engine rankings. This will make it easier for potential customers to find your store when searching for sustainable fashion options.
  • Engage in local community initiatives: Participate in local sustainability events, fashion shows, or charity drives to create awareness about your store and build connections within the community. This will further establish your brand as a trusted and active contributor to sustainable fashion efforts.
  • Monitor and analyze marketing metrics: Regularly track the effectiveness of your marketing initiatives by analyzing metrics such as website traffic, social media engagement, and customer feedback. This will allow you to make data-driven decisions and refine your branding and marketing strategies accordingly.
  • Focus on storytelling to communicate the store's mission, values, and commitment to sustainability.
  • Offer incentives such as referral programs or loyalty rewards to encourage repeat customers and word-of-mouth marketing.
  • Collaborate with local influencers or sustainable fashion organizations to host events or workshops that align with your brand's ethos.

Establish Relationships With Sustainable Fashion Designers And Suppliers

Collaborating with sustainable fashion designers and suppliers is essential for ensuring that your consignment store offers a curated collection of ethically sourced, upcycled, and eco-friendly garments . These partnerships will not only help you maintain a consistent inventory of high-quality items but also align your business with like-minded individuals or organizations that share your commitment to sustainability.

When approaching sustainable fashion designers and suppliers, it is important to emphasize the shared values and objectives that your consignment store represents. Highlight the eco-friendly aspects of the business and the positive environmental impact that can be achieved through second-hand clothing.

  • Research and identify sustainable fashion designers and suppliers who align with your store's values and target market. Look for those who incorporate sustainable practices into their production processes and source materials responsibly.
  • Reach out to designers and suppliers through email or social media, expressing your interest in collaborating. Clearly communicate how their products would fit into your store's aesthetic and sustainability goals.
  • Consider attending sustainability-focused trade shows or networking events to connect with potential partners in person. These events often attract industry professionals who are dedicated to sustainable fashion.
  • Negotiate terms and establish mutually beneficial partnerships with sustainable fashion designers and suppliers. This may include consignment agreements, bulk purchasing options, or exclusive collaborations.
  • Maintain open communication with your partners to stay informed about new collections, restocking opportunities, and any updates related to their sustainability practices. This will help you consistently offer the latest sustainable fashion trends.

Through establishing strong relationships with sustainable fashion designers and suppliers, your consignment store can become a go-to destination for customers seeking stylish and eco-conscious clothing options . These partnerships will not only support your business goals but also contribute to the growth of the sustainable fashion industry as a whole.

Define The Products And Services To Be Offered In The Store

When it comes to running a sustainable fashion consignment store, it's crucial to carefully define the products and services that will be offered. This step ensures that your store meets the needs and preferences of your target audience. Here are some key considerations to keep in mind:

  • Curated Collection: As a sustainable fashion consignment store, your primary focus should be on offering a wide range of pre-owned, high-quality, and trendy clothing items. However, it's important to curate your collection to maintain a consistent style and standard. By doing so, you will establish a strong brand identity and attract customers who resonate with your aesthetic.
  • Ethical Sourcing: A major differentiating factor of your store should be the ethically sourced and upcycled garments you offer. This means partnering with designers or suppliers who share your values and ensure that their clothing items are made in an environmentally and socially responsible manner. Communicating this commitment to sustainability will appeal to your target market.
  • Eco-Friendly Options: To further promote sustainable fashion choices, consider offering eco-friendly options such as clothing made from organic or recycled materials. This will provide customers with even more choices to align with their environmental values.
  • Add-On Services: To enhance the overall shopping experience and differentiate your store from competitors, you can also consider offering add-on services such as alterations, repairs, or customization. These services will not only attract more customers but also foster customer loyalty by providing value beyond just selling clothing items.
  • Regularly update your inventory to keep up with fashion trends and seasonal demands. Stay connected with your target audience and keep track of their preferences to ensure your collection remains relevant.
  • Display clear and detailed information about the sustainable practices behind each garment, such as the materials used, the recycling or upcycling process, or the fair trade practices involved. This transparency will build trust with your customers and reinforce your commitment to sustainability.
  • Consider offering virtual or online consignment services in addition to your physical store. This can significantly expand your reach and attract customers who prefer the convenience of online shopping.

By defining the products and services to be offered in your sustainable fashion consignment store, you will establish a strong foundation for your business. Remember to continuously assess and adapt your offerings to meet the evolving needs and desires of your target market. This will help your store thrive in the competitive sustainable fashion industry while making a positive impact on the planet.

Determine The Operational Requirements And Staffing Needs

Once you have identified the location for your sustainable fashion consignment store, it is crucial to determine the operational requirements and staffing needs to ensure smooth day-to-day operations. Consider the following factors:

  • Store Layout and Display: Design an efficient layout that allows for easy browsing and maximizes the use of space. Incorporate sustainable materials for fixtures and displays, aligning with your store's eco-friendly values. Utilize shelving, racks, and hangers to showcase the clothing items in an appealing and organized manner.
  • Inventory Management: Implement a system to manage your inventory effectively. Use software or online platforms to track customers' consigned items, sales, and purchase history. Ensure you have a method in place to organize and categorize inventory, providing ease of access and quick retrieval of items for customers.
  • Customer Service: Hire knowledgeable and passionate staff who understand the importance of sustainable fashion. They should be able to guide customers, answer their questions, and provide suggestions regarding ethical clothing choices. Additionally, emphasize the significance of friendly and attentive customer service to create a positive shopping experience.
  • Operational Procedures: Establish clear operational procedures that include opening and closing routines, handling customer inquiries and returns, and maintaining cleanliness and organization throughout the store. Clearly communicate these procedures to the staff to ensure consistency and efficiency.
  • Consider cross-training your staff to handle various tasks, such as assisting customers, processing consigned items, and organizing inventory. This flexibility can help maintain productivity, especially during busier periods.
  • Implement eco-friendly practices in your day-to-day operations, such as using energy-efficient lighting, recycling waste materials, and reducing paper usage through digital processes.
  • Provide ongoing training and education to your staff on sustainable fashion and emerging trends in the industry. Encourage them to stay updated and share their knowledge with customers.

By determining the operational requirements and staffing needs of your sustainable fashion consignment store, you can create a well-structured and efficient environment that aligns with your mission of promoting sustainable fashion.

Evaluate The Financial Feasibility And Create A Preliminary Budget

Evaluating the financial feasibility and creating a preliminary budget is a crucial step in establishing a sustainable fashion consignment store. This process will help determine if the business idea is financially viable and allow for the development of a comprehensive financial plan. Here are the key considerations:

Tips for evaluating the financial feasibility:

  • Calculate the startup costs: Determine the initial investment required to set up the store, including expenses such as lease deposit, renovations, fixtures, equipment, and inventory. Be sure to factor in any licensing or permit fees.
  • Estimate the operating expenses: Consider ongoing costs such as rent, utilities, insurance, staff wages, marketing, and inventory replenishment. Conduct thorough research to get accurate estimates.
  • Assess revenue streams: Project sales based on market research and competitor analysis. Take into account the consumer demand for sustainable fashion and determine a realistic sales forecast.
  • Analyze profit margins: Calculate the markup on consignment items and determine the gross profit margin. Also, consider any additional revenue streams, such as alterations or styling services.
  • Identify potential funding sources: Explore options for financing the business, such as personal savings, bank loans, or seeking investors. Research grants or funding programs specifically designed for sustainable fashion initiatives.

Once you have evaluated the financial feasibility, it is essential to create a preliminary budget. This will provide a roadmap for financial management and help allocate resources effectively. Consider the following:

  • Lease and utilities: Allocate a portion of the budget for monthly rent, utilities, and other overhead expenses.
  • Inventory: Budget for purchasing initial inventory and estimate ongoing restocking costs.
  • Marketing and advertising: Allocate funds for marketing campaigns, social media advertising, and collaborations with influencers or local sustainable fashion organizations.
  • Staffing: Determine the wages and benefits for employees and include those costs in the budget.
  • Operational expenses: Set aside funds for transportation, packaging, alterations, or any additional services offered by the store.
  • Contingency: Budget for unexpected expenses or emergencies that may arise during the initial stages of the business.

Creating a comprehensive preliminary budget will provide a clear financial roadmap and ensure that the business remains financially sustainable. Regularly review and update the budget as the business evolves to stay on track and make necessary adjustments to maximize profitability.

Writing a business plan is an essential step in establishing a sustainable fashion consignment store. By following these 9 steps, you can ensure that your business is well-prepared to meet the demands of the industry, attract your target audience, and make a positive impact on the environment. From conducting market research and analyzing competitors to developing a comprehensive business model and evaluating financial feasibility, each of these steps will contribute to the success of your sustainable fashion consignment store.

Remember to prioritize sustainability and ethical practices throughout every aspect of your business, from sourcing suppliers to curating your collection. By offering a platform for individuals to buy and sell pre-owned clothing, you can contribute to reducing waste and promoting a circular economy.

With a well-thought-out business plan in hand, you will be prepared to navigate the challenges of opening and operating a sustainable fashion consignment store. Stay dedicated to your values and vision, and you will be on your way to creating a successful and impactful business in the fashion industry.

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ProfitableVenture

25 Best Consignment Shop Business ideas You Can Start Today

By: Author Tony Martins Ajaero

Home » Business ideas » Retail Industry » Consignment Shop

Do you want to start a consignment shop but want to go niche and be unique? If YES, here are 25 best consignment related business ideas & opportunities.

A consignment shop is one where the owner of an item called the consignor, gives the item to a shop owner or seller called the consignee, with an agreement for commission after the item is sold. While the item is with the seller, the consignor still retains full ownership of the item, so if at any point the consignor feels the need to take back the item, they are free to.

This is different from a pawn shop were the owner uses the item to borrow money, he can only collect the item back upon the payment of the money borrowed with interest. These shops are also called second-hand shops, the terms are used interchangeably in different occasions. There are quite a number of business ideas within this industry and a few are listed below.

Best Consignment Shop Business ideas

Antiques consignment shops.

Antiques are by far the most popular kind of consignment shops you can find in the US. Antiques are items that have great value either because of their artistic designs, sentimental story lines, or how they came to be. More importantly, an item is not called an antique until it is at least one hundred years old.

I guess one of the reasons why such items may be so valuable is because of its longevity. Usually items would get missing or destroyed as the years go by, but for something to remain intact for more than a hundred years, that in itself is outstanding.

People who have these types of items in the present day may not have much use for them anymore. If they want a quick way to make cash, they can look for an antiques consignment shop to sell them. Some antiques are worth millions, but the total amount of worth will depend on those who analyze them.

MAGAZINES ON THE ENTIRE CONSIGNMENT BUSINESS INDUSTRY

Even if you may not be able to secure a location to store up used items for sale, you could still be part of the consignment business industry.

One way is to publish a magazine dedicated to the art of consignment shopping. In the magazine there would be features showing industry trends, new shops coming up and advice on how to pick the best set of items when buying second hand products.

The magazine could also address those who are already in the business, giving them tips on how to make the best out of what they have in their shops.

There could be a section with a more lighter tone and of course, advertisement. Advertisement is where you stand to make a lot of money in magazine publication. Inside of the magazine could also be tips on how to find the right consignment dealer for your items.

CONSIGNMENT SHOP FOR ELECTRONICS

We’ve all had that old VCR or HiFi system we would love to trade in for a another one, or simply sell it off to make a little money from it, either because we need the cash or because we have bought a new one and no longer have need for the present.

This actually goes beyond HiFi systems, it could be blenders, toasters, microwaves, washing machines and so on. Many people may not want to look for brand new items, they may prefer to buy those that are fairly used but still in great condition.

One of the major reasons behind people looking for used items is due to the present poor economic situation. It will be softer on the pocket to simply get used electronics from a shop that is known to have such items on sale. So, when looking to buy used electronic products, be sure to know if the item is in good shape.

In order for you as a consignee to have a good reputation with your customers, you too must ensure that the items you place in your shops are in good shape. They don’t have to be in the same shape as they were when they were bought, if they are, then it would be amazing, but if they are not then they must be useable at least for some time before they begin to develop problems.

ONLINE CONSIGNMENT SHOP

Many things are going online these days or should I say digital so having an online consignment shop is not such a bad idea in this present day.

You could choose to focus on particular item or make it a general theme type of deal. Payment could be done through electronic means of course, this means that the you would need to make sure your web developer has secured the payment procedures so that people’s information are safe when they shop with you.

However, many who intend to shop this way may want to actually see the item they are purchasing before they make payment. It’s used, so they may want to inspect the condition it is in before they part with their money, so you should expect that many would want to visit the place physically where the items are sold.

Of course, this does not necessarily force you to get a physical shop, you must have already spoken to the vendors, their shop addresses would be on the site, so after interest is shown, the interested person can begin to speak with the vendor. Your site is simply a meeting point for customer and vendor.

FURNITURE CONSIGNMENT SHOP

When a person comes into a home, one of the first things they pay attention to is the quality, style and arrangement of furniture in the house. The tables, sofa, chairs, stools are just a few of the items one can use to make the house seem more like a home.

Offices are also another set of people who would need furniture especially if they are just starting out in the business, they may not be looking for brand new items to buy as they would need to save cost.

So used furniture are great items to make a consignment shop out of, sometimes their value proceeds from the family that used to own it once; or the artisan who put it together in times past, one way or another the shop owner would know how to derive value from the items.

BOOKS AND LITERATURE CONSIGNMENT SHOP

It would amaze you but the united states is filled with people who love to read. Anything from fiction to self-help books can attract a large number of followers.

There are those who make a habit out of looking for special literature or books that have stopped being published or books that attract value due to various other factors. Then we also have the academic books. Some of these books can be bought at a cheaper price in a consignment shop.

In this type of trade, it would be easier to identify which books are still in good shape because they can be seen and handled on site, pages can be flipped over, the quality and strength of the paper can be felt. When buying a second-hand book, one does not have to worry about whether it would still work right.

Except of course it is a vintage, or an antique or even a very valuable piece of literature that has been through very harsh conditions and need to be restored, but there is a different kind of shop that deals with antiques or vintages. Books and literature are great items to develop a consignment store out of.

MUSIC CONSIGNMENT SHOP

This would appear to be more lucrative if the entire entertainment industry had not gotten digitized. Those who listen to the particular genre of the music or who are long-time followers of a musician may love to get their hands on some of their materials that may be scarce to find or even out of production.

However today, music has gone digital and a lot of the older songs can be bought online, because one way or another a group of people have digitized the sound.

However, there are still some music lovers who are dedicated to hearing the sound in the technology that was available when the songs were hits, some people still own vinyl record players, some still have cassette tape players and so on. And these enthusiasts would love to find a shop where they can get their hands on the format of music they love so much.

Due to copyright laws, it would be challenging to make your music consignment shop an Online business. Converting the songs into mp3 and posting it on the website for people to buy, would be against the law, except all you do is advertise on your website that such songs are available in CD, Cassette tapes or whatever other format you have it on in your store. Then that way those who are interested can come in and buy them personally.

VINTAGE AND COLLECTIBLES

There is a lot of money to be made selling vintage items that have gathered value. These would definitely be coming from owners who have probably had the item in their family for a longtime or through some other means have gained access to them.

Collectibles could be anything from baseball bats, comics, toys and so on. And some of these items that may seem valueless to some may actually rank up to hundreds of thousands of dollars.

Like the entire idea behind the consignment shop trade, the owner of the shop does not have to be the owner of these items, people who have these items and would like to sell them would know where to go to achieve this, and this would most likely be a consignment shop that deals in vintage and collectibles.

CONSIGNMENT SHOP OWNERS NETWORK

Building a standard network of consignment shop owners can do a lot for the industry. It will help shop owners meet and build relationships with other shop owners who may deal in complementary services.

When shop owners get items they are not too confident about, they should know who to call even within their community for advice on what price tag would be appropriate for such items so that their commission would be worthwhile.

The way money could be made from this group would be in fees or dues. This network will be in charge of organizing events that would bring more market to consignment businesses across the country. A network like this is going to make the trade a lot more interesting for consignment shop owners across the country.

CONSIGNMENT SHOP FOR FIREARMS

Guns and other kinds of firearms are also another set of items that are great for this type of business. One who intends to own such a shop must get all the licenses and permits that are associated with this type of venture.

Guns are a controversial issue in the US, so it takes a lot of meticulous investigation to make sure that those coming to sell their firearms to you, have all the legal papers for such transactions. If the owner of this kind of shop wants to be within the law, he would have to do a background check on the firearm that’s about to be showcased at his shop.

He would also have to be very particular about the people he makes business transactions with, so as to make sure that his business and his own life are not at risk.

ATHLETIC EQUIPMENT CONSIGNMENT SHOP

Most fitness enthusiasts love to have at least a treadmill and some weights at home. Going for used equipment may be the best option. As a fitness buff, you may not always have the opportunity to go to the gym, it would be nice to simply stay at home and work out. Another set of people who look for second hand athletic equipment are gym owners.

Believe it or not, when putting together a gym, it saves costs to simply buy used equipment to set up the gym . But whether it is for your own personal use or for a gym that serves others, this type of item must be tested to know if it is in a good condition.

CHILDREN’S CLOTHES CONSIGNMENT SHOP

We all grow out of the clothes we used while growing up and we wouldn’t want to just throw them away, especially if they are still in very good condition. Or some of us may have children that may have grown out of some clothes, which also could still be in very good condition.

Usually the practice would be to give them to a family member who may need them as well, but sometimes we can decide to make just a little about of money by setting them up in a children’s clothes consignment shop.

This even goes beyond individual families looking for how to sell their children’s clothes, there are wholesale suppliers of second hand children’s clothes. The supplier may not have a shop of his own but has a lot of these clothes in stock, he simply contacts a shop that deals in these items and sets up the consignor and consignee deal.

TOYS CONSIGNMENT SHOP

Many families who have had their children grow up or have outgrown some of their toys would definitely look for how to get rid of the items due to clutter. It wouldn’t be nice to simply throw the toys away, I guess they could give the toys to charity, but also making some money from them is also a very good idea.

If a shop sells toys that are already used by the owners, then the toys will definitely be priced cheaper than if the brand new one is being purchased. So, the consignment toy shop would be known for having toys cheaper, they may not have to advertise that the items there are used already, but that they are available at cheaper price.

In as much as used items are some of the most popular items present in a consignment shop, they all do not have to be used as such though. In any case, the toy consignment shop is a big hit in the United States of America, so this would be one of my very strong suggestions, should one want to enter into the consignment shop business.

WEDDING DRESS CONSIGNMENT SHOP

You only get married once right? Hopefully so I should imagine, so once the wedding is done, one may decide to make some money out of the wedding dress. Sometimes this could be the reason for buying such expensive wedding dress, because it could be sold afterwards.

Some people however may have sentimental attachment to the wedding dress and would love to keep them as a means of remembering the very enchanting day.

Or some ladies would have plans of giving them to their daughters someday, but other times, folks just look for opportunities to make money off of the wedding dress. Having a consignment shop that deals with wedding dresses can be very lucrative, seeing as many folks are getting married these days.

CONSIGNMENT SHOP FOR TOOLS

Households, construction companies, carpenters and so on need tools on a daily basis. And quite a number of people have tools they really don’t need anymore. Opening a consignment shop for tools is one of the best consignment shop ideas on the list. Tools are part of the everyday life of many and they are meant for a selected market.

MUSICAL INSTRUMENTS CONSIGNMENT SHOP

Musical instruments are timeless items to lovers of sound. To own a consignment shop that deals in musical instruments, you too should be music lover. If you are a music lover, then you would really appreciate the items you receive for sale at your shop.

You would be able to know if the items are in good condition and when they may not be you would know how to correct the things that may be wrong with them. Most people that come to buy at your shop would be those just seeking to start their musical hobbies, those who are already deep in the musical world or music schools that need to purchase musical instruments.

Your location would also matter when it comes to making a success out of your shop. If your shop is in a good location, a lot of people will come in to buy your instruments, this will also mean that those who have musical instruments they want to sell will make you their number one choice.

ACCESSORIES CONSIGNMENT SHOP

Belts, watches, bracelets, ear rings and such are great items to focus on as your niche in setting up a consignment shop. This will definitely appeal to those who are fashionable in the society.

Knowing where to place your accessories on display so they can be sold is good for those who have quite a lot of these types of items and do not know what to do with them. It would surprise you that there are people with full closets of accessories cluttering their rooms and gathering dust. Making some money from them would be a welcome idea.

HOME DECOR CONSIGNMENT SHOP

Interior designers would love a place where they can get nice quality home decoration items for less than their original price. Nowadays a home is not just a place with chairs you can sit on, tables you can place things on and a bed you can sleep on.

Interior decoration has been a great way to make money for centuries, people like to feel at home in their houses. The comfortable appearance of our living quarters speaks a lot about how comfortable we would feel in such environments.

We usually want to have items that help communicate our style, items that show forth our taste in the quality of our lives. Some of the decorative items in our homes can be gotten from a consignment shop that specializes in home decorations.

ART CONSIGNMENT SHOP

Art could also fall into the vintage category, there are various art that have been around for many years and thus have accumulated in value. Those in the art world understand the meaning of certain portraits and are willing to make some money from them by making them available to an art consignment shop for sale.

Maybe someone who doesn’t really appreciate art may have inherited a few of their grandparent’s portraits and have decided to make some money off of them. Art could also be in the category of a collectible item, also worth much money depending on the values placed on them.

And of course, there is art that have been done in recent years but can still make lots of money if they are sold to the right kinds of people. An art consignment shop is a great idea.

AUTOMOBILE CONSIGNMENT STORE

Used cars as they are known in the US have become one of the oldest consignment businesses ever established in the country.

As far back as many citizens can remember, owners of certain types of automobiles have been making money out of their cars by making them available to buyers everywhere. One looking to sell their cars should not struggle so much to find a shop that will oblige their desires.

The only challenge would be looking for one who will be willing to collect a reasonable commission on the car once it is sold so that the owner can still have some dignity in the sale without losing much money. Setting up an automobile consignment store is a sure ticket to revenue generation if your prices are decent.

CONSIGNMENT SHOPS FOR PHONES

Once again it wouldn’t be right to mention consignment shop classics like Antiques, Jewry, Electronics and Computers if I do not mention phones. Used phones are a great item for this type of market. The phones could be old models or newer ones, it really doesn’t matter as long as they are in usable conditions.

Vintage phones could even be sold as a collectible within this type of shop, the decor of the entire establishment could communicate the history of the telecommunications development in the society.

A CONSIGNMENT SHOP BUSINESS CONSULTANT

Whether one decides to be the consignor or the consignee, sometimes you would need professional advice on how to go about the entire business of this industry.

One intending to set up a consignment shop will definitely need instructions on how to go about it, what kind of consignment shop would be more profitable for the person given their present locations, the demographic of the area and the purchasing power of the target market.

This consultant can offer their service in the area of research and feasibility studies, in order to give the intending business owner a more informed guide to setting up shop.

On the other hand, those intending to sell of their items also need proper guidance too, in properly calculating the value of the item that is about to be sold, how the value might even increase with refurbishing efforts, who would be the best person or company to refurbish the item and so on.

There’s a lot a business consultant can offer to any one, more especially one intending to interact with the world of consignment shopping and sale.

CONSIGNMENT SHOP FOR MATERNITY CLOTHES

After a lady is through with having children, the question arises as to what to do with the maternity clothes bought for the pregnancy period. Also, those who have become heavy with pregnancy would need a place to get appropriate clothes.

The consignment shop owner brings these parties together so that every person’s need is met and everyone goes home happy, consignor, consignee and customer.

CONSIGNMENT SHOP FOR JEWELRY

This article wouldn’t be complete if I didn’t mention one of the most famous items used for a consignment shop business. Jewelry is valuable to all parties and extra measures have to be taken as per the security of the items. Some of them may be antiques or vintage items and hence their sentimental value may rival new items.

There are professionals who specialize in gauging the correct value of any piece of jewelry, this helps the participating parties to price the item within the proper range to ensure that no side is being cheated.

CONSIGNMENT SHOP FOR COMPUTERS

Computers have always been a strong part of the consignment business industry. This may go from very old computers that still use floppy disks to the most advanced laptops we have today. The truth is that many are eager to sell computers they no longer need, and you will always find those who are willing to pay for used computers as long as they are still in very good shape.

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How to open a consignment store?

how to open a consignment store

There's no doubt that starting a consignment store requires a lot of work, but with expert planning, you'll be well on your way to creating a profitable business venture.

This guide will give you a low down on all of the major steps involved, from choosing a legal structure to creating a financial forecast and registering your business.

We will also walk you through the process of checking whether or not your idea can be viable given market conditions.

Let's embark on this exciting journey together!

In this guide:

Learn how a consignment store works

  • Assemble your consignment store's founding team

Undertake market research for a consignment store

  • Choose the right concept and position your consignment store on the market

Explore the ideal location to start your consignment store

  • Decide on a legal form for your consignment store

Assess the startup costs for a consignment store

Create a sales & marketing plan for your consignment store.

  • Build your consignment store's financial forecast
  • Choose a name and register your consignment store
  • Develop your consignment store's corporate identity
  • Navigate the legal and regulatory requirements for launching your consignment store

Create a business plan for your consignment store

Raise the financing needed to launch your consignment store, track your actuals against your forecast, key takeaways.

Before you can start a consignment store, you need to have a solid understanding of how the business works and what are its main revenue streams.

This will give you a glimpse into the profitability potential of your venture, whilst allowing you to decide whether or not it is a good fit for your situation (current skill set, savings and capital available to start the business, and family responsibilities).

It may be that creating a consignment store is an excellent idea, but just not the right one for you.

Before starting their own company, successful entrepreneurs typically:

  • Consult with and take advice from experienced consignment store owners 
  • Acquire hands-on experience by working in an operational consignment store

Take relevant training courses

Let's explore each option in a bit more detail.

Consulting with and taking advice from experienced consignment store owners

Having "seen it all", established business owners can offer valuable insights and hands-on advice drawn from their own experiences.

This is because, through both successes and failures, they've gained a more informed and practical understanding of what it takes to build and sustain a successful consignment store over the long term.

Acquiring hands-on experience by working in an operational consignment store

If you want to open a consignment store, having industry-specific experience is imperative because it equips you with the knowledge, network, and acumen necessary to navigate challenges and make informed decisions critical to the success of your future business.

You'll also be able to judge whether or not this business idea is suitable for you or if there might be conflicts of interest with your personal life (for example, long working hours could be incompatible with raising young children).

This work experience will also help you to make contacts in the industry and familiarise yourself with customers and their expectations, which will prove invaluable when you set up your consignment store.

Taking a training course is another way of familiarising yourself with the business model of your future activity before you decide to make the jump.

You may choose to complete a training course to obtain a certificate or degree, or just take online courses to acquire practical skills.

Before going any further in setting up your venture

Before you go any further with your plans to open a consignment store, make sure you have a clear vision of what it will take in terms of:

  • What skills are needed to run the business successfully (do you have some or all of these skills?)
  • What a standard working week looks like (does it suit your personal commitments?)
  • What sales potential and long-term growth prospects the consignment store has (compare this with your level of ambition)
  • What options you'll have once you decide to retire (or move on and inevitably sell the company)

This analysis of the business model and the constraints of the business should help you to check that your idea of launching a consignment store fits your entrepreneurial profile.

If there is a match, it will then be time to look at assembling the founding team of your business.

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Assembling your consignment store's founding team

The next step to opening your consignment store is to think about the ideal founding team, or to decide to go in alone.

Starting and growing a successful business doesn't have to be a solo journey and setting up a consignment store with several co-founders is generally easier. The business benefits from a management team with a wider skillset, decisions are made together, and the financial risk is shared among the partners, making the journey more collaborative and less daunting.

But, running a business with several partners brings its own challenges. Disagreements between co-founders are quite common, and these can pose risks to the business. That's why it's crucial to consider all aspects before starting your own business.

We won't go into too much detail here, as this is a complex topic that deserves its own guide, but we do recommend that you ask yourself the following questions:

What is the ideal number of co-founders for this venture?

Are you on the same wavelength as your potential partners in terms of vision and ambition , how will you deal with potential failure.

Let's look at each of these questions in more detail.

To answer this question you will need to consider the following:

  • What skills do you need to run the business? Are you lacking any?
  • How much startup capital do you need? How much do you have?
  • How are key decisions going to be made? - It is usually advisable to have an odd number of partners (or a majority shareholder) to help break the tie.

Put simply, your co-founders contribute skills, capital, or both. Increasing the number of partners becomes advantageous when there is a deficiency in either of these resources.

Your business partners should share the same short and long-term vision, be it business expansion or social responsibility, to avoid future frustrations and simplify decision-making. Different views are natural, but alignment is ideal.

In any case, you should think of having an exit mechanism in place in case one of the partners wants to move on.

We wish you nothing but success when starting up and growing your consignment store, but it's always wise to have a backup in case things don't go as planned.

How you deal with a potential failure can vary significantly based on the relationship you have with your business partner (close friend, spouse, ex-colleague, etc.) and the personal circumstances of each of you. 

For instance, starting a business with your spouse might seem appealing, but if it doesn't succeed, you risk losing 100% of the household income at once, which could be stressful.

Similarly, going into a partnership with a friend can put pressure on the friendship in the event of failure or when you need to make difficult decisions.

There is no wrong answer, but it is essential to carefully evaluate your options before starting up to ensure you're well-prepared for any potential outcomes.

The next step to start your consignment store is to check that there is indeed an opportunity to be seized, using market research. Let's take a look at what this involves.

The objectives of market research

In a nutshell, doing market research enables you to verify that there is a business opportunity for your company to seize, and to size the opportunity precisely. 

First of all, market research enables you to assess whether the market you're targeting is large enough to withstand the arrival of a new competitor: your consignment store.

The market analysis will also help you define the product and service offering of your consignment store, and transcribe it into a market positioning and concept that will strike a chord with your target customers.

Finally, your market research will provide you with the data you need to draw up your sales and marketing plan and estimate the revenue potential of your consignment store.

Analyse key trends in the industry

Market research for a consignment store must always begin with a thorough investigation of consumer habits and current industry trends.

Normally, consignment store market research begins with a sectorial analysis which will provide you with a better understanding of how the industry is organized, who the major players are, and what are the current market trends.

Assess the demand

A demand analysis enables you to accurately assess the expectations of your consignment store's future customers.

Your analysis will focus on the following questions:

  • How many potential customers are present in the geographical areas served by your company?
  • What are their expectations and purchasing behaviors?
  • How much are they willing to spend?
  • Are there different customer segments with distinct characteristics?
  • How to communicate and where to promote your business to reach your target market?

The main goal of your demand analysis is to identify potential customer segments that your consignment store could target and what products or services would meet these customers' expectations.

Supply side

Supply-side analysis looks at the products and services offered by your competitors on the market.

You should focus here on the following questions:

  • Who will your competitors be?
  • Are they any good?
  • Where are they located?
  • Who do they target?
  • What range of products and services do they offer?
  • Are they independent players or part of a chain?
  • What prices do they charge?
  • How do they sell their products and services?
  • Do their concepts appeal to customers?

One of the aims of your supply-side analysis will be to gather the elements that will enable you to define a market positioning that will set you apart from what is already being done on the market, so as to avoid direct confrontation with competitors already established (more on that below).

Regulations

Market research is also an opportunity to look at the regulations and conditions required to do business.

You should ask yourself the following questions:

  • Does it take a specific degree to open a consignment store?
  • Do you need specific licences or business permits?
  • What are the main regulations applicable to your future business?

Given that your project is still in its early stages, your analysis of the regulation can be carried out at a high level for the time being. You just want to identify the main laws applicable and check that you meet the conditions for running this type of business before going any further.

Once your project is more advanced, you can come back to the regulation in greater detail with your lawyer.

Concluding your market research

Your market research should lead you to draw a clear conclusion about your chances of commercial success of your business idea:

  • Either the market is saturated, and you'd better look into another business idea.
  • Or there's an opportunity to be seized in the geographical area you're considering, and you can go ahead with your project to open a consignment store.

Don't start from scratch!

With dozens of business plan templates available, get a clear idea of what a complete business plan looks like

business plan templates

Choosing the right concept and positioning for your consignment store

Once your market research is completed, it's time to consider the type of consignment store you want to open and define precisely your company's market positioning in order to capitalise on the opportunity you identified during your market research.

Market positioning refers to the place your product and service offering occupies in customers' minds and how they differ from competing products and services. Being perceived as the premium solution, for example.

There are four questions you need to consider: 

How will you compete with and differentiate yourself from competitors already on the market?

  • Can you join a franchise to reduce the risk?

Is it better to start or buy a consignment store already in operation?

How will you validate your concept and market positioning.

Let's look at each of these in a little more detail.

When you choose to start up a consignment store, you are at a disadvantage compared to your rivals who have an established presence on the market. 

Your competitors have a reputation, a loyal customer base and a solid team already in place, whereas you're starting from scratch...

Entering the market and taking market share from your competitors won't happen automatically, so it's important to carefully consider how you plan to establish your presence.

There are four questions to consider here: 

  • Can you avoid direct competition by targeting a customer segment that is currently poorly served by other players in the market?
  • Can you offer something unique or complementary to what is already available on the market?
  • How will you build a sustainable competitive advantage for your consignment store? 
  • Do you have the resources to compete with well-established competitors on your own, or would it be wiser to explore alternative options (more on that below)?

Also, think about how your competitors will react to your arrival on their market.

Are there franchises available for you to join?

Opening a new consignment store from the "ground up" is exciting because you'll enjoy more freedom and flexibility. However, you'll need to put in extra effort to establish a trustworthy brand and attract customers.

On the other hand, joining a franchise might limit your personal flexibility, but you'll be operating under an established brand name. This is likely to bring significant benefits in terms of operational processes, supplier relationships, recruitment, and more.

Of course, joining a franchise is not free: you will have to pay an entry fee and an annual royalty (generally as a percentage of sales).

And franchising opportunities vary from country to country and region to region, so there's no guarantee that you will be able to find a franchise to join.

Nevertheless, where possible, joining a franchise is generally a good way of reducing the risk associated with setting up a consignment store, and is well worth considering.

Another alternative to opening a new business is to take over a consignment store already trading. 

Purchasing an existing consignment store means you get a loyal customer base and an efficient team. It also avoids disrupting the equilibrium in the market by introducing a new player.

A takeover hugely reduces the risk of the business failing compared to starting a new business, whilst giving you the freedom to change the market positioning of the business taken over if you wish.

This makes buying an existing consignment store a solid alternative to opening your own or operating under a franchise.

However, here again, buying a business requires more capital compared to starting a consignment store from scratch, as you will need to purchase the business from its current owner.

Regardless of how you choose to establish your business, it's crucial to make sure that the way you position your company aligns with the expectations of your target market.

To achieve this, you'll have to meet with your potential customers to showcase your products or services and get their feedback.

The next stage in our guide on how to start a consignment store: choosing where to set up shop.

Setting up your business in the right location will have a direct impact on your chances of success, so it's a good idea to think things through before you launch.

To help you decide where to set up your business, we recommend considering the following factors:

  • Visibility and foot traffic: This is important for a consignment store as it increases the chances of attracting potential customers and making sales. A location with high visibility and foot traffic will also help to create brand awareness.
  • Parking space, road and public transport accessibility: Adequate parking space and accessibility to roads and public transport are important for customers who may need to transport larger items purchased from the consignment store. It also makes the store more convenient for customers to visit.
  • Proximity to target customers: Being located near the target customer base for a consignment store is crucial for the success of the business. This includes neighborhoods with a higher income and a preference for secondhand shopping.
  • Competitor presence: It is important to consider the presence of other consignment stores in the area. Being too close to a direct competitor can negatively impact sales and market share.

These criteria will need to be refined according to the specific features of your project.

After weighing the factors mentioned earlier, it's crucial to focus on your startup's budget. Look for a location that suits your business needs while being affordable, especially in the short term.

One of the issues that will also come up is the long-term future of your location, particularly if you opt to rent your premises rather than buy. In this case, you will need to consider the conditions for renewing the lease (duration, rent increases, etc.).

Lease agreements vary widely from country to country, so make sure you check the terms applicable to your situation and have your lawyer review your lease before you sign.

What legal form should I choose for my consignment store?

The next step to start a consignment store is to choose the legal form of your business.

The legal form of a business simply means the legal structure it operates under. This structure outlines how the business is set up and defines its legal obligations and responsibilities.

Why is your consignment store's legal form important?

Choosing the right legal form for your consignment store is important because this will affect:

  • Taxation: your tax obligations depend on the legal structure you choose, and this principle applies to both personal income tax and business taxes.
  • Risk exposure: some legal structures have a legal personality (also known as corporate personality) and limited liability, which separates them from the owners running the business. This means that the business would be liable rather than the owners if things were to go wrong (lawsuit, debt owed in case of bankruptcy, etc.).
  • Decision-making and governance: how you make key decisions varies based on the legal form of your business. In some cases you might need to have a board of directors and organise general assemblies to enable shareholders to influence major decisions with their voting rights.
  • Financing: securing funding from investors requires you to have a company and they will expect limited liability and corporate personality to protect them legally.
  • Paperwork and legal formalities: the legal structure you select determines whether certain obligations are necessary, such as producing annual accounts, or getting your books audited.

Popular business legal forms

The specific names of legal structures vary from country to country, but they usually fall within the two main categories below:

Individual businesses

Individual businesses, like sole traders or sole proprietorships, are made for self-employed entrepreneurs and freelancers rather than businesses which employ staff.

They benefit from straightforward administrative requirements, minimal paperwork to start, simpler tax calculations, and streamlined accounting procedures.

However, the downside is that there's typically no legal distinction between the business and the person responsible for day-to-day operations. This means the owner's personal assets are at risk if the business faces problems or goes bankrupt.

There is also no share capital in such a structure, meaning that individual businesses cannot raise equity from investors which seriously limits funding options.

Companies are versatile structures suited to projects of all sizes in terms of number of founders, number of employees and amount of capital.

They are a bit more complex to operate than individual businesses with more formalities, stringent accounting requirements, more complex tax implications, etc.

In return, they offer stronger protections to their shareholders. They usually benefit from having their own legal identity and limited liability, meaning co-founders and investors can only ever lose the amount of money they have put into the company.

For instance, if things were to go south (the company files for bankruptcy or there is a legal issue), the company would take the hit, safeguarding the personal assets of the founders and investors.

How should I choose my consignment store's legal structure?

Deciding on a legal form is easy once you've estimated your sales, decided whether or not you need employees and figured out the number of co-founders joining you.

It's essential to remember that a solid business idea will succeed no matter which legal structure you pick. Tax laws change regularly, so you can't rely on specific tax advantages tied to a particular structure when starting a business.

A proven approach is to look at what legal structures your top competitors are using, and go with the most common option as a working assumption. Once your idea is mature enough, and you're getting closer to officially registering your business, you can get advice from a lawyer and an accountant to confirm your choice.

Can I switch my consignment store's legal structure if I get it wrong?

Yes, changing your legal structure later is possible, though it may involve selling the old entity to a new entity in some cases, which adds further expenses. If you want to save on such costs, it makes sense to pick the correct legal form for your business the first time around.

The next step in creating a consignment store involves thinking about the equipment and staff needed for the business to operate.

After figuring out what you need for your business, your financial plan will reveal how much money you'll need to start and how much you might make (check below for more details).

Because every venture is distinctive, providing a reliable one-size-fits-all budget for launching a consignment store without knowing the specifics of your project is not feasible.

Each project has its own particularities (size, concept, location), and only a forecast can show the exact amount required for the initial investment.

The first thing you'll need to consider is the equipment and investments you'll need to get your business up and running.

Startup costs and investments to launch your consignment store

For a consignment store, the initial working capital requirements (WCR) and investments could include the following elements:

  • Store Fixtures and Furniture: These are essential items for any consignment store, including display racks, shelving units, cash registers, and furniture for the sales floor and office.
  • Point of Sale System: A modern and efficient point of sale system is crucial for tracking inventory, processing transactions, and managing customer information. This can include hardware such as computers, scanners, and barcode printers, as well as software licenses and subscriptions.
  • Security Systems: Protecting your inventory and store is important, so investing in security systems such as cameras, alarms, and sensors is necessary. This can also include the cost of installation and monitoring fees.
  • Delivery Vehicles: If your consignment store offers pick-up and delivery services, you may need to purchase a delivery van or truck. This can also include the cost of vehicle maintenance and insurance.
  • Store Renovations and Improvements: As your business grows, you may need to make updates and improvements to your store, such as expanding the sales floor, adding dressing rooms, or updating the storefront. These costs can include materials, labor, and permits.

Of course, you will need to adapt this list to your business specificities.

Staffing plan of a consignment store

In addition to equipment, you'll also need to consider the human resources required to run the consignment store on a day-to-day basis.

The number of recruitments you need to plan will depend mainly on the size of your company.

Once again, this list is only indicative and will need to be adjusted according to the specifics of your consignment store.

Other operating expenses for a consignment store

While you're thinking about the resources you'll need, it's also a good time to start listing the operating costs you'll need to anticipate for your business.

The main operating costs for a consignment store may include:

  • Rent: This includes the cost of leasing the physical space for your consignment store.
  • Utilities: This covers the cost of electricity, water, and gas used in your store.
  • Staff Salaries: You will need to pay your employees for their time and labor in managing and running the store.
  • Inventory Costs: This includes the cost of purchasing items to sell in your store, as well as any fees for shipping or handling.
  • Marketing and Advertising: In order to attract customers, you may need to spend money on marketing and advertising efforts such as social media ads, flyers, or partnerships with other businesses.
  • Accountancy Fees: You may need to hire an accountant to help manage your store's finances and taxes.
  • Insurance: It's important to have insurance for your consignment store to protect against any potential accidents or damages.
  • Software Licenses: In order to keep track of inventory, sales, and customer information, you may need to purchase software licenses for point-of-sale systems or inventory management software.
  • Banking Fees: There may be fees associated with processing credit card transactions or managing your store's bank account.
  • Cleaning and Maintenance: You will need to keep your store clean and in good condition, which may require hiring a cleaning service or purchasing cleaning supplies.
  • Equipment Rentals: If you need any equipment for your store, such as racks or display cases, you may need to rent them rather than purchasing them outright.
  • Professional Services: You may need to consult with lawyers, marketing experts, or other professionals to help with various aspects of your consignment store.
  • Credit Card Processing Fees: There may be fees associated with processing credit card transactions, such as interchange fees or monthly fees for using a payment processor.
  • Security: It's important to keep your store and its inventory safe, so you may need to invest in security measures such as cameras, alarms, or security personnel.
  • Training and Development: In order to run a successful consignment store, you may need to invest in training and development programs for yourself and your employees.

Like for the other examples included in this guide, this list will need to be tailored to your business but should be a good starting point for your budget.

The next step to launching your consignment store is to think about the actions you need to take to promote your products and services and build customer loyalty.

Here, you'll be looking at the following issues:

  • What is the best method to attract as many new customers as possible?
  • How to build customer loyalty and spread word of mouth?
  • What human and financial resources will be required to implement the planned actions?
  • What level of sales can I expect to generate in return?

The precise sales and marketing levers to activate will depend on the size of your consignment store. But you could potentially leverage some of the initiatives below.

Besides your sales and marketing plan, your sales forecast will be affected by seasonal patterns related to the nature of your business, such as fluctuations during the holiday season, and your competitive landscape.

Building your consignment store's financial forecast

The next step to opening a consignment store is to create your financial forecast.

What is a consignment store financial forecast?

A consignment store financial forecast is a forward-looking tool that projects the financial performance of your business over a specific period (usually 3 years for start-ups). 

A forecast looks at your business finances in detail - from income to operating costs and investments - to evaluate its expected profitability and future cash flows.

Building a financial forecast enables you to determine the precise amount of initial financing required to start your consignment store.

There are many promising business ideas but very few are actually viable and making a financial forecast is the only way to ensure that your project holds up economically and financially.

financial projection for a consignment store

Your financial forecast will also be part of your overall business plan (which we will detail in a later step), which is the document you will need to secure financing.

Financial forecasts are used to drive your consignment store and make key decisions, both in the pre and post-launch phases:

  • Should we go ahead with the business or scrap the idea?
  • Should we hire staff or use an external service provider?
  • Which development project offers the best growth prospects?

Creating a financial forecast for starting a consignment store is an iterative process as you will need to refine your numbers as your business idea matures. 

As your consignment store grows, your forecasts will become more accurate. You will also need to test different scenarios to ensure that your business model holds true even if economic conditions deteriorate (lower sales than expected, difficulties in recruiting, sudden cost increases or equipment failure problems, for example).

Once you’ve launched your business, it will also be important to regularly compare your accounting data to your financial projections in order to keep your forecast up-to-date and maintain visibility on future cash flows.

What does a financial projection look like?

The following financial tables will be used to present your consignment store's financial forecast.

The projected P&L statement

Your consignment store's forecasted P&L statement will enable you to visualise your consignment store's expected growth and profitability over the next three to five years.

example of projected income statement for starting a consignment store

The projected balance sheet of your consignment store

The projected balance sheet gives an overview of your consignment store's financial structure at the end of the financial year.

financial forecast to open a consignment store balance sheet example

The cash flow projection

A cash flow forecast for a consignment store shows the projected inflows and outflows of cash over a specific period, providing insights into liquidity and financial health.

cash flow projection example to launch a consignment store

What is the best financial forecasting tool for starting your consignment store?

The simplest and easiest way to create your consignment store's projections is to use professional online financial forecasting software such as the one we offer at The Business Plan Shop.

There are several advantages to using specialised software:

  • You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
  • You have access to complete financial forecast templates
  • You get a complete financial forecast ready to be sent to your bank or investors
  • The software helps you identify and correct any inconsistencies in your figures
  • You can create scenarios to stress-test your forecast's main assumptions to stress-test the robustness of your business model
  • After you start trading, you can easily track your actual financial performance against your financial forecast, and recalibrate your forecast to maintain visibility on your future cash flows
  • You have a friendly support team on standby to assist you when you are stuck

If you are interested in this type of solution, you can try our forecasting software for free by signing up here .

How do I choose a name and register my consignment store?

Now that your project of launching a consignment store is starting to take shape, it's time to look at the name of your business.  

Finding the name itself is generally fairly easy. The difficulty lies in registering it.

To prevent this guide from being too long, we won't go into all the criteria you need to take into account when choosing a striking name for your consignment store. However, try to choose a name that is short and distinctive.

Once you have a name that you like, you need to check that it is available, because you cannot use a name that is identical or similar to that of a competitor: this type of parasitic behaviour is an act of unfair competition for which you risk being taken to court by your competitors.

To avoid any problems, you will need to check the availability of the name:

  • Your country's company register
  • With the trademark register
  • With a domain name reservation company such as GoDaddy
  • On an Internet search engine

If the desired name is available, you can start the registration process.

It is common to want to use the trading name as the name of the company, and to have a domain name and a registered trademark that also correspond to this name: Example ® (trading name protected by a registered trademark), Example LTD (legal name of the company), example.com (domain name used by the company).

The problem is that each of these names has to be registered with a different entity, and each entity has its own deadlines:

  • Registering a domain name is immediate
  • Registering a trademark usually takes at least 3 months (if your application is accepted)
  • The time taken to register a new business depends on the country, but it's generally quite fast

How do I go about it?

Well, you have two choices:

  • Complete all registrations at the same time and cross your fingers for a smooth process.
  • Make sure to secure the domain names and trademarks. Once that's done, wait for confirmation of a successful trademark registration before moving on to register the company.

At The Business Plan Shop, we believe it's essential to prioritize securing your domain names and trademarks over the business name. This is because you have the flexibility to use a different trading name than your legal business name if needed. 

Regardless, we suggest discussing this matter with your lawyer (see below in this guide) before making any decisions.

What corporate identity do I want for my consignment store?

The following step to start a consignment store is to define your company's visual identity.

Visual identity is part of the DNA of your consignment store: it makes you recognizable and recognized by your customers, and helps you stand out from the competition. It also helps convey your values, notably through the choice of colors that identify the company. 

Creating your business's visual identity yourself is entirely possible: there are several online tools that let you generate color palettes, choose typography and even generate logos.

However, we advise you to delegate this task to a designer or a communications agency for a professional result.

Your corporate identity will include the following elements: 

  • Your business logo 
  • Your brand guidelines
  • Your business cards
  • Design and theme of your website

Your consignment store's logo serves as a quick identifier for your company. It will be featured on all your communication platforms (website, social networks, business cards, etc.) and official documents (invoices, contracts, etc.).

Beyond its appearance, your logo should be easy to use on any type of support and background (white, black, gray, colored, etc.). Ideally, it should be easy to use in a variety of colors.

Brand guidelines

One of the challenges when starting a consignment store is to ensure a consistent brand image wherever your company is visible.

This is the role of your company's brand guidelines, which defines the typography and colors used by your brand and thus acts as the protector of your brand image.

Typography refers to the fonts used (family and size). For example, Trebuchet in size 22 for your titles and Times New Roman in size 13 for your texts.

The colors chosen to represent your brand should typically be limited to five (or fewer):

  • The main colour, 
  • A secondary colour (the accent),
  • A dark background colour (blue or black),
  • A grey background colour (to vary from white),
  • Possibly another secondary colour.

Business cards

Classic but a must-have, your business cards will be at your side to help you easily communicate your contact details to your founders, customers, suppliers, recruitment candidates, etc.

In essence, they should feature your logo and adhere to the brand guidelines mentioned earlier.

Website theme

Likewise, the theme of your consignment store website will integrate your logo and follow the brand guidelines we talked about earlier.

This will also define the look and feel of all your site's graphic elements:

What legal steps are needed to start a consignment store?

The next step in opening a consignment store is to look in detail at the legal and regulatory formalities.

Although it is possible to do the formalities yourself and draft some of the documents detailed here, The Business Plan Shop recommends that you seek advice on these aspects from a law firm.

Registering a trademark and protecting the intellectual property of your consignment store

One of the first things you need to do here is to protect your company's current and future intellectual property.

One way of doing this is to register a trade mark, as mentioned earlier in this guide. Your lawyer will be in a position to do the formalities for you and to help you select the classes (economic activities) and jurisdictions in which you have an interest in obtaining protection.

Your law firm can also advise you on other ways of protecting your company's intellectual property.

Preparing the legal documents for your consignment store

Your consignment store will need a set of legal and contractual documents to operate on a daily basis. 

Your exact needs in this respect will depend on the country in which you are launching your consignment store and the size and legal form envisaged for the company. Once again, we highly recommend having these documents prepared by your lawyer.

As a minimum, we recommend that you have the following documents prepared: 

  • Employment contracts 
  • General terms and conditions of sale
  • General terms and conditions of use for your website
  • Privacy Policy for your website
  • Cookie Policy for your website

Applying for licences and permits and registering for various taxes

Here too, the list of licences and business permits required for your business to operate legally will depend on the country in which you have decided to start your consignment store.

Your law firm will be able to advise you on all the regulations applicable to your business.

Likewise, your accountant will be able to assist you and take care of the formalities involved in complying with the tax authorities.

The next step to open a consignment store: put together your business plan.

What is a business plan?

To keep it simple, a business plan comprises two crucial components:

  • Firstly, a numerical part, the financial forecast (which we mentioned earlier), which highlights the initial financing requirements and profitability potential of the consignment store,
  • And a written, well-argued section that presents your project in detail, aims to convince the reader of its chances of success, and provides the context needed to assess whether the forecast is realistic or not.

The business plan will enable you to verify the coherence of your project, and ensure that the company can be profitable before incurring further costs. It will also help you convince business and financial partners.

As you can see, your business plan must be convincing and error-free.

How to write a business plan for a consignment store?

Nowadays, the modern and most efficient way to write a consignment store business plan is to use startup business plan software like the one we offer at The Business Plan Shop.

example of business plan to start a consignment store made with The Business Plan Shop

Using The Business Plan Shop to create a business plan for aconsignment store has several advantages :

  • You are guided through the writing process by detailed instructions and examples for each part of the plan
  • You can access a library of dozens of complete startup business plan samples and templates for inspiration
  • You get a professional business plan, formatted and ready to be sent to your bank or investors
  • You can create scenarios to stress test your forecast's main assumptions
  • You can easily track your actual financial performance against your financial forecast by importing accounting data
  • You can easily update your forecast as time goes by to maintain visibility on future cash flows

If you're interested in using this type of solution, you can try The Business Plan Shop for free by signing up here .

With your business plan in hand, you can tackle one of the final steps to open a consignment store  business: the search for financing.

Raising the capital needed to launch your business will probably require a combination of equity and debt, which are the two types of financing available to companies.

Equity funding

Equity is the sum of money invested in a consignment store by both founders and investors.

Equity is a key factor in business start-ups. Should the project fail, the sums invested in equity are likely to be lost; these sums therefore enable the founders to send a strong signal to their commercial and financial partners as to their conviction in the project's chances of success.

In terms of return on investment, equity investors can either receive dividends from the company (provided it is profitable) or realize capital gains by selling their shares (provided a buyer is interested in the company).

Equity providers are therefore in a very risky position. They can lose everything in the event of bankruptcy, and will only see a return on their investment if the company is profitable or resold. On the other hand, they can generate a very high return if the project is a success.

Given their position, equity investors look for start-up projects with sufficient growth and profitability potential to offset their risk.

From a technical standpoint, equity includes:

  • Share capital and premiums: which represent the amount invested by the shareholders. This capital is considered permanent as it is non-refundable. In return for their investment, shareholders receive shares that entitle them to information, decision-making power (voting in general assembly), and the potential to receive a portion of any dividends distributed by the company.
  • Director loans: these are examples of non-permanent capital advanced to the company by the shareholders. This is a more flexible way of injecting some liquidity into your company as you can repay director loans at any time.
  • Reserves: these represent the share of profits set aside to strengthen the company's equity. Allocating a percentage of your profits to the reserves can be mandatory in certain cases (legal or statutory requirement depending on the legal form of your company). Once allocated in reserves, these profits can no longer be distributed as dividends.
  • Investment grants: which represent any non-refundable amounts received by the company to help it invest in long-term assets.
  • Other equity: which includes the equity items which don't fit in the other categories. Mostly convertible or derivative instruments. For a small business, it is likely that you won't have any other equity items.

The main sources of equity are as follows:

  • Contributions made by the owners.
  • Private investors: business angels, friends and family.
  • Crowdfunding: raising funds by involving a group of people through campaigns where they contribute money or make donations, often getting something in return for their support.
  • Start-up aid, e.g. government loans to help founders build up their start-up capital.

Debt financing

Debt is the other way of financing companies. Unlike equity, debt offers lenders a limited, contractually guaranteed return on their investment.

Your consignment store undertakes to pay lenders' interest and repay the capital borrowed according to a pre-agreed schedule. Lenders are therefore making money whether or not your company makes a profit.

As a result, the only risk lenders take is that of your consignment store going bankrupt, so they're extremely conservative and will want to see prudent, hands-on management of the company's finances.

From the point of view of the company and all its stakeholders (workforce, customers, suppliers, etc.), the company's contractual obligation to repay lenders increases the risk for all. As a result, there is a certain caution towards companies which are too heavily indebted.

Businesses can borrow debt in two main ways:

  • Against assets: this is the most common way of borrowing. The bank funds a percentage of the price of an asset (a vehicle or a building, for example) and takes the asset as collateral. If the business cannot repay the loan, the bank takes the asset and sells it to reduce losses.
  • Against cash flows: the bank looks at how much profit and cash flow the business expects to make in the future. Based on these projections, it assigns a credit risk to the business and decides how much the business can borrow and under what terms (amount, interest rate, and duration of the loan).

It's difficult to borrow against future cash flows when you're starting a consignment store, because the business doesn't yet have historical data to reassure about the credibility of cash flow forecast.

Borrowing to finance a portion of equipment purchases is therefore often the only option available to founders. The assets that can be financed with this option must also be easy to resell, in the unfortunate event that the bank is forced to seize them, which could limit your options even further.

As far as possible sources of borrowing are concerned, the main ones here are banks and credit institutions. Bear in mind, however, that each institution is different, in terms of the risk it is prepared to accept, what it is willing to finance, and how the risk of your project will be perceived.

In some countries, it is also possible to borrow from private investors (directly or via crowdfunding platforms) or other companies, but not everywhere.

Key points about financing your consignment store

Multiple solutions are available to help you raise the initial financing you need to open your consignment store. A minimum amount of equity will be needed to give the project credibility, and bank financing can be sought to complete the financing.

You've reached the end of the road and are ready to launch your consignment store.

Congratulations and welcome to the fantastic world of entrepreneurship! Celebrate the work you've done so far, and get back to work quickly, because this is where the real work begins.

Your first priority will be to do everything you can to make your business sustainable (and thus avoid being one of the 50% of start-ups that fail within five years of launching).

Your business plan will be your best ally to ensure that you're on track to achieve your objectives, or to help rectify the situation if necessary.

The key to financial management is to regularly compare your actual accounting data with your consignment store forecasts, in order to be able to :

  • Quantify the gaps between what you planned and what you achieved
  • Adjust your financial forecasts as the year progresses to maintain visibility over your future cash flow

No one can predict the future with certainty, but by closely monitoring the variances between actuals and forecasts, regularly adjusting your forecasts and simulating several scenarios, you can prepare your consignment store for the worst while hoping for the best.

It's the only way to keep an eye on your cash flow and actively manage the development of your consignment store, ultimately reducing the risk to your company. 

There's nothing worse than waiting for your company's annual accounts to close, which can be many months after the end of your financial year (up to nine months in the UK for example), only to realize that you've fallen far short of your forecasts for the past year, and that your consignment store urgently needs a cash injection to keep going.

That's why it's strongly recommended to use a financial planning and analysis solution that integrates forecasting, scenario analysis, and actuals vs. forecast tracking, like we do at The Business Plan Shop with our financial dashboards .

  • This guide outlines the 15 key steps to open a consignment store.
  • The financial forecast is the tool that will enable you to validate the financial viability of your business idea.
  • The business plan is the document that will enable you to approach your financial and commercial partners to convince them of the strengths of your project and secure the financing you need to launch your business.
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consignment store business model

Consignment Shops: Best business model ever?

by JL Collins 21 Comments - Updated: February 19, 2013

consignment gallery

Our local upscale consignment shop, er, I mean Gallery

Imagine you could have a business selling stuff you didn’t own.

Imagine you had no manufacturing costs.

Imagine you had no cost of goods sold.

Imagine you could stock your store with inventory that didn’t cost you a dime unless and until it sold.

Imagine you could be guaranteed a hefty profit margin.

Imagine you had no shipping costs.

Imagine you could have this stuff delivered free to your door.

Imagine you could have this delivery made with no obligation and with the complete freedom to say, “Ah, no thanks.”

Imagine you never had to run a sale to move unwanted merchandise.

Imagine you could have it removed for free if it didn’t sell, and on your time-table.

Imagine you could just give it away if the owners declined to retrieve it when you told them to.

You’ve just imagined a consignment shop. Near as I can tell, the best business model ever.

As regular readers already know, point #8 in My Plan for 2013 is selling the house. With any luck at all, by May we’ll be settling into our new and more cosy deluxe apartment in the sky.  In addition to allowing us to move on to the next phase of our lives, it give me the delicious opportunity to indulge on a large-scale in one of my very favorite things: Getting rid of stuff.

I love getting rid of stuff. Each item going out the door feels like a burden lifted. Moving provides an unloading opportunity like no other. But this unloading can be surprisingly difficult and time-consuming.

But because we already run a pretty lean ship, even the things we won’t be taking with us play a currently useful role in showing the house to its best advantage. That means I don’t want to unload anything until the house is sold. Not only sold, but past inspections and any financing or other contingencies that might cause a buyer to pull out. And, of course, that means when the time comes the selling window will be small.

It’s never too soon to explore options (and I’ll have another post shortly on some of the others) and that got me over to our local consignment store this past Sunday to check it out.  I’ve been to lots of these places before and this one is the cleanest, nicest and best organized I’ve come across. It’s not a “Shop,” it’s a “Gallery.” Heh!

They tend to carry quality stuff and it is displayed as well as any retail store you might visit. If you are a buyer, let’s say looking for a dining room set (something I’ll happen to have for sale shortly — Just saying), you’ve got a couple of options.

You could buy new. It’s easy. And it’s very expensive.

You could buy used. It’s far cheaper, but can require a lot of running around.

Buying used you might search Craig’s List. Look at the pictures. Make a list of those that appeal to you. Set up appointments. Drive around town looking at them. Hopefully find one you like and then drive back to negotiate for it. You might get a killer bargain. More likely, at least in my experience, you’ll be dealing with folks who have a highly inflated idea of what it’s worth.

Or you could mosey on over to the consignment shop and see 8 to 12 sets all in one place. They’ll all be priced realistically by professionals without any pesky emotional (…remember, sob, Grandma used to sit right there each Thanksgiving before she died back in ’78…) attachments to the things. If you didn’t see what you wanted, you could stop by in another week or so and check out the new inventory.

If I were a buyer, I’d certainly take a look at Craig’s. I’d review the ads in case the perfect set was sitting there. But I’d also visit the consignment place. It’s every bit as easy as any retail store, just cheaper.

As a seller, it’s a tougher call. But, not surprisingly, the consignment store folks have come up with some strong reasons to use them. Saves me the trouble. Here’s the case our local place makes, in their own words, directly from their website:

Why use a consignment gallery?

  • Avoid the hassle of placing newspaper ads and having strangers walk through your home.
  • Garage sales bring low prices and a limited number of shoppers for a short time.
  • Auctions cannot guarantee reasonable prices.
  • Consignment Gallery in Bedford and Amherst offer excellent visibility in high traffic locations, 7 days a week.
  • With over 20,000 square feet we are the largest consignment business in the area for pre-owned furniture and decorative accessories.
  • We provide you with a simple agreement form which lists your items and prices.
  • We have the experience to price and attractively display your consignments.
  • Consignment Gallery has established a reputation for integrity and customer service.

Compelling stuff. But it comes with a price:

1. I have to get the stuff there. For small things, no problem. But for my Wing Chairs and Dining Room set arrangements need to be made.

2. They gave me the cards of two reliable guys that will cart the furniture over there, but that’s an added cost of sale to me.

3. I’ll still need to take pictures to send them, just to confirm that they’d be interested in accepting my consignment.

4. Even if they like the pictures, they reserve the right to reject the items upon arrival and inspection. More risk to me.

5. Their commission is 35% on items priced over $30. It’s 50% on items under $30.

6. They decide what the price will be and it might be lower than I want (especially after commissions and what with Grandma having sat at that table each Thanksgiving ’till she died in ’78 and all).

7. They want the inventory to turn over. That’s far more profitable for them than squeezing out the best price on my stuff for me. One cost they do have is rent for the floor space and nothing wastes that money like stagnate inventory.

8. After 30 days the price automatically comes down 10%.

9. After 60 days you can agree to another 10% reduction or collect your things.

10. If the items don’t sell, I’ll have to pay to retrieve them or agree just to donate them; which the store will arrange.

Like I said, it is a great business model. For them. And maybe for me.

Let’s look at some numbers. Let’s say my dining room set is worth, as I think it is, about $500. If it sells at the full price in the shop, I’ll net 65% of that or $325. Less whatever it costs me to get it there. So anything I can get above $325 is found money.

But I’ll need to sell quickly when the time comes.

Here’s my plan. When I’m ready, I’ll put it on Craig’s List at around $375 for a few days. If somebody recognizes it as the screaming bargain it is, they’ll get a deal and I’ll pocket a bit of extra dosh. If not, the consignment shop will get the biz. Sometimes a hammer won’t do and you need a nail-gun.

Read Next from JL

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February 19, 2013 at 5:41 pm

“Deluxe apartment in the sky” makes it sound like you are dying and going to heaven. I sure hope that is not the case. I will miss your writing 🙂

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February 19, 2013 at 5:48 pm

Wow Mr. RS….

You just very likely set an all time speed record for posting a comment after the post went up!

Click on the link. It’s from an old sit-com theme song. Of course the fact I remember that sit-com is reason enough to believe I’m getting close to that heavenly lodging option. At least I hope that’s the one I’m getting close to.

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February 19, 2013 at 6:26 pm

A consignment shop also has the cost of insurance and labor and if the owner it means your probably there a lot, like any small business owner. Another option is to have a “moving estate sale”. The estate sale folks come to your home and conduct an estate sale of the things you leave behind. You don’t have to move things and someone else does the sale. They’ll even negotiate with you to take care of the leftovers.

February 19, 2013 at 6:34 pm

Hi Bonnie…

Didn’t mean to suggest there are no costs or effort, just that many typical costs are avoided.

Not sure we have enough stuff of enough quality to be of interest to estate sales folks. Maybe next time, if we leave the country and sell every thing. Something to keep in mind. Do you know what commission levels they charge? Thanks.

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February 19, 2013 at 9:29 pm

You might want to contact a local auctioneer or two. In my area (Southern Illinois), they will typically bundle your stuff with some other estate sale. Commissions run around 10% on personal property. Of course, there are typically no reserves so you’ll likely get low-ball prices.

I wish you luck this time around selling the house. It’s never a fun thing to do with the constant cleaning, staging, inconvenient appointments, etc. There’s also the realtor commission and other annoyances like helping buyers with their closing costs.

February 19, 2013 at 10:30 pm

Thanks, Prob8….

..and you’re right. Selling a house is a real PITA. Expensive, too. I’ll have more on this as things progress.

February 20, 2013 at 12:30 pm

I’d have to ask, I had a friend who died and her attorney arranged the estate sale and that was my first exposure to the industry. With the crash of the housing market here in AZ, they have been doing moving estate sales too.

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February 19, 2013 at 7:03 pm

Where are you moving to? Why are you moving? Won’t you miss your yard/garden? Just curious about all this.

February 19, 2013 at 9:11 pm

To the city of Manchester, NH. It is the closest to my wifes job. We like city living, walking to cafes and such. Where we live now is very car dependent.

There are some things I’ll miss about the house. Mostly the screened porch on summer days, the view of our pond and occasional wildlife visitors. Since the remodel, the walk in master bath shower is pretty nice, too.

But we’ve been in the house for 13 years, our daughter is off to college and we like change. I won’t miss the cost and the upkeep.

Plus if we get the apartment I have my eye on, we’ll have a wonderful view west over the Merrimack river.

Stay tuned. I’ll be writing more about this and already have written some:

https://jlcollinsnh.com/2012/02/23/rent-v-owning-your-home-opportunity-cost-and-running-some-numbers/

https://jlcollinsnh.com/2012/01/17/selling-the-house-and-adventures-in-staging/

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February 19, 2013 at 10:35 pm

I love getting rid of stuff. Each item going out the door feels like a burden lifted. — I am with you on this thought train. I can imagine your excitement to begin another phase in your life.

February 19, 2013 at 10:40 pm

another way in which we are kindred spirits!

Yep. It’s been fun, but looking forward to the next phase.

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February 21, 2013 at 9:21 pm

I remember the Jeffersons. 🙂

Not sure where to ask unrelated questions so I am posting it here.

Can you tell me the best method of getting a passport? What should I expect to pay for a passport? How long does this process take?

Does one need immunizations to travel to Ecuador? If so, who do I see for this? The local health dept?

Hope you don’t mind, I could really use the information.

February 21, 2013 at 9:41 pm

Betty – Passports will cost around $135 plus the cost of photos and mailing. You can get one at many locations including the local post office or courthouse – call ahead to see what they need and to set an appointment. The after you submit the paperwork, processing times depend on how behind they are at that time. Expect 6 to 12 weeks. You can pay an extra fee for expedited service if you need it faster.

If you are concerned about immunizations, I would make an appointment with my doctor to discuss what they recomment. You can also visit the CDC’s website for a general discussion about health information for traveling to Ecuador.

Go ahead and run a Google search for both of those topics and you will find everything you need.

February 24, 2013 at 1:49 pm

Thank you very much. 🙂

February 21, 2013 at 11:46 pm

What great readers hang out here! Thanks Prob8!

Congratulations on your planned trip to Ecuador, Betty! Where in the country are you going and when?

February 24, 2013 at 1:51 pm

Well, I haven’t a direct plan as yet. We are still in the talking about it phase. However, I am going to get the passports and, see about immunizations now.

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February 22, 2013 at 2:56 pm

Mr.JIm this blog just screamed for my reply. I believe in terms of this topic, I am the definitive, Anti-JlCollins. As you know I collect on a real basis and sell on the theoretical plane most of the time.. So far no hoarders episodes but I have a tolerant family. On the side of selling I do now have 2 re-sale operations going and I would encourage your readers to look for a sale to a re-seller rather than go the consignment route. I see dozens of people like me every week buying at auctions, estate sales and most of us look for a double on our investment, but we offer the advantage of cash on the spot. I have seen too many consignment shops that just don’t move product. The effects of that are a real push for discount. It may be ugly to be faced with liquidation value, but it is like a shot of NyQuil ( leaves a nasty taste in your mouth),you really will sleep better with the cash and not just a hope of tomorrow’s sale. Once you decide to part with something, turning your thoughts to the employment of whatever the proceeds are should be the fulfillment of your plan. I have sold many items that I would like to have kept, but the excitement of the next find is the motivation.

Your readers who are looking for an auctioneer should go to AuctionZip.com this site will list auctioneers in their area and also give them an idea of the kinds of items they are most successful selling. All auctions don’t attract the same crowds and the same motivated buyers. Consignment auctions are a risk if your items do not fit the theme of the other lots being offered. Different horses for different courses.

Anyway, hope the un-bundled of JLCollins continues to progress toward portability.

February 22, 2013 at 4:00 pm

Hi Dennis….

Always great to see you check in!

With your business savvy, I would have expected comment from you on my assessment of the consignment store business model. Not sure I’d want to run one, but they sure look like interesting investments.

(For the benefit of my other readers, in addition to being a collector Dennis is a former banker and current venture capitalist. He holds ownership stakes in several businesses.)

BTW, I have a very good friend who is considering selling her business. If you are willing to provide a little informal guidance, I’d like to pass along your contact info.

How would sellers like me best find buyers like you?

February 22, 2013 at 4:54 pm

Most antique malls are made up of independent dealers who scour the world for deals, most have extraordinary connections regarding who buys what and where to sell things. So don’t be afraid to just ask someone at these establishments about a buy out or where they think you could sell your items. Chances are good you will come away with a couple avenues to pursue..

Happy to help your friend,email me the info or give me a call. Either way I will be happy to help her evaluate the potential of a sale. PS thank you for the kind words, usually when people mention my name there are more adjectives than nouns used.

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March 11, 2013 at 12:23 pm

I was in the local thrift store with Mrs. Moneyseed this past week buying some new-used baby clothes and I said to her “Can you imagine that EVERYTHING in this place was donated??” They have less operating costs than consignment shops, because they don’t owe anything to the person who brought the item in.

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March 12, 2013 at 12:23 am

Good point!

But also consider that the one cost both have is rent. So the more valuable the items you can offer in a given space, the more money there is to be made. For instance, if I have space to display a chair for sale and it was donated and if I can sell it for $20, I’ve made $20 for that space.

But if I can take a $100 chair on consignment and make 35%, I’ve made $35. And it still costs me nothing unless and until it sells.

Mmmm. I need to go into the consignment business!

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Simple Consign

10 Surefire Ways To Be A Successful Consignment Shop Owner

SimpleConsign

By SimpleConsign

Table of contents, what makes a successful consignment shop owner, 1. treat your store like a real business- not a side hustle or hobby.

Many people who love thrift shopping decide to open a consignment or thrift store. They assume that their ability to find good bargains means they know how to run a consignment store. However, it's essential to recognize that opening a consignment shop means starting a business and not just pursuing a hobby. To run a successful consignment store, you must acknowledge this fact and treat your consignment shop start-up with the seriousness and dedication it deserves.

2. Recognize that you need more than a dream.

You need to create a business plan. Opening a consignment shop is a long-held dream for most shop owners. However, many entrepreneurs in the resale industry think it's easier to open this type of shop because there's no inventory to purchase. They quickly learn the truth.  To make a consignment store successful, you need more than a business license. You need a solid business plan in place. That means you need to research the industry, know your product, and study the competition. 

3. Get skin in the game by making a financial investment.

SimpleConsign serves a diverse group of customers, ranging from successful multi-location stores to new store owners.

Conversations with new store owners often go like this:

New Store: "Hi, I want to ask about your software." SimpleConsign: "Sure. Tell us about your business!" New Store: "We're signing the lease for the basement area under my sister's hair salon. I borrowed a computer from my cousin and have handwritten all of our tags. Once we start making money, I'll add an actual cash drawer." 

This is a clear sign that your business is underfunded, and your chances of succeeding are low.  Successful business owners make an investment in time and money. Purchase reputable software . Invest in quality hardware. Keep reserve funds that you can draw on during slow times. Create an attractive retail store in the best possible location with in-demand consignment items. If you cannot do these things, there may be a better time to open your shop.

4. Build a reliable team.

A successful consignment shop owner understands that you can’t do it alone. You need a solid support system and business structure. Take time to hire top-notch full and part-time employees. Invest time in training your team so you can trust them to work independently. Build a network with other shop owners either in your community or across the country. Find a mentor to counsel with for business and personal needs. If you're wondering how to set up a consignment store, these are the people to ask!

5. Accept the need for marketing and know how to measure your results.

Owning a consignment shop can be challenging, and one of the biggest challenges is attracting customers. Advertising and marketing must be a top priority to open a new consignment store successfully. A vibrant and active social media presence is crucial for any business nowadays, and they are usually free to set up. If you lack the necessary skills or time to do this, you can hire someone to help. Remember, the ultimate goal is to get more customers within your target market. If you're managing your marketing team correctly, you should see a return on this investment.

6. Don't skim over the details.

Details matter, yet many consignment shop owners ignore them. When reading Yelp reviews of consignment shops, we often see comments like "No one spoke to me during my entire visit," "The store is dingy and smells bad," and "Are you ever open?" These may seem like small details, but making excuses or ignoring them altogether can cost a lot of business. If you're wondering how to open a consignment store, start by reading reviews online for consignment shops in your area.

7. Identify and understand your customers.

When starting a consignment shop, it's essential to know your customers. The question is whether you choose your physical location and then determine your merchandise based on the location's demographics or decide your inventory and then find a place with the people who want to buy what you offer.  Regardless of where you start, understanding your customers is vital to running a successful consignment shop. Study the neighborhoods around your shop and survey your existing customers to get better acquainted with them. Look for unique ways to get involved with your community and build customer relationships before you start selling items. This will improve your bottom line.

8. Give your customers what they want.

A staff member from our team once visited a consignment shop in another state. The shop owner complained about the poor business and how no one wanted to buy her clothes. Instead, customers were more interested in her display pieces, which were clearly marked with "Not For Sale" signs. Our staff member suggested that the owner sell the right merchandise and advised her to switch to the used furniture and fixtures market. Her options were to continue with dismal results or try something new to increase sales. A successful consignment shop owner should know what their customers are looking for and offer the merchandise they want.

9. Be flexible and open to change

We often hear shop owners say they can't change because of customer and vendor expectations. What if inefficient inventory searching , consignor payment tracking, or data entry is costing time and money? The consignment industry has grown beyond traditional brick-and-mortar shops, becoming a large and profitable industry. The RealReal's success is a testament to this fact. It shows that to succeed in this industry, one must be flexible and willing to adapt to changing circumstances. Successful consignment shop owners should be ready to grow and evolve as the industry changes. If you're willing to take that step, you can get a free trial of SimpleConsign.

10. Make the hard decisions

As a business owner, you may face difficult situations with customers or suppliers who have high expectations or unreasonable demands. However, it's important to stand firm and maintain your policies. To make your stance clear, ensure that you have documented your policies and made them easily accessible on your website. Remember to remain respectful and professional. Your customers and consignors are crucial to your business's survival, but ultimately, you are the one responsible for setting the guidelines. Your consignors should not be allowed to dictate what they will or will not accept. It's important to establish a set of rules and expectations for your team to follow and lead by example as a role model for your employees. Remember to maintain consistency and fairness in your approach.

Starting and running a successful consignment shop requires hard work, dedication, and a solid business plan. It's crucial to invest time and money in creating an attractive retail space, hiring a reliable team, and developing effective marketing strategies. Paying attention to the details, understanding, and catering to your customer's needs, and constantly adapting to changes in the market are all essential factors that contribute to the success of a consignment shop. With the right mindset, resources, and support, anyone can become a successful consignment shop owner and thrive in the resale industry.

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Business Practices

Retail Practices You Should Use at Your Consignment Store

consignment store business model

Oct 28, 2022

The details of the business models differ widely, but at their core, retail and consignment businesses function on many of the same principles. They both need suppliers, and both have to maintain good relationships with their suppliers. They both need to track key performance metrics like revenue growth and monthly sales, as well as efficiently manage their inventory. And if you want your consignment business to be successful in the long term, it's worth studying the best practices used by retail businesses to keep operations running smoothly.

Of course, there are a few criteria that a practice should meet to be considered a "best" practice. A best practice is one that either increases sales, reduces costs and time, sharpens your employees skills, reduces waste, or improves the quality of your store—or some combination of all of them. Simply put, a best practice is the most efficient, effective method for producing a desired end. 

In this article, we're going to cover the following best practices:

Consignor management

Inventory management, customer service.

Performance metric tracking

Just like retail stores have wholesale suppliers that supply their inventory, consignment stores have consignors who bring in items to sell. And the key to keeping inventory on your shelves is maintaining good relationships with your consignors.

In retail, supplier management operates under one key principle: clarity. First, they make sure to establish clear, comprehensive contracts with their suppliers so that there's no room for miscommunication. Similarly, you should include certain key details in your consignor contracts: the consignment split on each item, how long the consignment period is, how unsold items will be handled, and who pays for shipping (if you do online consignment). You can find a sample consignor agreement here .

Second, successful retail businesses communicate regularly with their suppliers about the items they provide. You should do the same with your consignors. Let me know which items sell well, show them any surges in the sales of their items, and tell them about the items that tend to sit on the shelves longer. Most importantly, make sure they know when they'll be paid according to the consignor agreement.

Third (and this will set you up for the next best practice), you should set up an account for each consignor. Retail businesses keep detailed records relating to each of their suppliers so that they can easily access information on previous sales and trends. If you're processing fewer than 200 items per month, you can keep records in manual consignor accounts in spreadsheets. Create a spreadsheet for each consignor and assign them a number. When they bring in a new item, tag the item with their number, the date it was accepted, and the price. When it sells, record all the information on the tag on the consignor's spreadsheet.

If you're processing more than 200 items per month, you'll want to purchase consignment software, which usually  includes a built-in system for creating and managing consignor accounts.

consignment store business model

You might not need a forklift, but your inventory management is still a key part of operating successfully!

Supplier management and inventory management go hand-in-hand. Retail stores only operate well if they know what's on their shelves, what sells the best, and what doesn't sell. Consignment businesses are no different. 

To manage your inventory, you have to track certain pieces of information. The first is how long different items tend to sit on the shelf before being sold—if they sell at all. In each consignor's spreadsheet or account page, keep track of when they bring in an item, then regularly refer to their pages to check on items that haven't sold yet. If the consignment period expires, return the item promptly to the owner. This will free up shelf space in which you can put inventory that's more likely to sell.

Second, you should keep track of the types of items that don't sell well. Using that information, you can refine your acceptance criteria and avoid taking in low-quality, low-demand items. And as you get better at accepting items, you'll actually reduce the amount of inventory management you have to do. The fewer low-demand items you accept, the fewer you have to return, and the more time you can spend on other aspects of your day-to-day operations.

Good customer service matters. A lot. Those last 3 to 5 minutes in the checkout line are where most good customer relationships are built, and it will most likely be the part your customers remember most vividly. Not only that, but providing good customer service to a regular customer will generate 5 times more revenue than attracting new customers will!

Think about the best customer service experiences you've ever had at retail stores. They tend to have a few things in common. Most likely, the employees were well-selected and well-trained. When you hire employees, it's crucial to look at their resumes and call up references to learn as much as you can about their integrity, work ethic, and personality. Try to hire people who are friendly, honest, and hard-working. Once you've hired them, invest some time in teaching them how to use software systems, stock shelves, keep items neat and organized, and maintain a clean store. 

One of the things you'll need to train them in is how to be speedy at checkout. Customers don't like having to wait very long in line or at the counter, so make sure your staff have the know-how and tools they need to keep checkout clipping along at a good pace. High-quality software like card processors and POS platforms will help out a lot. Check out this article to learn more about how to find the right POS system and consignment software.

For online stores, customer service can be a little tricky. Since your transactions take place on a computer or mobile device, it's easier for the process to be impersonal. But you can overcome this hurdle with two tactics. First, create an accessible customer service platform via live chat, email, or phone (or all three). Make it easy for customers to contact you. Second, make your site user-friendly. Customers need to be able to easily find an item's details, like price and size. Then, they should be able to quickly and easily checkout. Around 28% of customers abandon their shopping carts simply because the checkout process is too complicated, so don't add unnecessary steps, and include as many payment options as you can (Visa, MasterCard, PayPal, Apple Pay, etc.). Make the process simple and convenient.

Tracking performance metrics

consignment store business model

Tracking key performance indicators (KPIs) is an indispensable part of running a consignment store.

We've already mentioned one or two performance metrics you should keep an eye on, but we're going to cover a few more here. The most successful retail businesses record and analyze as many useful data points as they can. Some of the most important once include:

Sales per category

Sales per square foot, costs of goods sold, inventory turnover.

Volume of customers

Year-over-year growth

Gross margin return on investment.

This is one metric we've already covered, but it's so important that we're going to mention it again. Tracking sales per category allows you to measure your total sales for each type of item that you sell. Once you have that information, you can start to accept only items from categories that are historically strong sellers. 

You can get even more granular than "item category," though. You can (and should) also track sales by item brand and consignor. Not surprisingly, some brands will sell better than others, and some consignors will bring you higher-quality products than others. The more you can focus on high-demand brands, and the more items you accept from high-value consignors, the better your overall sales will be.

Sales per square foot refers to how productive your business' use of space is. It's calculated by dividing your total net sales by your total square footage of sales space. The higher the sales per square foot, the more productive your use of space is. And, not surprisingly, businesses that have higher sales per square foot tend to be more profitable.

You can create a heatmap of your store's sales space to track and improve sales per square foot. First, you'll need a map of your store's layout with different inventory sections labeled with "A, B, C," etc. Next, open a new spreadsheet and record the following information for each section:

Types of items displayed

Display type for each item type

Item density

Estimated square footage for each section

Total monthly sales for each section

To calculate each section's sales per square foot, simply divide its monthly net sales by its square footage. As you identify item types and displays that tend to have lower sales, you can make adjustments to displays, store layout, inventory acceptance, and pricing to improve overall sales per square foot.

Your costs of goods sold (COGS) shows you how profitable each item is and how profitable your business is overall. It refers to the amount of money your business has to spend on an item before it sells. 

Ideally, your COGS shouldn't be more than 40% of the total sale price of each item. To calculate your monthly COGS, use the following equation:

Start-of-month inventory value + new inventory value - end-of-month inventory value  

Once you start to analyze your COGS, you can begin to improve inventory management to reduce time spent organizing inventory and streamline your acceptance process.

Inventory turnover refers to the rate at which inventory is 1) brought into the store and 2) sold to customers. Tracking inventory turnover lets you identify issues like excessive stock levels and slow-moving items, which can lead to higher carrying costs, displace higher-demand items, or reduce your revenue.

To calculate your inventory turnover ratio, divide your COGS by your average in-house inventory value. That gives you your turnover rate. Next, divide 365 by your turnover rate. This gives you your turnover ratio. If you have a ratio of 8, that means you sell through your entire inventory 8 times in a calendar year.

There is no magic number for what constitutes a good inventory turnover ratio, but generally, a higher ratio indicates that the store is efficiently managing its inventory and selling products in a timely manner.

Foot traffic

While foot traffic isn't necessarily as important as the dollar amount of your monthly and annual sales, it is a strong indicator of how well your store is doing. After all, while the quality of your customer relationships is more important than their quantity, you'll do better if you have both high-quality and high-quantity customers. 

There's not a scientific, 100% accurate way to calculate your total foot traffic, but one way to do it is to spend one business week recording the daily number of people who come through the door. Then, you can extrapolate your monthly and annual traffic, and estimate how much traffic you can expect during busier seasons, like Christmas. If you have a website, you should also track website traffic. Site builders like SquareSpace will automatically track this information for you. If your site's platform doesn't include a tracking tool, you can use software like Google Analytics and Live Traffic Feed .

Comparing your annual net profit each year will show you whether your store is growing. Keep track of your monthly profits in a given calendar year, then record the total amount for the full 12-month period. Do the same thing for the next 12 months, and at the end of the 24 months, compare the two years to determine if your business has grown or not.

consignment store business model

GMROI is one of the strongest indicators of your business' profitability.

When it comes to measuring profitability, gross margin return on investment (GMROI) is one of the most important metrics to track. It takes into account both the revenue generated from sales and the costs associated with running the business so you can get a clear picture of overall profitability

To calculate GMROI, take the total revenue generated from sales and subtract your total business costs. This will give you the net profit for the business. From there, you can divide the net profit by the total costs to get the GMROI percentage. A good gross margin return on investment (GMROI) for a consignment business is anything above 20%. This means that for every $1 of sales, the business should be bringing in at least $0.20 in profit.

Tracking many key performance indicators can be automated with consignment software, so it's definitely worth looking into available platforms. To learn more about best practices around tracking and utilizing business data, you should also check out this article .

Hopefully, this article has given you some insights that will help you streamline your business' operations. And we'd encourage you to do more research! This article is far from comprehensive—we've given you an introduction to the world of business best practices, but there are plenty of other insider secrets you can learn. 

For now, though, start with something simple. Choose one of the best practices from this article and start applying it today: refine your consignor agreement template, choose a method for tracking key performance indicators, or write a checklist for training new employees. Then, put it into practice!

More Resources

consignment store business model

How to Build a Consignor Referral Program

Your consignors stock your store, so to get more inventory get more consignors.

consignment store business model

7 Key Steps to Laying your Consignment Store's Operational Foundation

The success of any business relies on a foundation of operational capabilities.

consignment store business model

Social Media for Consignment Stores

Social media is a time effective way to engage new and existing customers!

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IMAGES

  1. 20 Consignment Shop Business Plan Template

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  4. Consignment Definition: What Does Consignment Mean

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COMMENTS

  1. How to Build Your Ideal Consignment Business Model

    When it comes to consignment, "business model" simply refers to 1) the forms of resale you want to use and 2) where your store lives. For resale forms, you can choose between consignment and buy-outright. And your store location is limited to either bricks-and-mortar or online.

  2. Consignment Shop Business Plan Template [Updated 2024]

    Consignment Shop Business Plan Over the past 20+ years, we have helped over 1,000 entrepreneurs and business owners create business plans to start and grow their consignment shop companies.

  3. Consignment Store Business Plan Template (2024)

    Below is a template to help you create each section of your Consignment Store business plan. Executive Summary Business Overview Casual Consignment is a startup consignment company located in Houston, Texas.

  4. Understanding The Consignment Business Model

    Consignment refers to a business model in which the Business Owner, referred to as the consignee, agrees to pay the Supplier, or consignor, a commission proportionate to the proceeds of a product when it is sold to a buyer.

  5. How to Start a Consignment Shop in 9 Steps

    Get 50% Off for 3 Months. Starting a consignment store can cost up to $10,000, according to a commonly reported figure from Entrepreneur, with average salaries for consignment shop owners ranging from $40,000 to $60,000. Here's how to start a consignment shop―as a brick-and-mortar store―in nine steps. 1. Choose the Right Type of ...

  6. 8 Tips for Launching Your Consignment Business

    4 Min Table of Contents Wondering how to start a consignment shop? Follow these steps Smart business owners start with a strong business plan 4. Choose a consignment store software 5. Design an attractive store 6. Acquire inventory with a clear consignment agreement 7. Seek community support 8. Think outside the resale box

  7. How to Start a Consignment Shop in 2024

    Pros Business Model Options - Choose a physical or online consignment shop

  8. Explanation of the Consignment Business Model

    The consignment business model is a simple and straightforward process toward profitability for everyone involved. The shop provides a place for someone to sell their goods or services. In return for the sales space, the shop owner takes a percentage of the sales price.

  9. How to Start a Consignment Business w/ Popup Events and Online Sales

    Provided you do have some storage space available, the buy-low, sell-high business model is alive and well with thrift store finds and yard sale treasures. One inspiring case study is Stacy Gallego, who actually started her flipping journey with a $0.50 purchase, and has gone on to sell more than $100,000 worth of items.

  10. How to Start a Consignment Store

    In summary, there's no universally right or wrong business model. You can build an online buy-outright store, or start a B&M consignment store (and vice versa). You can even run a B&M store that eventually expands into the online market, or start online and open a B&M location when you have the money.

  11. What is Consignment? Consignment Definition and Benefits

    Consignment is a business arrangement between two parties: a consignee (usually a retailer), and a consignor, the seller. The consignee agrees to compensate the consignor for the goods sold, usually after the sale. Traditionally, consignment stores have been physical shops catering to a specific consumer need.

  12. How to Write a Business Plan for a Consignment Shop

    The overview should include details about the products the store will sell, where it will get its merchandise and where it will be located. List your management experience, focusing on experience ...

  13. How to write a business plan for a consignment store?

    The executive summary, the first section of your consignment store's business plan, serves as an inviting snapshot of your entire plan, leaving readers eager to know more about your business. To compose an effective executive summary, start with a concise introduction of your business, covering its name, concept, location, history, and unique ...

  14. What Is Consignment? Definition and How It Works (2023)

    In a consignment model, a business (a consignee) sells merchandise on behalf of its owner (a consignor). Consignment stores often specialize in selling particular products and attracting motivated buyers.

  15. What Is Consignment In Ecommerce & How To Approach It?

    Consignment is a method of selling goods in which the seller (consignee) agrees to sell the items on behalf of the manufacturer/wholesaler (consignor) without paying for any stock upfront. Once the consignment item sells, the consignor gets a cut of the sale.

  16. Consignment Shop Business Plan [Sample Template]

    Cost for Shop remodelling - $5,000. Cost for payment of rent for a shop for 12 month at $1.76 per square feet in the total amount of - $52,800. Insurance (general liability, workers' compensation and property casualty) coverage at a total premium - $30,000. Cost for hiring Business consultant - $2,500.

  17. How To Craft a Sustainable Fashion Consignment Store Business Plan

    Developing a comprehensive business model and pricing strategy is crucial for the success of your sustainable fashion consignment store. A well-defined business model will outline how your store will generate revenue, attract customers, and create a sustainable competitive advantage in the market. 1.

  18. 25 Best Consignment Shop Business ideas You Can Start Today

    If YES, here are 25 best consignment related business ideas & opportunities. A consignment shop is one where the owner of an item called the consignor, gives the item to a shop owner or seller called the consignee, with an agreement for commission after the item is sold. While the item is with the seller, the consignor still retains full ...

  19. How to open a consignment store?

    Adjust your financial forecasts as the year progresses to maintain visibility over your future cash flow. This guide outlines the 15 key steps to open a consignment store. The financial forecast is the tool that will enable you to validate the financial viability of your business idea. The business plan is the document that will enable you to ...

  20. Consignment Shops: Best business model ever?

    Consignment Shops: Best business model ever? by JL Collins 21 Comments - Updated: February 19, 2013 Our local upscale consignment shop, er, I mean Gallery Imagine you could have a business selling stuff you didn't own. Imagine you had no manufacturing costs. Imagine you had no cost of goods sold.

  21. 10 Surefire Ways To Be A Successful Consignment Shop Owner

    4. Build a reliable team. A successful consignment shop owner understands that you can't do it alone. You need a solid support system and business structure. Take time to hire top-notch full and part-time employees. Invest time in training your team so you can trust them to work independently.

  22. Retail Practices You Should Use at Your Consignment Store

    First, create an accessible customer service platform via live chat, email, or phone (or all three). Make it easy for customers to contact you. Second, make your site user-friendly. Customers need to be able to easily find an item's details, like price and size. Then, they should be able to quickly and easily checkout.

  23. B2C or Consignment Business Model?

    Consignment Business Model is a business arrangement in which a business, also referred to as a consignee, agrees to pay a consignor/ third party a specific amount if they successfully sell our products. An example of this is when a brand put their products in some department stores/ E-commerce websites.