How to Start a Consignment Store Business

Thinking about starting a Consignment store? Let’s break it down into manageable steps and see how you can make it profitable. Consignment store also know as thrift store.

Getting Your Inventory

One of the toughest parts of running a thrift store is stocking your shelves. You can fill your store with items you’ve purchased, received as donations, or bought from wholesalers (often Chinese suppliers who offer low-cost goods).

Legal Requirements

You’ll need the right licenses, handle sales taxes properly, and decide if your store will be for-profit or non-profit. This choice affects everything from tax breaks to the way you handle donations.

What to Sell

Decide what kind of items you’ll offer. Will you compete with Goodwill and the Salvation Army by selling used goods? Maybe sell new, low-cost items, or discounted goods from big retailers? You could also run a consignment store, where people bring items for you to sell and you keep a percentage of the sale price.

Non-Profit vs. For-Profit

Non-profit thrift stores are often linked to charities, which can increase donations because people get tax deductions. However, you need to ensure most of your profits go to the charity to avoid being classified as a for-profit business. Non-profits typically spend 66-75% of their revenue on their mission.

If you earn $150,000 a year and spend $75,000 on expenses, paying yourself a $50,000 salary leaves $25,000 for charity, which might not satisfy the IRS. Consult with a tax advisor who specializes in non-profits to understand the costs and benefits.

Finding Inventory

If you’re in a wealthy area with few thrift stores, you might get plenty of donations. Otherwise, you may need to buy inventory. Look for items at swap meets, garage sales, and yard sales. Some professional sellers arrive early at these sales to find items they can resell for a profit. Others show up at the end of the day to haul away unsold goods for a small fee.

Selling New Items

If you prefer selling new items, check websites like Alibaba for low-cost products. For instance, you could buy cat laser toys for 80 or 90 cents and sell them for $10 or more.

Advertising and Prepping

If you’re going the donation or consignment route, start advertising and putting up signs well before your store opens. Gather enough inventory, and be ready to clean, repair, price, and display items.

Planning and Strategy

Never start a business without a launch strategy and operating manual. This will outline your goals, start-up costs, and monthly expenses. Use free business plan templates online and have a SCORE mentor review your plan for free to boost your chances of success.

Location, Location, Location

Decide whether to lease or buy your store. Renting might be smart initially, but be aware that your landlord might increase the rent if your business does well.

Managing Legal Responsibilities

Handle insurance, business licenses, seller’s permits, and sales tax accounts. Consult a small business attorney to navigate these steps.

Marketing Your Store

As a retail business, you must attract customers. Use on-site signage and ongoing marketing. Set up accounts on Facebook, Twitter, Instagram, TikTok, LinkedIn, and YouTube. If you’re a charity, ask local businesses to help promote your store by displaying your brochures or flyers. Local radio and TV ads might be more affordable than you think and often include free commercial production.

Retail Display Best Practices

Finally, learn the best ways to display your merchandise to make it appealing to customers.

Starting a thrift store can be challenging but rewarding. With careful planning and the right strategies, you can create a successful and profitable business.