How to Operate a Consignment Store

Cost-conscious consumers frequent consignment shops looking for a bargain.
Cost-conscious consumers frequent consignment shops looking for a bargain. (Image: Jupiterimages/BananaStock/Getty Images)

Consignment stores offer great deals for bargain hunters.The stigma once associated with buying used clothing has disappeared, with such celebrities as Drew Barrymore lending some star-appeal to bargain shopping in the summer of 2010 by walking down the red carpet in a $25 thrift store dress. Some consignment stores specialize in a particular market segment like children's apparel, while other consignment stores offer a wide range of items for sale. The largest fixed expense a consignment store typically has is the leased retail space, since the inventory is not purchased upfront. Payroll and advertising costs are the other main expenses.

Set high standards for the items you accept on consignment to sell. Your store will be judged by the quality of the items you stock. Image is important. Establish a reputation for quality with strict rules about what is acceptable. For stores specializing in selling clothing, it is crucial that clothes are clean and do not have stains, broken zippers or missing buttons. Attach an expiration date for all items to keep the inventory fresh.

Maintain accurate records that are easily accessible. Store records for consignment merchandise must be easily retrievable to answer the consignor's questions quickly and accurately. Keeping the consignors satisfied will ensure they keep bringing items in for you to sale. Consignors should be paid regularly so they know when to expect payment in exchange for the items they loaned the store. Many stores pay once a month.

Establish a sales-transaction protocol to keep important sales information and to instruct buyers of the return policy. Keep a copy of the sales receipt and attach it to the inventory tag taken from the merchandise. Be sure the date and final price are recorded in the information. Include a printed refund policy with the receipt given to the customer. Staple the store copy of the sales receipt to the tag information to update consignor records for future payment, and to analyze prices and inventory turnover time for future planning purposes.

Keep the inventory moving. Check the inventory weekly to clear out any expired items, or to markdown older items. Using colored tags to identify how long an item has been in stock can make it easy to identify items in the store that are about to expire. Some consignors mark an item down 10 percent after 30 days, then another 10 percent after 60 days, allowing the article to expire after 90 days. Establishing a definite policy about expired merchandise is critical. Giving a consignor one week to pick up expired items before donating the merchandise to a charity is one way some store owners manage expired inventory.

Maintain an organized, clean store that makes shopping a pleasurable experience for the customer. Organizing your store so that it is arranged in an attractive and easy to navigate layout is very important.

Conduct ongoing market research. Ask your customers where else they shop. Inquire about changes they would like to see in the store. Ask customers about what merchandise they are most interested in purchasing. Constantly keep up with market trends and how the store measures up against the competition.

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