How to Start a Consignment Business - Sample Chapter
How to Set the Right Atmosphere and Present Items in Their Best Light
Above all, your shop should be neat and uncluttered. This means having ample racks, shelves and space to show everything with plenty of space for attractive display. Appearance is very important. A well-organized, nicely decorated store elevates buyers' moods and increases their willingness to buy and to pay higher prices.
Sales Display
Roomy displays are always a plus and must be balanced. People tend to purchase things that are displayed at eye-level, so put the highest-margin items about 5.5 feet from the floor, near the entrance, in windows and near the check out counter. Grocery stores always use the 'ender' approach, placing items they wish to move more quickly at the ends of isles.
Sales Ambiance
If you're looking to attract with taste and money to spend, you'll want to pay very close attention to carpet/paint/plaster/wallpaper/decor. No matter who your target audience is, a classy store will go a long way toward increasing net profits.
If you plan to locate your store in an affluent area, you can expect better consignments and higher profits. Keep your clients by keeping your shop a pleasant and classy place to visit. If you're going upscale, you might want to spend some time visiting trendy, expensive boutiques. Take note of the decor, layout and demeanor of the staff - even the fragrance of the place. (A little potpourri or the nicely-scented candle or incense will go a long way toward improving your store's appeal).
Consignment Requirements
Be absolutely sure - this is very important - that your consignments are like new - not just free from spots and stains but also lint, odor and hair. Some shop owners require their consignors to launder, press and/or hang clothing before bringing it to the shop. Others charge the consignors a fee to do it for them. (See the next section on pricing and setting store terms.)
Clothing should be free from worn spots, fraying or tears and all zippers, hooks, buttons, etc. should be intact and functional. Take only seasonal consignments - sandals won't sell in December and sweaters won't sell in May. Out-of-date fashions are usually not a good idea either, unless you plan for at least part of your venue to be vintage clothing. Use caution when it comes to lingerie, wigs and bathing suits. Check with your local health department for regulations and suggestions on handling of these items.
Pricing Consignments
Pricing of consigned clothing is usually 25-40% of retail (based on manufacturer, age, wear, season, style and demand), so you will need to be knowledgeable in fashion - brand/designer labels and their original prices. Catalogs are often useful references. If customers don't know what an Armani is, and/or they can't afford even 25-40% off, you'll have to adjust your pricing accordingly.
In no time at all, you'll learn what sells well in your shop and what doesn't. You'll also get a better feel for pricing consignments. You may find it necessary to make adjust prices from what you think things are worth to how much people will be willing to pay for items. Be careful not to over price items.
Setting Store Policies
Always remember that you are not obligated to take every item. From your market research and experience, you will have a pretty good idea of what will sell. Receive only items that fit your buyers!
Consignment splits vary a great deal. Most shops charge a percentage of the purchase price (anywhere from 20-50%). Whatever you decide on, make sure to get a signed contract (and keep a copy in your files). Other items that should be included in the contract:
- Who will set prices?
- Include pricing methodology.
- Minimum seller price (if applicable)
- The days and times you will receive consignments
- Limits, if any, on the number of consignments from one person
- The condition consignments are to be in when brought to you (dry-cleaned, laundered, pressed, and/or on hangers, etc.)
- How long you will keep consignments (usually 90 days) and how often it will be marked down (e.g., every two weeks or every 30 days for example)
- When are people expected to pick up unsold items (Most shops donate unclaimed items to charity for a tax deduction.)
- How payment will be made and how often
- A statement (or disclaimer) about liability
Some shops place limits on how many items can be brought in at one time and/or how many items one person can have in the shop at any given time. Some also allow new consignments only on certain days or between specific hours to help organize time. You can change provisions whenever you find the need, but try to make sure you have enough information to make the right changes - your clients won't appreciate it if your rules are different every time they come in.
You can have cards made up to keep a record of each item (or, you can keep that information in your computer system) - information you'll need to keep track of includes consignor's name, the date the item was brought in, and a description of the item. You can also record the minimum and/or starting price and the schedule (if any) for markdowns.
Payment to consignors is generally done on a monthly basis. You may also want to set a minimum amount for which you will issue a check or establish a minimum amount of time that must elapse between settlements. A good software program will allow you to set such parameters and apply them automatically.
Cut down on expenses by having consignors help. They can pick up their payments or provide you with self-addressed, stamped envelopes but the benefit of such requirements fall obviously to you and may conflict with your desire to encourage consignors to do business with you. Draw the line somewhere between focusing on making it easy for yourself and inconveniencing your clientele.
