Steps for Starting a Thrift Store the Right Way!
Everyone, whether they admit it or not, shops at thrift stores. Why not open your own. Many people open consignment stores because they do not know how to get merchandise for their store any other way. In this article, I will lay out a way to get quality merchandise for pennies on the dollar.
How to Start a Successful Thrift Store
- Decide how your business will be classified
- Advertise that you are buying used items
- Plan an item transportation strategy
- Create a marketing structure
- Buy fixtures and racks
Step 1: Decide How Your Business Will Be Classified
I have helped people and organizations from all across the country set up thrift stores. The major problem in starting a thrift store is discovering where to get, and keep getting, good merchandise. People are use to donating their used or unwanted clothes to thrifts run by charities across the country. Many people do not even know that these thrift stores only give a small percentage of the money to the charity that is on the door. They are run for profits, and big profit at that. If you have a charity to affiliate your business with in order to receive donations, then this is a great way to do it. Most people, who run for profit businesses, do not want to go through the legal steps necessary to take donations and advertise a charity's name on their door. However, it is not that difficult to set up. I do this on a regular basis. Nevertheless, it is not necessary.
Step 2: Advertise That You Are Buying Used Items
Several years ago, I started helping people start thrift stores by advertising to buy clothing for a few cents a pound. Usually, about four to five weeks before the store opens, I have them put ads on sites like craigslist and other local internet posting sites. The ad simply reads, “Wanted Used Clothing. Will come to your home and pick up. We pay $.10 a pound-CASH paid on spot”. Be sure to list a phone number as well. If you do not want to go to their homes, you can have them come to your future store. I have found that going to homes is a much better way to get started. This ensures that the merchandise is a better mix. Now, if you wish, you can advertise to buy other products like furniture and household items. It has been my experience that when you buy their used clothes and shoes for $.10, or whatever number you come up with that is fair for your area, you should ask if they have anything they wish to donate. You will get the other items.
Step 3: Plan an Item Transportation Strategy
You will need an SUV, pickup or another type of truck to make the pick-ups. When you are buying a few hundred pounds of clothes, it takes up a lot of room. Usually, within two weeks in most areas, five to 10 thousand pounds of clothes and shoes can be purchased.
Let's say you buy 10,000 pounds of clothes and shoes for $.10 a pound, the cost would be equal to $1,000. The average number of items per pound is roughly three. Therefore, 10,000 pounds of clothes would have 30,000 or so items of clothing to sell. Shoes weigh around one pound to five pounds, depending on whether they are children’s, men’s, or women’s. That gives you a cost basis for your clothing of around $.03 per item. I've included a table below that can help you visualize this.
What Do I Do With Leftover Items?
You will have some clothes that are not suitable for reselling. Those should be saved. Anything you cannot resell can be saved up and sold to rag businesses. Large thrift stores sell a container of rag clothes for around $.20 a pound. Large thrift stores also sell most of the clothing that is donated to them in container form to wholesale operations that pay around $.30 to $.60 a pound for the clothing. Small consignment, or thrift stores, buy the item for several dollars a pound.
# of Pounds
# of Items Per Pound
Total # of Pounds
Cost Per Pound
Step 4: Create a Marketing Structure
By purchasing clothing direct from people, you cut out the middleman and set your business up to make huge profits. Even if you sold your clothing for an average of say $2.00 an item, you are making a huge profit margin. As you are picking up the clothing you are should also collect email addresses and phone numbers. This is your start of a marketing base to send weekly emails in order to drive business.
Thrift stores are profitable, but you can still have huge profit margins. If you do not plan a great marketing structure, then, even if you follow my previous instructions, your store will not make it. Word of mouth is the best marketing strategy. By using the purchasing strategy I mentioned above, you will get the word out fast.
Step 5: Buy Fixtures and Racks
When you start to set up your store, you will need fixtures and racks. These are expensive, if you buy them used or new. Remember, for thrift stores, you do not need a department store look. When I am buying racks and fixtures for my store, I first ask local chain stores if they have racks they are getting rid of. I drive behind the local strip malls to see what has been put next to the dumpsters. You can obtain 90% of the fixtures and racks you need, if you start using this strategy around two months before you open. Most other things can be found on online liquidation auctions. At these auctions, you can usually find fixtures for a few dollars. I would go to fixture dealers as a last resort. They will make you pay through the nose. Remember, a pretty fixture in a thrift store does not make you money.
Hangers are another big expense, but these can be gotten using the same method you used to get the fixtures (going to local chain clothing stores and asking for them). If they say no, remember that their dumpsters always have lots of hangers. Most stores do not reuse the hangers, but simply throw them away when someone does not want the hanger.
If you have any questions please post a comment with an email and I will try to get your question answered. Using the methods I have described above, a 2,000 to 5,000 square foot store can usually be opened for around $10,000. Most of that expense is taken up by paying for rent, paint, advertising, a cash register, and other non-merchandise items. If you already have most of these items, then you can open for little to nothing. Good luck!