Consignment Stores or Resale Stores? Five big differences
Who doesn’t love a bargain when shopping for on-trend clothing, shoes and accessories? More shoppers are turning to upscale resale stores to snag great deals on the latest fashion finds. They’re also discovering a way to recycle their own gently-used items—and earn some cash– by selling their clothing to, or through, a used clothing shop.
The two major types– consignment stores and resale stores—have different ways of acquiring items. Both accept high-quality, gently used clothing, and both look for designer and name-brand labels from customers who want to sell their clothes. However, resale shops like Clothes Mentor tend to be more fashion-forward, purchasing current, up-to-date fashion as opposed to the classic or vintage items often found in consignment stores. Shoppers can get great deals at either type of place.
For store owners, though, the business models have some significant differences. Owners need to know their comfort levels in dealing with daily operations and cash flow issues to determine which type of upscale resale clothing store is a good fit for their temperament.
For shoppers and for store owners, there are five big differences between consignment shops and resale stores.
1. Who Maintains Possession?
In a consignment situation, the owner of the item (the consignor) maintains ownership of it, but gives the right to sell it to the store, which is the consignee.
Most times, if an item doesn’t sell, the consignor can pick it up and keep it, give it to a friend, or donate it to charity. It’s also common for the shop to arrange for a charitable donation on behalf of the consignor.
At a resale clothing franchise such as Clothes Mentor or Children’s Orchard, the store buys the items outright from a seller or a wholesaler, then displays and sells the goods at a profit. Once an item is purchased from the seller, it becomes the property of the resale store, which then decides how to display, market and sell it. If the items don’t sell in a reasonable amount of time, most resale stores donate them to charitable organizations in the local community.
2. Who Sells the Items?
With consignment, the shop helps the consignor sell her clothing and accessories, and pays the consignor only after the items have sold to a third party. Each local store sets its own policy, but in general, the items are dropped off and marked for sale for a predetermined cycle, usually 30, 60, or 90 days. If the pieces don’t sell by the end of the term, some shops will discount the items (often by 30% or more), or require the owner to pick them up. Consignment shops often charge a seller a commission between 25% and 60%, which becomes profit for the shop.
At resale stores, the seller parts with the clothing in exchange for on-the-spot payment. In other words, she sells her pieces of clothing to the store the same day she drops off the items. The waiting period is minimal—basically, just the time required for the store personnel to determine the value of the items, and prepare an offer to purchase. It’s common for the store to offer 50% or less of the price it intends to charge for the item. Employees will then process the merchandise and tag it for resale, and the seller has nothing more to do with the items.
3. Who Controls the Pricing?
With consignment, a seller has limited control over how much her item will be priced for resale. She can work with the shop to determine the best price so that it can potentially sell for top dollar. Oftentimes the price drops on a set schedule, depending on how long the clothing remains in the shop prior to purchase. Still, the consignor risks the chance that the item won’t sell at all.
At a resale clothing franchise stores like Clothes Mentor, the store determines the price paid to the seller based on the condition and age of the clothing, and whether it is in high demand. It also prices the item for resale using data provided by the franchise parent company, and current local market trends. The store assumes the risk for the resale, so the profit to the franchise owner is often higher than in a consignment store.
4. Benefits of Opening a Resale Franchise vs. Consignment
Most franchises offer owners a proven business structure, which can be attractive for first-time owners with limited or no business experience. The franchise parent company normally provides training in how to start up and run the operation before the doors ever open. In many locations, owners find it easier to secure financing for a franchise than a start-up consignment or resale store. Analyzing and implementing the pre-opening plans can help owners make informed decisions about purchasing, staffing and ongoing development. In contrast, consignment shop owners devise their own business and operating plans, and often have higher initial startup costs than a franchise. Any pre-opening training must come from in-house, or be outsourced. The consignment shop owner makes all decisions regarding the business.
5. Support for Ongoing Operations
A typical franchise agreement at a store like Clothes Mentor or Children’s Orchard includes ongoing support for the business operation. The franchise already has its own image, branding and marketing plans. Owners receive ongoing sales and marketing support and access to national advertising. The franchise also has built-in buying power for bulk office and retail supplies
As for consignment shops, any support must be initiated internally, or be outsourced. Owners must negotiate their own deals for supplies, and come up with their own marketing, training and development plans.
No matter the preference, there are options to suit every need when it comes to buying and selling used clothes—either as a customer or a business owner.
Consumers are really buying into the resale trend, whether to make money, save money, or help the environment by reducing the amount of discarded clothing. And the resale industry is responding, with a growth rate in resale shops of approximately 7% a year. More upscale resale clothing shops are making room for specialty items such as plus sizes, maternity and athletic wear. It’s an economical way for a shopper to purchase clothing, and a socially-conscious way for a seller to part with unneeded garments. It’s also a way for a business owner to become part of the fabric of the local community.
Buying and selling gently used clothing is more than a trend—it’s a movement. And by choosing consignment or resale, savvy shoppers and sellers are guiding the flow in a fashion forward direction.