Most families are on a tight budget these days, trying to reduce their debt and looking for ways to stretch a dollar. Yet there is always a need for new stuff. A good place to find lightly used items from clothing and furniture to rare items is a resale shop. If you have a knack for finding deals, owning a resale shop is a great way to pass along those deals. There are some things that need to be considered before entering a resale business venture though.

Percentages for Consignors

Starting out, you will most likely need to accept items on consignment. Consignors are the people who bring their new and used items for you to sell. They get a share of the sales price on each item and so does the business. A plan needs to be developed to explain how consignment sales will be split. Will you choose a 50/50 or a 60/40 split, for example? Then decide how you will pay the consignors. Will they be able to collect cash, check or in-store credit? Is there a limit as to how much you will pay out?

Documentation

Once you have decided on how much to offer your consignors for their items, all of this needs to be put in writing. Write a clear, concise statement to explain what items will be accepted and which items will not. To protect both the business and the seller, all policies should be detailed, printed and signed by both parties. Providing such contracts will show your professionalism.

Rental Space

Location, location, location. The resale shop should be a highly visible site with a lot of traffic and easy parking. Choosing the location of a resale shop can be tricky. Carefully pick a spot where there is a mix of incomes. A consignment shop will attract various types of people who are buying used items. Some are only interested in saving money, while others are in search of just the right item they have been looking for. The same is true for potential consignors. Some clients desperately need the money and will bring in heaps of stuff in hopes that you will accept some of it, while others have designer items in excellent condition and they expect top dollar for them. A demographic study is recommended.

While you can start out small, with 700 square feet or more, be sure you will have enough room for display units, clothing racks, and big ticket items such a furniture, electronics, toys, outdoor equipment, etc. Plenty of shelves and a lot of workspace are needed, as well. It is necessary to have a holding space where you can sort incoming consignments, outgoing consignments, accepted items and items being held that can’t be accepted. Being highly organized and creative with the displays will certainly help.

Equipment

You will need a variety of equipment to start any new small business. However, the benefit of opening a resale store is that used equipment is completely acceptable. You can obtain used counters, display cases, shelving units, racks, size spacers, hangers, a register and a credit card machine in good, used condition. Many times these items can be found at liquidation stores, local stores that are closing their doors and Ebay for a fraction of their original cost.

You will also need general office supplies. For starters, you should obtain price tags, paper, pens, sticky notes, register tape, shopping bags and sale signs. Eventually you should also have a personalized logo printed on business cards, letterhead, tags, frequent shopper cards, shopping bags and all of your business forms.

Merchandise

Acquiring merchandise for your startup can be handled in several ways. Stocking up on items from garage sales and donations is one way to get a wide base of products in. You can purchase bulk clothing and toy lots from Ebay and other online sources. You could also post a sign to recruit consignors even before you open to build your starting items. Choose items carefully. Deny anything that is not in good shape. Your reputation will be based on the items you accept and how you price these items.

Pricing

Pricing your merchandise is what can make or break your business. With consignments, you have to walk a thin line. Consignors will argue that they have name brand items and want several dollars per item in return. They want the most money they can get for their gently used items. The more you charge, the more they make, based on the percentage agreed upon. At the same time, buyers are looking for a deal. If your prices are set too high, customers will walk out empty handed and will most likely spread the news that it is not worth the trip. A general guide is to price items at 50 percent of their retail price.

Sales

Every store has a sale from time to time. Even in resale, sales are often necessary to generate interest in your store, sell items you have an excess of and to increase your income. Be clear about the terms of the sale, use proper signage in the store and decide what forms of advertising to use. A clearance sale is another useful way of getting rid of seasonal items quickly and making way for new arrivals.

Staff

You will either be the owner/operator of your resale shop or you will need to hire staff to run it. Even if you decide to run the store yourself, you never know when you will have the need for extra help, even on a part-time basis. It is a good idea to have plans in place for your pay scale and what your training procedures will encompass. If you enable employees to accept and reject consignments, clear acceptance and pricing rules need to be put in writing.

Capital

Unfortunately, a resale shop doesn’t become successful overnight. It takes time to establish a new business and develop returning clientele. Even more so in the resale business than most because it is a business built on reputation. If the customer feels they got a good deal, they will be back. Until the business does develop a large clientele, however, it cannot be counted on as a source of income. In fact, it will most likely cost a good deal to run for a least the first year of business, and that isn’t including the planning stages.

For the person with the right retail experience, business savvy, capital and passion for finding and offering good deals, opening a resale shop could be a great investment. It can be a very rewarding career path with the right business plan and a lot of preparation.