How to Open a Consignment Shop

Opening a consignment shop lets you stock a store without buying all your inventory up front, but it comes with its own responsibilities to the people who trust you with their things. This guide is for anyone considering starting a consignment business and covers the main decisions to make before you open the doors.

Choose your niche

Successful shops usually focus on a clear category: women's clothing, children's items, upscale designer goods, furniture and home decor, sporting equipment, or antiques and collectibles. A focus helps you attract the right consignors and shoppers and makes it easier to price well.

Study your area. Visit existing resale shops, note what they sell and what seems missing, and consider who lives nearby and what they buy.

Plan your finances

Write a basic business plan that covers rent, utilities, insurance, fixtures, signage, software, staffing and marketing, along with how long you can operate before the shop is profitable. Consignment inventory takes time to build, and sales can be slow in the early months.

Talk with an accountant about how to set up your business, record consignment sales, and handle sales tax and reporting, since these rules vary by state and locality.

Handle licenses, permits and insurance

Requirements differ by state, county and city. Check with your local and state governments about business registration, a sales tax permit, zoning and occupancy rules, and any secondhand dealer regulations. Some places have specific rules for businesses that buy or sell used goods, jewelry or precious metals.

Get business insurance that covers property in your care, including items that belong to consignors. Ask your insurance agent specifically about consigned inventory, theft and damage.

Pick the right location and layout

• Look for visibility, convenient parking and easy access for consignors dropping off items.
• Furniture shops need a loading area and plenty of floor space.
• Plan a separate back room for receiving, sorting, cleaning and pricing.
• Invest in good lighting, fitting rooms for clothing, and clear displays.

Write a clear consignment agreement

Your agreement protects both you and your consignors. Have an attorney review it before you use it. It should spell out:

• The commission split and any fees.
• How long items will be displayed and your markdown schedule.
• When and how consignors are paid.
• What happens to unsold items and the deadline to pick them up.
• Your responsibility for loss, theft or damage.
• Your right to decline items and to set or adjust prices.

Set intake standards

Decide what you will accept and be consistent. Publish your standards on your website and at the counter: condition requirements, seasons you accept, categories you do not take, and whether you require appointments. Turning away unsellable items protects your floor space and your reputation.

Use a system to track inventory and payouts

Consignment bookkeeping is more involved than ordinary retail because every item belongs to someone. Use point-of-sale or consignment software that can tag each item to its consignor, track price changes and sales, calculate splits, and produce statements. Consignors will ask about their sales, and accurate, quick answers build trust.

Attract consignors and shoppers

You need both sides to succeed. Reach consignors through community groups, local moving and downsizing services, and word of mouth. Reach shoppers with social media posts of new arrivals, an email list, and in-store events. List your business in local directories so people searching for resale shops can find you.

Bottom line

A consignment shop runs on trust. Pick a focused niche, get your legal and insurance basics in place for your state and city, use a written agreement reviewed by an attorney, and track every item and payout carefully. Consignors who are paid accurately and on time will keep bringing you their best items.