To open a consignment shop in the United States, you should be ready to spend between $20,000 and $120,000 or more depending on the niche (type), size, whether or not it will be heated, require electricity and how you have it plumbed.
Your retail shopfront will require another $20,000 investment minimum and your start-up supplies will run you another $5,000 to $25,000.
A consignment shop is a business that specializes in selling second-hand items on behalf of the original owner, who receives a percentage of the selling price.
If you want to open a consignment shop, certain factors will influence the overall cost of opening the business. Some of the factors are universal while some are unique to the location where you want to open your consignment shop. With that in mind, one can only estimate or give a range of how much it will cost to open a consignment shop.
In order to get a clear understanding of how much it will cost you to open a consignment shop in your city, you should consider the following factors.
Factors That Influence the Cost Of Opening a Consignment Shop
-
The Cost of Lease or Rent
The size of the shop you want to lease, the location of the shop, and of course, the additional facility that comes with the lease agreement will determine the amount you will spend.
Note that if you choose to operate your consignment shop from your garage, you may have successfully cut off the cost of leasing or renting a shop facility.
-
The Cost of Equipment and Supplies Needed in the Consignment Shop
You will need to equip your consignment shop with clothing racks, hangers, display shelves, mirrors, cash register, price tags, labeling supplies, clothing steamer or iron, clothing racks and shelving, security tags and devices,
Shopping bags, pricing gun, computer and inventory management software, mannequins or dress forms, surveillance cameras, lighting fixtures,
Clothing racks and hangers for storage, sizing charts or guides, checkout counter, credit card processing system, furniture for seating or waiting area, etc.
Note that the amount it will cost you to equip your consignment shop will no doubt take a large percentage of your start-up capital.
-
The Cost of Registering the Business and Obtaining Licenses and Permits
If you are looking to start a standard consignment shop business in the United States or in most countries of the world, you will be required to register the business.
You will need licenses and permits such as general business license, retail sales tax permit, zoning permit, occupancy permit, signage permit, fire department permit, resale or secondhand dealer license,
Federal Employer Identification Number (EIN) or Social Security Number (SSN), state sales tax permit, home occupation permit (if operating from home), music license (if playing copyrighted music), and special event permit (for occasional sales or pop-up shops).
-
The Cost of Start-Up Inventory
Going by how the consignment shop business model works, you may not necessarily need to spend the bulk of your money on start-up inventory.
This is so because consignment shops get their inventory from individuals, families, organizations, and businesses who want to sell and make money off their old or used products and wares, and consignment shops typically take a 40% commission, which is considered a 60/40 split.
But in some cases, you will need to spend money to purchase used goods from people, thrift stores, and businesses to get your shop stocked at least if you are just starting out. There is no fixed amount to spend when it comes to stocking up your consignment shop.
-
The Cost of Employing Workers
You can open a consignment shop as a one-man business especially if you want to operate from your home (garage), but if you want to open a standard consignment shop, then you should make plans to employ workers.
You should plan to hire a shop manager, merchandise manager, accountant (cashier), administrative assistant, delivery guy, and salespeople.
Trust me, employee wages such as recruitment fees, training, salaries, and any additional costs usually influence the overall cost of opening a consignment shop.
-
Operational Expenses
The size of your consignment shop, the number of workers you want to employ, and of course the additional services you want to offer in your consignment shop will determine the amount you should budget.
Note that your operational expenses are part of your ongoing expenses and they include utilities, maintenance, accounting software, security, software systems for inventory management,
Point-of-sale (POS) systems, customer relationship management (CRM), and other ongoing expenses associated with running a retail business.
-
Additional Services Offering
A standard consignment shop can conveniently provide various services to cater to the needs of its customers. A standard consignment shop may offer electronic and home appliance repairs, shoe and clothes mending, etc.
These service offerings will basically attract more cost of opening the business because you are expected to put structures and processes like hiring someone to take care of such services and also purchasing and installing the equipment and tools needed to make it happen.
-
Miscellaneous Expenses
Miscellaneous expenses refer to costs that do not fall into specific categories but are still necessary for the operation of a business.
These expenses can vary depending on the nature of the business and individual circumstances. For a consignment shop business, your miscellaneous expenses can cover professional services (such as accounting, legal assistance, and possibly repair services),
Expenses related to shipping products to customers or suppliers of consignment goods (consignors), and postage for mailing documents or packages, and also cost associated with office supplies, packaging materials, credit card processing fees, internet and phone services, and professional memberships.