Do you want to open a clothing store or boutique? If YES, here is a detailed guide on how to start a clothing business with buying wholesale. If you are planning on starting a clothing business and you are in doubt of the specific area to specialize in, then you should consider starting a used cloth business. It is a kind of business that guarantees you patronage and good turnover.
With fairly used clothes been sold all over the streets and local markets, you could also start up your own and make huge profits from it. Selling used clothes can be done with little or no capital, and you can steadily grow your business till you become highly successful in it.
You can leverage on the fact that fairly used clothes are far cheaper and highly affordable than brand new clothes to thrive in the business and build a profitable venture for yourself.
Starting a Used Clothes Business by Buying Wholesale – A Complete Guide
Table of Content
- 1. Understand the Wholesale Business
- Interesting Statistics About the Industry
- 2. Conduct Market Research and Feasibility Studies
- List of Well – Known Brands in the Used clothes Industry
- 3. Decide Whether to Start from Scratch or Buy a Franchise
- 4. Know the Possible Threats and Challenges You Will Face
- 5. Set up your business properly and legitimately
- 6. Choose a Catchy Business Name
- 7. Get the Necessary Insurance Policies
- 8. Get the Necessary Legal Documents You Need
- 9. Source for Funds for your Used Cloth Business
- 10. Choosing a Suitable Location for your Business
- 11. Do a Thorough Technical and Manpower Analysis
- 12. Come Up With Winning Marketing ideas and Strategies
- 13. Start Finding Wholesalers
- 14. Make enquiries
- 5. Conduct a background check
- 6. Enter into an agreement
- 6 Helpful Tips for Buying Wholesale Clothing for your Boutique
- a. Be wary of Fake suppliers
- b. Make Sure You Get a Reliable Partner
- c. Buy big or go home (Wholesale lots):
- d. Trade Shows
- e. Shipping Problems
- f. Client references
1. Understand the Wholesale Business
Before proceeding to deal with wholesalers, you need to understand the types of wholesalers there are as well as how they operate. This will help you make well-informed choices and decisions. There are different type of wholesalers based on their size, distribution channels, and supply chains.
As the owner of a new clothing retail store, you are unlikely to be able to buy directly from a high-volume wholesaler, because your initial sales volume won’t support buying in bulk. You will need to find smaller wholesale distributors who will gladly sell smaller volumes. As your sales volume grows, you can deal with bigger wholesalers and demand better wholesale volumes.
Interesting Statistics About the Industry
It is estimated that the united states of America consignment/resale industry is worth billions of dollars. The industry rakes in over 16 billion dollars in revenue annually which includes the revenue generated from antique stores which are pegged at about 13 percent of the annual income of the industry.
Statistics have it that the number of consignment stores opening across the United States of America is on a steady growth of 7 percent with over 25,000 registered consignment and resale stores scattered across the country.
Globally, many businesses are forced to close up due to unfavorable economy conditions, but consignment retailing business in which the used clothing business belongs remains ever growing and perhaps more profitable over the years.
From the recent research conducted by the America’s Research Group, it concludes that within a year, about 16-18 percent of Americans will shop at a thrift store while about 12-15 percent will shop in consignment shops (resale shops). Within this same time frame, it is believed that 19.6 percent of those that shop in consignment stores visited the used cloth stores.
It is a known fact that the turnover of an average fairly used cloth business can be more than 50%. That is the main reason why entrepreneurs who want to make good money from a business without much stress and little start-up capital open a used cloth shop. They could either start the business by making use of their cars/vans, garage (garage sales) or rent a shop.
The consignment sale industry is enjoying more patronage as more consumers are becoming aware of the need to cut unnecessary spending and save up as much money as they can. Another factor that makes people venture into the used clothing business is the amount needed to start the business is relatively low when compared to other small-scale businesses.
This further makes it easier for the interested entrepreneur to come into the industry at any time they so desire. The entry barrier for this business is quite affordable, and any serious minded entrepreneur can comfortably raise the capital needed to start-up to this business without sourcing for loans from the bank.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
When defining the demographics and psychographics of those that require used clothing, you should make it all encompassing with a specific focus on low-income earners. It transcends beyond gender and age as the need for cloth is general, so different age groups, sex and social status will need your services.
List of Niche ideas Within the Business That You Can Specialize in
There are several areas in the used cloth business that you can diversify into to make more profit and gain more customers. They are all closely related to the used cloth business and could be done side by side with it. Below are some of the ideas one can specialize in within the used cloth business;
- Online used cloth shop
- Mobile used cloth shop
- Not-For Profits Resale Shops
- Garage Sales
- Bricks and Mortar Consignment Shop
It is also important to note that entrepreneurs who are looking towards starting a used cloth business can also decide to specialize in either the sale of used electronics, used furniture and home appliances, used books and educational materials, used shoes, bags, belts, used computers, phones and accessories etc.
The Level of Competition in the Used cloth Industry
The fact that the used cloth business requires low startup capital, is easy to start, requires no technical skills and is highly profitable makes it one of the sought after businesses that people would want to start, leading to the high level of competition in the industry.
It is quite easier to meet with stiff competition when selling used clothing. The truth is that despite this level of competition, entrepreneurs running the business are still making their profits with some of them generating as high as 50 percent turnover.
List of Well – Known Brands in the Used clothes Industry
Here are some of the well-known brands in the used cloth sale industry;
- Trunk Show Consignment
- Michael’s Consignment
- Buffalo Exchange
- Crossroads Trading Co
- Second Time Around
- A&E Clothing
- Beacon’s Closet
- The Dressing Room
- Cadillac’s Castle
- The RealReal – therealreal.com (online consignment store)
- ThreadFlip – threadflip.com (online consignment store)
- Poshmark – poshmark.com (online consignment store)
- ThredUp – thredup.com (online consignment store)
- Twice – liketwice.com (online consignment store)
Used cloth business attracts different consumers from all economic levels. There is no typical used cloth shopper, just as there is no unique resale shop. The truth is that everybody would usually look towards saving money irrespective of their financial status.
Low-income people especially take advantage of the opportunity of buying used clothing at a lower price to save money on clothes. The money they save from purchasing used clothes can be diverted to other areas like paying bills for vacations.
In order to start this business, you have to conduct comprehensive feasibility studies and market survey to get your economic analysis right so as to grow the business to generate profits, and perhaps expand the business beyond your present locations to other cities within the United States.
When conducting economic analysis for your used shop business, you have to examine critically these 4 key factors; place, product, pricing, and promotion. As a matter of fact, you would need to review these factors at regular intervals while running your used clothing business.
3. Decide Whether to Start from Scratch or Buy a Franchise
When it comes to choosing which Business model to adopt, there is no hard and fast rule about it. Your overall business vision and mission statement should act as a guide for you. If all you intend to do is earn money and make a living without much stress, then you can afford to look for a successfully run used clothing company to buy their franchise.
However, if your aim of starting a used cloth business is to build a business brand that will grow from just one outlet in one city to all around the United States, then choosing to start the business from scratch is your best bet. Starting a used cloth business from scratch is less stressful when compared to other small-scale business which is why it is very much advisable to initiate the business from scratch as against buying a franchise.
Starting this business from scratch might not be comfortable from the onset, but one thing is sure, with due diligence and application of the right business strategies, it won’t be too long before your business becomes recognized not only in your city or state but throughout the United States of America.
4. Know the Possible Threats and Challenges You Will Face
The threats and challenges you are likely going to face when starting your used clothing business have to do with competing with already established used clothing shops. You are also going to face competition from newly opened used cloth shops around your location.
Other threats and challenges you will likely face when you starting your used cloth business are economic downturns which usually affects customers buying decisions and purchasing powers. unfavorable government policies could be a threat to your used clothing business as some countries might ban the export or import of second-hand clothes.
5. Set up your business properly and legitimately
First, you must bear in mind that no wholesaler will want to do business with you if your business is not properly set up within the law—because they are aware that if you run into problems with the law, they might not be spared. So, you need to ensure that you take all steps perfectly.
Register your Business Name with the appropriate local agency. Obtain all necessary licenses and permits that apply in your state or country. Fulfill your tax obligations. Complete all your legal paperwork. And follow due process when acquiring a location for your business. When choosing a legal entity for your business, the way you want to run your business and the model you intend to build should be some of the key factors to guide your decision.
Ordinarily, sole proprietorship should be the perfect legal entity for your used business especially if you are just starting out with moderate start-up capital. But most people prefer Limited Liability Company. The limited liability company makes it easier for you to open several outlets of your used cloth business. If your sole purpose is to own a used cloth shop in different cities and to sell the franchise, then choosing sole proprietorship is not an option for you.
Setting up a limited liability company helps to protect you from personal liability that could occur in the course of running the business. If anything goes awry in the business, you will only have the money that you invested in the limited liability company at risk.
When it has to do with choosing a name suitable for your business, it is quite important for you to choose a name that will indicate the type of business you are doing. Your business name will make it easier for people to identify your brand. Here are some catchy business name ideas that you can select from when you want to start your own used clothes business.
- Caravan Consignment Shop
- Casey Fairly Used Warehouse
- Downtown Resale Company
- Shelly Chapman Consignment
- Colorado Exchange and Resale Store
- Gracious Online Consignment Store
- Chris-Cross Trading Co.
- Ohio Garage Sale Company
7. Get the Necessary Insurance Policies
The type of Insurance Policy cover that will be needed for your used cloth business largely depends on the business you choose to start. Averagely, to start any business in the United States of America, you will be expected to get at least some of the basic insurance policy covers relevant to the industry you plan to invest at.
Below are some of the basic insurance policy covers that you are expected to purchase if you want to start your own used cloth business in the United States of America;
- General insurance
- Health insurance
- Liability insurance
- Business owner’s policy group insurance
- Workers Compensation
- Overhead expense disability insurance
Intellectual Property Protection/Trademark
If your idea of starting a used cloth business is to run franchise/chains of used cloth shops model, then filing for intellectual property protection should be a viable option for you. It will be very useful as your used cloth shop brand starts to expand far beyond your reach. The truth about it is that even if you are starting your own used cloth business from the scratch, you can still file for your trademark.
8. Get the Necessary Legal Documents You Need
Generally, you do not have any need for professional certification to legally operate your used cloth business in the United States of America. It is a business that is open to both the learned and the unlearned; both the skilled and the unskilled hence there is no need for professional certification.
Below are some of the basic legal documents required to successfully start and run your own used cloth business in America:
- Business License
- Business Plan
- Business and liability insurance
- Building License
- Operating Agreement for LLCs
- Franchise or Trademark License
- Insurance Policy
- Tax Payer’s ID
- Fire certificate
- Certificate of Incorporation
- Employment Agreement (offer letters)
- Contract documents (for vendors / shipping partners)
9. Source for Funds for your Used Cloth Business
One good thing about the used cloth business is that you can start the business with little or no startup capital. All you need to do is to source for used clothes from friends and family members with the agreement of helping them sell it and afterwards pay them a certain amount which you will both agree on while you take your cut.
But on the average, you would need startup capital to launch a standard used cloth shop and it could be challenging raising capital to start your business. You must have a workable business plan that will enable you secure finance from financial institutions.
The first thing you would need to put in place before you source for capital to finance your business is to draft a well detailed business plan. With a good business plan, you will find it much easier to convince investors to invest in your business. The truth is that no financial institution will be willing to give you a loan without a good and workable business plan.
Also no serious investors will take you seriously if you don’t have a business plan on ground before sourcing for startup capital. There are several options you can explore to raise money to finance your start up business. Some of the options are;
- Raising money from personal savings and sale of personal stocks
- Applying for loan from bank
- Raising money from investors and business partners
- Sourcing for soft loans from family members and friends
- Pitching your business idea while you apply for business grants and funds from angel investors and donor organizations.
10. Choosing a Suitable Location for your Business
In starting a used cloth business, it is very important to get a strategic business location. It is worthy of note that used cloth shops may likely not thrive in highbrow areas of the society, but rather in the lower class suburbs of the city.
Therefore, it is quite necessary for you to ensure that you locate your used cloth shop in close proximity to where the lower class of the society resides. This is important as you would get serious patronage from these areas and you would also get shops at a reduced rates compared to getting the same shops in high class areas.
The fact that there are different sizes of used cloth shops scattered across the United States of America does not mean that the used cloths business can thrive in every location. Therefore, before you choose a location for your used cloth business, ensure that you conduct thorough feasibility studies and market survey. You could possibly come across a used cloth shop that just closed shop in the location you intend to open yours.
Here are some of the factors that you might need to consider before choosing a location for your used cloth shop;
- Accessibility of the location
- The number of used cloth shops in the location
- The purchasing power of the residents
- The local laws and regulations in the community
- The demography of the location
- Traffic, parking and security
11. Do a Thorough Technical and Manpower Analysis
Generally, there are no technical requirements needed to start and run a used cloth business asides from POS machines for those who might want to pay via their debit/credit cards. You might also be interested in buying a CRM software application that will help you to manage your customer base; while you can make use of it to inform your customers about new consignments.
Regarding renting or leasing a shop, your financial capacity should have a big influence on your choice. With the required finance, you could acquire a property or lease a facility to be used for your used cloth business. However, if you are low on cash, then the only option you have other than renting a facility is to operate your used cloth shop from your garage or from your car.
Usually, an ideal used cloth shop would have the owner and one or more sales persons/attendants. But if you intend to operate a standard used cloth shop, then you should hire a store manager, purchasing manager, sales girls/boys and a driver. On the average, you could make do with 5 to 15 employees to successfully run a standard used cloth shop in the United States of America
The Service Delivery Process of a Used Cloth Company
Some used cloth shops do operate daily on a walk-in basis within a stipulated time. For example they may offer 30% off the current value of cloth you want them to sell or 50% store credit. When used cloth shops collect cloths from clients/suppliers, they are expected to remit the agreed amount after the goods have been sold.
If you bring your used cloths to used cloth shops for sale, the owner of the used cloth shop (the buyer) will inform you about the proposed amount they will sell your items for, and if you are satisfied, you will sign a contract for three months with the option of a fourth.
You need to be proactive when running a business that requires marketing your goods or services. If you choose to run a used cloth business, you need to employ strategies that will help you attract customers or else you will definitely struggle with the business.
Here are some of the marketing ideas and strategies that you can employ for your used cloth business;
- Direct Marketing
- Online Marketing (via your official website, social media platforms and blog et al)
- Sponsor TV and Radio Programs
- Referral Marketing
- Engage in road shows within the community where your used cloth store is located
- Make use of sales Agents and sales reps
- Erect your billboards in Strategic locations around the city
- List your business in local directory/yellow pages
Possible Competitive Strategies for Winning your Competitors in Used Cloth Industry
When it comes to favorably competing in the used cloth industry, you would be required to explore several ways to sell your used clothes at giveaway prices. One thing is certain, if you operate the biggest used cloth shop in your location and you deal in various secondhand clothing items, you will likely attract more customers than your competitions.
One good idea is to rent a bigger shop/warehouse to run a one-stop used cloth shop for all kinds of wears. Make it a shop where it will be challenging for any customer to visit without getting the cloth that suits them. That is one of the key competitive strategies you can adopt to be successful in this type of business.
Possible Ways to Increase Customer Retention for a Used Cloth Business
There is absolutely no doubt that one of the strategies that you could employ in order to maximize sales and also to retain your customers is to ensure that you sell neatly used second hand clothes at an affordable prices. You should also employ the win – win approach when negotiating purchase of used items from your customers. You also need to ensure that your customer service delivery is always on point.
The reason why this is important is that if your customers find it difficult to get quality used goods from your shop, you will definitely have a hard time winning them back once they leave you. This is because people usually patronize places where they are guaranteed of getting value for their money. You can also adopt some other promotional ideas such as loyalty schemes, direct marketing, door drops, merchandising, etc.
Strategies to boost your brand awareness and Create Your Corporate Identity
The used cloth business, just like any other business in the retailing industry requires steady promotion in order to get people to buy into the brand. Your brand goes a long way to determine how people perceive you. This is the more reason why you should be deliberate about communicating and promoting your brand in the market place.
To promote your brand and corporate identity, you should take advantage of both the print and electronic media. You should also not forget the social media because it is very much effective too. Here are the some of the platforms you can use to create a brand awareness for your used cloth business and promote your corporate identity;
- Place adverts on national TV stations, Radio Stations and Newspapers/Magazines
- Make use of the internet and social media platforms like Facebook, YouTube, Instagram, Twitter et al
- Sponsor relevant community programs
- Encourage the use of word of mouth especially from loyal customers
- Send out introductory letters to households in and around your location
- Distribute your fliers and handbills to targeted areas from time to time
- Install your billboards in strategic locations
- Ensure that all your employees wear your branded shirts during work hours
- Engage in road shows from time to time
13. Start Finding Wholesalers
Having set up your business correctly and understood wholesalers and their modes of operation, you can start finding the right wholesalers for your clothing retails store.
If you know of reputable clothing retail stores in your locale, you should check their merchandise. This will give you an idea of what stock you need and which merchandise appears to be in vogue. So, you can quickly figure out what their best selling stock is. And if you are not a direct competitor to that store, you can ask the business owner about where they source their stock and ask for wholesale recommendations.
Clothing manufacturers can also direct you to wholesalers of their products if they don’t sell wholesale themselves or cannot sell to you because you are not a high volume retailer. You can also find information about wholesalers by using search engines and online directories. These offer good sources of information about wholesalers within your locality that you can contact and do business with.
Trade magazines and other periodic publications are also good sources of information about clothing wholesalers. Many of wholesalers use these magazines as media for placing ads.
14. Make enquiries
Once you have found a number of clothing wholesalers that you think will be a fit for your business, you should contact them. There are several questions you need to ask then before deciding whether to go ahead with them or not. Ask about minimum orders retailers can place. You must ensure that they can allow you to buy from them in smaller volumes.
Also ask about their unit prices for various types of clothes, wears, and fashion accessories. Compare the prices of all the wholesalers you contact. You may want to go with the one offering the best unit prices, because you will earn more profits that way.
The turnaround time for orders is another factor you should question wholesalers about. In other words, how soon you will get your orders after placing them. Also, find out if you can return any damaged merchandise for a replacement or full refund.
5. Conduct a background check
After you have decided which wholesaler to do business with, you need to conduct a background check to ensure that you are dealing with a legitimate wholesaler. Check with the Better Business Bureau or any business regulatory agency in the town or city the wholesaler is located to know if they are actual wholesalers and not middlemen. Your background check will also reveal their reputation among retailers they have done business with.
6. Enter into an agreement
Once you have conducted your background check and have found your chosen wholesaler to be credible and reliable, you can go ahead to sign a contract with them. This will involve the services of a seasoned attorney. Then you can proceed to source for clothing for your store.
Sourcing your boutique wears from the right suppliers ensures that you buy the clothing at the proper prices, that you set appropriate prices to sell the clothing and consequentially be able to calculate how much profit you would make from the business.
Without getting the best supplier in your market range, calculating the profit to be made from sales becomes rather complex. It is time to move from being a boutique owner in your mind to being a boutique owner in action as well.
The foundation of a solid boutique is having reliable and standard suppliers (the kind of suppliers that have your interest at heart). Below are important tips to take into consideration when deciding on how to buy wholesale clothing for your boutique:
6 Helpful Tips for Buying Wholesale Clothing for your Boutique
a. Be wary of Fake suppliers
Most individuals believe that going into the clothing business or owning a boutique would make their pockets full immediately. They are all about using the business to make quick bucks by sourcing out easy ways to get supplies but lack the true passion a boutique business demands.
There are suppliers out there that can spot boutique owners trying to make quick, smart cash, and are always ready to take advantage of those types of individuals. The most commonly used technique by these suppliers is to pretend to be wholesalers or manufacturers when in reality they are likely consumers.
Their aim is to take advantage of boutique owners by charging exorbitant prices for clothing pieces at rates sometimes double the price of what the actual manufacturer charges. After the boutique owners pay the suppliers and the clothing has been delivered, it becomes difficult for the boutique owner to get the clothing off the shelves.
He finds it difficult to make a profit because the selling price would be much higher than what the clothing was bought for. This can easily be avoided if prospective boutique owner has a genuine passion for the business.
b. Make Sure You Get a Reliable Partner
To avoid scam in the business, it is highly encouraged that your supplier be someone you can trust and can be confident in, not some scam artist trying to make as much as he can off you. If you possess a true passion for clothes and sufficient research has been done, the dilemma others have of figuring out what to put on the shelves would not be an issue for you.
To avoid scam artists posing as suppliers, it is very important to first off all register your boutique. Some hear the word register and think ‘stress’ but registering a boutique is fairly easy and involves minimal cost. The registration of your boutique provides you with an official Business Name and registration number, and these things allow you to contact reputable suppliers and distributors with ease.
Having a registered business (boutique) makes contacting suppliers so easy because reputable suppliers/traders only work with businesses that are registered. In conclusion, anyone interested in supplying you products without checking to see if your business is registered is most likely out to sell above wholesale price.
c. Buy big or go home (Wholesale lots):
Being a registered boutique owner makes things easier when sourcing out a supplier, but it doesn’t lead you to a perfect supplier for your boutique. The next thing to put into consideration is the quantity of products you wish to acquire for your boutique.
When starting a business, you need to possess enough clothing in stock based on customer demands, and that creates a win-win situation for you and your supplier since wholesalers do not sell products in small quantities. The operations of wholesalers depend on them selling the entirety of a box to boutique owners rather than open up the box and sell pieces.
This is because less work is involved in selling a box as per selling in pieces and also more money is made. Apart from that, if a wholesaler sells clothing in pieces, what is to stop a potential customer from buying directly from the wholesaler and cutting out the middle man (the boutique owner?).
Also this prevents “fake wholesalers” from buying in end-user quantities and selling at high prices. This method protects boutique owners too as they are then able to buy products in large quantities at lower prices from the wholesaler and sell at profitable rates to their customers.
Things to watch out for with regards to scheming suppliers;
- They won’t request your boutique’s registration number which results in you buying clothing at exorbitant prices
- These suppliers come along with monthly product update fees- reputable suppliers do not ask for such
With these in mind, weeding the real suppliers from the fake would be fairly easy. If all else fails, when you see a product you believe would be a perfect fit for your boutique, check the packaging for the manufacturers information.
Call or send an email asking for a distributor close-by, if luck is on your side the distributor being used would be interested in selling to you, and if not, they might be kind enough to refer you to an individual who can be of service to you, depending on your boutique size.
d. Trade Shows
Trade shows aren’t simply for consumers looking for the next trendy accessory to hang on their wall or around their necks. They can also be a good networking avenue for small and big business owners alike and if you are a budding boutique owner looking for reputable suppliers, it is good to visit trade shows and ask about manufacturers and distributors of the products you see and have an interest in.
e. Shipping Problems
Your boutique is registered, you have a reliable supplier, but you don’t have enough capital to invest in warehousing your products. Not a problem. This is one of the reasons why drop shipping exists. Drop shipping puts more of your profit in your pocket by allowing you forward your client’s order to a shipping house where the products are stored by a supplier, from where the product will then be shipped to your client.
The burden of shipping is now removed from your shoulders, and all you have to do is stock up on products and market your boutique.
Keep in mind that just like when looking for a reputable supplier, there are some drop shippers looking to charge inflated prices for clothing they don’t have a high quantity of in stock. Have it in mind that competent drop shippers would ask for your boutique’s registration details as they only work with officially registered businesses.
f. Client references
Owning a business is not everyone’s cup of tea, but as stated earlier, if you possess a passion for the business, then the stress of starting a boutique would be worth it. Now that you have handled the shipping aspect, the next step is to ask your drop shipper for client references after ordering a product so as to experience firsthand how the shipping goes.
Even though the product shipping is out of your hands, clients would still hold you responsible since the products were ordered from your store and not from your drop shipper, so it is best to see how reliable and how fast the product shipping goes.
Lastly, remember that when operating a business, communication is a very essential part because your reputation, income and boutique growth depends on you as an entrepreneur establishing good relations with your supplier(s).