This type of consignment shop, like others, is relatively cheap to run. Consideration should be given to the initial start-up costs for a gently used clothing business. Even though the costs are reduced, they should be looked at carefully before jumping into the business.
Rent and Deposits
Two of the largest areas of start-up cost for gently used clothes business ideas is the initial rent and deposits. Depending on where you locate, you could find required deposits for rent and some utilities as well as permits and operating licenses from local and county government agencies. Initial rent will include both the first month and the security deposit at a minimum;
While most of the inventory for a used clothing business is either low- or no cost, the fixtures to display those items are not. Metal clothing fixtures as of 2010 retailed for $200 each and upward. This start up cost for gently used clothes business ventures can be cut by designing and building your own frames out of 2-by-4 lumber, paint or stain screws and hooks. Using your own creative nature fixture start-up costs for a gently used clothes business can be significantly reduced.
Advertising is essential to a consignment business even before opening day. Your clothing store will need signs and banners. You will need business cards to hand out to prospective consignees, auctioneers looking to disperse unsold items, other business owners, churches and potential customers. Find old Realtor signs and rework these into your own brand for signs in front of your shop. Use banners printed from your computer.
Among this list you will find fees associated with fictitious name applications, tax licenses, EIN (Employer Identification Number) from the IRS and banking fees. Registering with your state most likely will cost under $100 after filing for tax licenser and a fictitious name. Stamps will be required for filing with both state and federal agencies; expect to go through a book of stamps which as of 2010 was under $5. Incorporation will cost a couple hundred dollars.
Consignment contracts, price tags and receipts and bookkeeping forms will need to be ready before opening the doors or accepting your first item. These will all need to be printed out. There is also the need for accounting software such as Quicken or general business software such as Open Office or MS Office, which has spreadsheets, word processing and database creation. A computer will be necessary because the IRS requires separation of business and home computers and use. As of 2010, MS Office for Business priced at $280, while Open Office is relatively free but with fewer features. A new computer in 2010 ranged from $260 for a small laptop up to $450 for a basic desktop and went up from there.
Most of your inventory will come to you free. Although the initial start-up costs for a gently used clothes business can include part of the initial inventory; especially if you acquire inventory or other items for the store through auctions, yard sales or liquidation sales from other stores. Your initial inventory will need to be large enough to fill the retail space regardless of how many consignments you obtain before opening day. Plan on spending at least a couple of hundred dollars in this area.
Once you have the initial costs taken care of, the cost of operation decreases. The cost of fixtures can be depreciated over time. The cost of inventory can decrease to almost zero depending on how often new consignees arrive. Marketing will still be required although the goal is to have a large referral base who provide lots of “word of mouth" advertising for you.