“I have two kids, and I shop consignment,” the woman
said. “So I basically figured I know how to shop for it, so I can sell it. Then I ran across this empty store and here I am! It’s so much FUN, running a consignment shop. It’s just like the garage sales I ran for my neighbors.”
Less than 3 years later, her resale shop closed abruptly, leaving unpaid consignors, outstanding debts, and a very stressed-out family.
“I never realized it would take so much of my time. That it was so complicated. I was taking bookwork home with me every night, and my kids never got to do what their friends did, because they were always with me at the store,” she said. “It’s hard to run a business when you have two bored kids whining at you all the time.
“I priced things good but I just couldn’t sell enough. And the cost of advertising? I couldn’t do it. Every day someone would say How long have you been here? even after I’d been open 5, 6, 7 months.
“I don’t see how consignment shops make it. I don’t think they do. They must all be hobby-businesses.
“My husband finally said that the shop was just costing him too much, and we hadn’t been able to take a vacation for 3 years, and he never saw me anymore and when he did I was too tired to be any fun. So I had to close the shop. That, or give up my marriage and I couldn’t afford that…even after almost three years, I wasn’t making a living and we had to put money into the business about 5 out of 12 months, the months when it was slow.”
No one goes into any business planning to fail. But many start-ups DO fail. Why is that? Lack of capital and lack of knowledge.
Alas, all too many newbies think that taking goods on consignment means they don’t need the recommended 6 months’ of living AND business expenses ready to tap if needed. Or, for some reason, they figure the recommendation is for other people, not them. Every business needs the capital behind it to get started. And to survive not only the get-established period, but the slow seasons, the local blips on the retail radar, and the inevitable mistakes any entrepreneur makes.
And that newbie will also realize, in short order, that a love of shopping resale, cruising garage sales, and haunting rummage sales doesn’t turn her into a wise shopkeeper. Not even a background in running neighborhood sales or church bazaars is enough. Without a thorough grounding in what running a consignment or resale shop involves, all the time, money, effort, and pride expended will not be enough to succeed.
And that’s why there’s Too Good to be Threw: The Complete Operations Manual for Resale & Consignment Shops and the dozens of other Products for the Professional Resaler. I hate to see that sparkling joy and eager enthusiasm get wasted.
Auntie Kate The Resale Expert 
I am the owner/manager of an art and fine craft gallery in business for 7 years which does a fair business, mostly making good profits for newer artists and crafters who are not familiar with gallery contracts and ettiquette. I do not charge rent, but take a 40% commission. The Business is steadily growing with a good reputation in a small tourist town. My problem is with consignors who have their personal customers come into the shop to choose items and then the artists takes it out and sells it to the privately. I have seen this happen by chance when I came by the store at times when I wasn’t expected to be in. As a career artist myself, I did not expect this….I assumed others would realize the benefit of sending their customers into a nice venue where their work was displayed in a professional setting. I am not sure how to handle this as this is a very small tight knit community and I am relatively new to the area. Some of the artists who are more professional understand the gallery ettiquette but those who strictly do craft shows seem to play ignorant regardless of clear communication in the past concerning this. I am not sure how to word this in a contract so that it does not sound totally self serving. My mission has always been to support others who are self employed and to create a venue for which they can benefit and be free to create.
I made my living doing commissioned art for years as the sole support of a family of 6. This is something I am passionate about but I feel many of the biggest selling artists in my gallery think I am taking more than my share. Can you help? I have looked everywhere for this particular topic and no one seems to bring this up. It doesn’t happen often but when it does I find it to be painful, and it creates a distrust that is uncomfortable.
Laura, I know how you feel! I assume some wording is in your consignment agreement with your artists about the issue of withdrawing their goods from the shop so they can make more/ charge less. I wouldn’t presume to tell you what precisely to say, but something along the ideas of a cooperative venture among all the artists/ opening the eyes of the public to art via the shop, sales of their goods help support the gallery where even people who have never seen their work can become customers and clients, etc etc. Stressing the cooperative aspect, I guess you’d call it.
That, and a penalty equal to the amount the shop would have received, for withdrawing goods “early” (assuming you have a set time period), might help!
Auntie Kate, I need to hear the voice of reason! I am retired with a small retirement income. I want to open a consignment store to feature local artists. I want to offer rental spaces for their work. Oh I have so many questions. How do I determine if an area will support this idea? How does one conduct market research? I live in a small town. Anything i do will require me to drag folks kicking and screaming into the store….but will it? You see I don’t really know, and I don’t know how to begin to find out. I would like to see a good community involvement from the store by offering access to juried shows, and children’s art classes. Any ideas before I walk away from this before I even start?
Thank you.
Hi Gerry Jo, there’s so many possibilities in what you’re thinking of! I’d suggest grabbing hold of that trusty #2 Ticonderoga and trying out a few scenarios. Consignment vs. renting out display space. Amount and cost of space needed. Who you know who’ll teach the children. When the place will be open, and who’ll be running it when.
And, of course, what you mention: is there a market for what you want to do… a market big and spendy enough to make it monetarily feasible. Are there artists in your area, how organized are they, are there art lovers/ collectors around? Would you perhaps supplement a B&M location with online selling? Maybe the whole venture should be a co-op? Could there be a space to sell art supplies? Do a monthly materials swap? Can you rent out studio space or event space to artists who want to work or run classes?
An exciting idea, but lots of pencil lead and eraser rubber and talking to people will come first, even before (my particular hobby of) finding and dreaming of a location 🙂 Let me know how it progresses!
I would recommend that she do a business plan. The business plan will give you and a potential financial institution or angel funder the full picture (costs of good, equipment, overhead, staffing, etc.) Survey random people within the community and get their input. Additionally, the financial picture in a key component when looking for financing to open a consignment store or any business for that matter.
D. James MBA
Thanks, D! Wise words.
I need to know the pro’s and con’s of owning a consignment business. I would like to open one where I reside in Tennessee. However, I have a capstone for school to do, and one of the questions is pro’s and con’s of owning and running your business.
Googling “capstone”, Dianna, I find that it’s a course requirement in Australia, and I guess in Tennessee? “Final year courses that give the student the opportunity to apply knowledge and skills learned earlier in their studies”? Is that what you need? Welcome to not only a primary source (my blog here), but expert advise on the industry, on my web site, TGtbT.com. I’m sure that your skills will be put to great use researching our industry!
What I really need to know is the pro’s and con’s to opening a consignment store.
The e-book; is “threw” used instead of “through” for a reason?
Yes. Most folks interested in the resale industry hate to “throw” anything away… thus, it’s Too Good to be Threw. BTW, our manual is not an ebook, it’s a real one :)!
do you know about how to start a “CO-OP” consignment store where the booth owners work a portion of the open hours in lieu of … say the rent, or utilities?
Cheryl, these types of stores were immensely popular a while back… usually crafts or antique malls. Some had a consignment angle to them… you could rent a booth for a flat fee & a %age of sales, or consign items to the “owner’s” booth. In return for working, booth patrons got a reduction on rent or a smaller consignment fee deducted. Lots of organization and hand-holding necessary, but it makes for a fun and popular shopping destination when all who participate cooperate and learn from one another!
I have been given the opportunity to take over an upcycled furniture and home decor shop that has been in business for a year. They have a steady clientele, and also retail one of the chalk paint brands.. It is my idea to create booths within this large store to have booth rental space/consignors. The desire for booth space is hot here in San Diego, and most places have a waiting list for booth space. If I can rent out all the spaces, it will pay about 75% of monthly costs. Is this crazy to think I can do this? I already have another business in which I work about 25 hours a week, and I do not want to give it up. Based upon the current owner’s advice, I would have this store open Weds – Saturday. I’m so conflicted!
Therese, what an exciting possibility! As to your question on whether you can do it, I have some Qs to throw back to you:
* 100% of your booth spaces will pay 75% of your monthly costs… I assume you mean overhead? Where will the other 25%, and of course the profit, come from?
* What do you have to fall back on, if 100% of the booths are NOT paying? (They could be undesirable tenants whom you terminate, they could be late or non-pays for extended periods of time, you could have temporary non-rentals between appropriate lessors…)
* If you are already committed to spending 25 hours on another aspect of your career, do you have the time, energy, and enthusiasm to not only run a shop, but deal with lessors as well? Or do you have the wherewithal built into your business plan for a shop manager?
* A 4-day-a-week retail space needs to really rack up the sales to pay the 7-day-a-week overhead. Always a challenge to run a bricks-&-mortar that is open limited hours, so be prepared for that!
All that said, sounds like FUN!
Great advice, as usual! I had a really great job when I opened up my shop. I kept that job and ran myself ragged. Just quit a portion of it and now I am able to keep my shop open later during the week. Worked like a charm. I am sure I made the right decision. But I did hold on to that job for almost two years!
Looking into composing our first consignment contract, not sure where to start with $$ percentages… Do you have an examples of %s? Our goal is to keep our products relevant which is why we are wanting some consignment… With a win-win on both sides. But we are a humanitarian boutique, unique in that all proceeds are donated to a non-profit.
Aloha! I think the way you might wish to approach this is looking at your projected numbers, your paid vs volunteer staff, as well as overhead and projected expenses and go from there in constructing not only your percentages, but the other details of your consignment agreement. After all, if you cannot keep enough of each sale, your business won’t make the money you are planning for, to support your non-profit. Also, of course, you will want to structure your marketing approach to letting potential suppliers know that their goods are doing good within the community. Offering donation as well as consignment will probably involve a decision as to what you consign vs what you can only accept as donations, whether that’s predicated on resale value, categories, or other guidelines.
Best wishes, and look forward to hearing how it goes!
How do you figure what price to charge to rent out space to people who want to have their own booth or corner in a consignmentshop? by the square footage plus percentage of sales?
That’s a good place to start, Mona. As to an actual dollar amount, I think it would be wise for you to figure your total cost for the shop, how much the requested square footage makes you when you are selling your goods, and also whether this vendor will help you attract more customers to the store. If you will be handling their sales for them, you also need to consider your costs for doing that: time, materials, credit card fees, and so on.