Published on October 19th, 2015 | by Millennium Magazine Staff0
How to Start a Consignment Business
Are you interested in opening your own consignment shop? Consignment shops can offer lower overhead cost compared to traditional retail stores, because a consigner provides your inventory and they are paid out only when the item sells. Shop owners resell items from multiple consigners and share a portion of the profits. While the business model might be slightly different than a traditional retail shop, starting a consignment business still involves planning, development, making key financial decisions, and completing a series of legal activities.
Follow these 10 steps to prepare your business.
How it Works
Consignment shops commonly sell clothes, shoes, and housewares, but the there is no limit to the items that you can sell. Crafts, music, toys, antiques, and cars old and new can be sold.
While the items are in your possession, legally you do not have ownership. The consigner maintains ownership until the item is sold at which point you earn a commission on the sale and pay the consigner the rest.
If the item does not sell within the timeframe allotted by your consignment agreementDownload Adobe Reader to read this link content*, then the contract should be renegotiated or the item returned to the consigner.
Startup costs for a consignment business are often less than say thrift or pawnshops, since you do not own the items, you do not incur the cost of purchasing inventory. Additionally you are not obligated to purchase the items if they do not sell. After the agreement time is up you can return the item if you do not think it will sell.
Keeping up With Your Inventory
In general retail businesses should invest in a point of sale or (POS) system. This is especially important with a consignment business because you do not own the inventory. Having documentation on the item’s description, the agreed upon price, and condition is an important part of the process.
POS systems can also help you determine what types of items you have a need for in the shop with up-to-the-date, accurate assessments of your inventory. When shopping for an inventory system you want to think of function and price; a good system should be a balance of both. You want to be able to set alerts, add new items, and print out price agreements. If your budget is a concern you can always start with a basic system and then add more robust features as your business grows.