How to Start a Consignment Shop (with Free Checklist)

Here are the most crucial considerations when you are starting your consignment shop:

1. Location — Choose a location in a busy shopping area, near other popular retail stores, or in a neighborhood with a lot of residential foot traffic.
2. Niche — Focus on one niche to reach your target market, such as clothing, luxury goods, vintage and antiques, furniture and home decor, books, electronics and technology, and collectibles.
3. Inventory management and tracking — Use inventory software to track stock levels, sales patterns, and reorder times efficiently. This can prevent overstocking or stockouts.
4. Licenses and permits — Since consignment shops sell goods on behalf of others, a resale certificate (also known as a seller’s permit) is often necessary.
5. Register your business — A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple. Form your business immediately using ZenBusiness LLC formation service or hire one of the best LLC services on the market.
6. Legal business aspects — Register for taxes, open a business bank account, and get an EIN.
7. Security — Install CCTV cameras both inside and outside the store to monitor activity and deter shoplifting and burglary. An alarm system can provide an added layer of security during non-business hours by alerting local authorities to any unauthorized entry.

Step 1: Decide if the Business Is Right for You

Pros and Cons

In a nutshell, consignment shops get paid for selling other people’s stuff. People bring in unwanted shoes and clothing, antiques, and household goods, and the shop sells them for an agreed-upon price and takes a commission, usually about 50%.

Still, starting a consignment shop has pros and cons to consider before deciding if it’s right for you.

Consignment Industry Trends

Industry Size and Growth

• Industry size and past growth — The global second-hand clothing industry is worth $197 billion, about $56 billion more than in 2021.((https://www.thredup.com/resale/#size-and-impact))
• Growth forecast — The global second-hand clothing industry is projected to reach $350 billion by 2028. 

Trends and Challenges

Trends

• Online clothing resale is the fastest-growing market segment, expected to quadruple by 2026.
• In 2021, 244 million US consumers said they were open to buying second-hand clothing.

Challenges

• A growing number of players in the online consignment store market are creating greater competition.
• Generally only brand name clothing is sold in consignment shops, which means shop owners have to watch out for knock-offs. 

How much does it cost to start a consignment shop business?

Starting an online consignment shop will cost about $2,500. Your costs will be for a website and marketing costs. Starting a brick-and-mortar consignment shop will cost about $13,000.

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$150 - $200	$175
Business licenses and permits	$100 - $300	$200
Insurance	$100-$300	$200
Business cards and brochures	$200 - $300	$250
Website setup	$1,000 - $3,000	$2,000
Space rental	$0 - $3,000	$1,500
Space preparation	$0 - $3,000	$1,500
Marketing budget	$1,000 - $3,000	$2,000
Total	$2,550 - $13,100	$7,825

How much can you earn from a consignment shop business?

Prices for consignment items will vary. Since you’ll be looking for high-end items to sell, these calculations will assume an average item price of $300, of which you’ll get 50%. If you’re running an online consignment store, your profit margin after marketing costs and paying the consignor will be about 40%. 

In your first year or two, you could sell 10 items a week, bringing in $156,000 in annual revenue. This would mean $62,000 in profit, assuming that 40% margin. As your website gets more traffic, sales could climb to 30 items a week. With an annual revenue of $468,000, you’d make an outstanding profit of $187,000.

What barriers to entry are there?

The only barrier to entry for a consignment shop is the competition you’ll face.

Step 2: Hone Your Idea

Now that you know what’s involved in starting a consignment shop, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an opportunity

Research consignment shops in your area and online to examine their products, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the market is missing a consignment store that sells furniture and household items.

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine the types of clothing and other products you’ll offer

You’ll need to determine if you want to specialize in clothing or some other type of merchandise. In addition to consignment items, you could also operate in part as a thrift store or online thrift store and sell donated items or items you find at garage sales. You could also have a retail store in your shop where you sell items that you’ve purchased wholesale. 

How much should you charge for consignment items?

Prices will vary based on the item and its retail price. For an online store, after the cost of paying consignors and marketing, you should aim for a profit margin of about 40%.

Once you know your costs, you can use our profit margin calculator to determine your markup and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will be broad, so you should spread out your marketing to include sites like TikTok, Instagram, and Facebook. 

Where? Choose your consignment shop location

Choosing the right location for your consignment shop is crucial for attracting customers and ensuring its success. Look for a spot in a high-traffic area with good visibility, such as a popular shopping district or a busy downtown area.

Consider accessibility and convenience, ensuring that the location is easily reachable by public transportation and has ample parking. Additionally, assess the local demographics and aim to select a location that caters to a wide range of customers. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a Consignment Shop Name

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “consignment shop,” boosts SEO
• Name should allow for expansion: “Renewed Treasures” over “Sports Gear Consignment Shop”
• A location-based name can help establish a strong connection with your local community and help with the SEO, but might hinder future expansion

Once you’ve got a list of potential names, visit the US Patent and Trademark Office website to make sure those names are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Consignment Shop Business Plan

Here are the key components of a business plan:

• Executive Summary — A brief overview of your consignment shop business, highlighting key points such as the business concept, goals, and potential for success
• Business Overview — Detailed information about your consignment shop, including its mission, vision, location, legal structure, and any notable achievements or milestones
• Product and Services — Description of the items your consignment shop will accept and sell, emphasizing the quality, uniqueness, and appeal of the products
• Market Analysis — Examination of the target market for your consignment shop, including demographics, trends, and potential growth opportunities
• Competitive Analysis — Evaluation of other consignment shops or similar businesses in the area, identifying strengths and weaknesses to position your shop effectively
• Sales and Marketing — Strategies for promoting your consignment shop, attracting customers, and driving sales, encompassing both online and offline channels
• Management Team — Introduction of key individuals involved in running the consignment shop, highlighting their expertise and roles
• Operations Plan — Details on the day-to-day operations of your consignment shop, covering aspects such as inventory management, staffing, and customer service
• Financial Plan — Projections and analyses of the financial aspects of your consignment shop, including startup costs, revenue forecasts, and break-even analysis
• Appendix — Additional supporting documents, such as resumes of key team members, detailed market research data, and any other supplementary information relevant to the business plan

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to consignment shops. 

If you’re willing to move, you could really maximize your business! Keep in mind that it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your consignment shop will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship — The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership — Similar to a sole proprietorship but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) — Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corp — Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corp — An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number or EIN. You can file for your EIN online or by mail/fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.

Step 7: Fund Your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans — This is the most common method, but getting approved requires a rock-solid business plan and a strong credit history.
• SBA-guaranteed loans — The Small Business Administration can act as a guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants — A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Friends and family — Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding — Websites like Kickstarter and Indiegogo offer increasingly popular low-risk options in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal — Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best bets, other than friends and family, for funding a consignment shop business. You might also try crowdfunding if you have an innovative concept. 

Step 8: Apply for Consignment Shop Business Licenses and Permits

Starting a consignment shop business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your consignment shop business as a sole proprietorship. Opening a business bank account is quite simple and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability — The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business property — Provides coverage for your equipment and supplies.
• Equipment breakdown insurance — Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation — Provides compensation to employees injured on the job.
• Property — Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto — Protection for your company-owned vehicle.
• Professional liability — Protects against claims from clients who say they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP) — This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks. 

You may want to use industry-specific software, such as ConsignPro, resaleworld, or SimpleConsign, to manage your inventory, billing, and payments. 

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, FreshBooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences of filing incorrect tax documents can be harsh, so accuracy is crucial.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech savvy, you can hire a web designer or developer to create a custom website for your business.

However, people are unlikely to find your website unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

Marketing

Here are some powerful marketing strategies for your future business:

• Website — Create a compelling website that showcases your latest finds, store events, and customer testimonials.
• Local SEO — Optimize your website to target local search terms related to consignment, thrift shopping, and sustainable fashion to increase online visibility. Regularly update your Google My Business and Yelp profiles to strengthen your local search presence.
• Professional Branding — Ensure your branding captures the eclectic and unique nature of your shop, reflecting a sense of discovery and sustainability.
• Social Media Engagement — Leverage Instagram, Facebook, and Pinterest to share new arrivals, fashion inspirations, and sustainable shopping tips.
• Fashion and Sustainability Blog — Publish content about fashion trends, upcycling tips, and the benefits of consignment shopping.
• In-Store Events — Host events like styling workshops and local artist pop-ups to create engaging shopping experiences.
• Partnerships with Local Designers — Collaborate with local designers or artisans to offer unique products and support local talent.
• Loyalty Rewards Program — Implement a program that provides discounts or special privileges to frequent shoppers.
• Targeted Local Advertising — Advertise in local media and online platforms to reach potential customers in your community.
• Email Marketing — Engage your customer base with newsletters that highlight new inventory, fashion tips, and store events.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Customers are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your consignment shop meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your consignment shop business could be:

• Luxury brands at non-luxury prices 
• Top-quality consignment and thrift items shipped fast!
• Sell your unwanted collectibles and make good money

Networking

You may not like to network or use personal connections for business gain, but your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a consignment shop business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in consignment shops for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in consignment shops. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a consignment shop business include:

• Shop clerks — making sales, customer service
• General manager — inventory management, accounting
• Marketing lead — SEO strategies, social media

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Consignment Shop — Start Making Money!

The consignment market is heating up, with resale clothing and accessories experiencing boom times. Now is the perfect time to open your own consignment shop. If you have a great eye for fashion and a desire to provide customers with great products, you could build a lucrative consignment operation.

You’re done your business homework now, so it’s time to get the word out and launch your successful consignment shop. 

Common Questions

Is a consignment shop profitable?

Yes, consignment can be a very profitable business. The market for resale clothing is growing rapidly, so demand for the items you sell should be high.

How do consignment shops get paid?

Consignment shops get a percentage of the sale price of the consigned items. The fee ranges from 40% to 60% for clothing and accessory sales. Fees can be higher for items like furniture.

What are the risks of a consignment store?

The main risks are the items being damaged or stolen. Then you could be liable to the owners of the items.

How do I train and manage employees for my consignment shop?

You’ll need to train them on how to value consignment items. Then you’ll need to monitor the transactions they make to ensure that the prices are accurate.

How do I plan for the long-term growth and sustainability of my consignment shop?

You’ll need to create a strategic plan for how to market your shop, and how you’ll handle the business as your sales increase. 

How do I measure the success of my consignment shop?

The bottom line is most important. You need to be able to make enough profit to make a living.