Consignment business has become one of the fastest-growing markets in the past few years. The idea actually sounds dreamy! You are surrounded by high-end brands and you make money by selling them. The path of a business owner looks shiny and attractive. There's no more shame in wearing secondhand clothes, there's no more shame in making money the way you want. You can choose an office job or you can sell high-end clothing people don't want or like anymore.
More and more people prefer buying pre-owned items, because they are cheaper and the quality is still high. Owning a luxury consignment store sounds like an ultimate dream of every fashion lover. But there's something more hiding behind opening a consignment store than just a true passion for luxury brands. We have gathered all information about luxury consignment business, which you might find useful before you decide to turn your hobby into a thriving career.
What Is A Luxury Consignment Business?
It may come as a surprise but plenty of people who own high-end clothing and bags cannot estimate the value of the goods themselves. To get quick profit from their pre-owned items they hand out or ship them to a consignment store that takes care of evaluation according to a number of criteria: age, look, brand, damages and marks, season, style, etc.
Buyers who are looking for luxury pieces online will more likely purchase them at a consignment store as well. This is how they can be sure that fashionable clothing is authentic and won't cost a fortune. Both customers and sellers prefer dealing with consignment stores, it is a win-win for each side.
Consignment store serves as a third party between consignors and shoppers. It guarantees that the customer receives a valuable product and that the previous owner gets money for it. Consignment stores are especially popular when it comes to luxury brands. Basic clothes by common designers can be sold via numerous platforms like eBay or Amazon. High-end clothing and accessories require special treatment and attention. Having a luxury consignment business you must be a fashion expert, as it will be your work to properly evaluate and take care of the items. It's totally another level of sale!
Is Consignment A Good Idea?
The first thing you need to understand about consignment - it is not a hobby or a fun activity to be done from time to time. Running a luxury consignment store requires knowledge, skills, and funds. Money won't be miraculously flowing into your pockets, you need to dedicate a lot of your time to make your business stand out. Before planning to start a luxury consignment business it is better to analyze all pros and cons.
Pros Of A Luxury Consignment Business:
- It's an opportunity to make good money, as commissions are usually more than 50% of the product price.
- You will be developing your skills in the field of fashion.
- There's no need to own luxury items, as other people would ship or bring them to you.
- You decide what commission you charge.
- Plenty of customers prefer buying at consignment because they cannot afford a luxury item at full cost, so there's a high chance of fast selling.
- Dealing with high-end quality brands increases self-esteem.
- By giving items a second life you help the environment.
Cons Of A Luxury Consignment Business:
- There are already way too many consignment stores.
- Some items might not be interesting for the public, so you may just waste time trying to sell them.
- It takes some time to see the result of this business, you won't wake up being a millionaire next morning after opening.
- Consignment requires a constant hunt for good and rare items, you won't be thriving having a couple of basic bags to sell.
- A great amount of work to do while evaluating and selling items.
How Much Does A Consignment Store Make?
Before opening a business every entrepreneur tries to analyze how much money they can make. And that's also true for consignment business. It's a mistake to expect to have millions at the end of the year, just because you're working with luxury brands.
The amount of earnings differ, as some consignment stores fail and close down, and some make twice as much as last year. The more items you are able to sell, the bigger your income will be. Having unique rare items will attract collectors to your store, overpriced clothing won't be in demand. A consignment store get profit only when it sells, otherwise, it will be just a warehouse for high-end things.
As for commission, every owner decides for themselves. Typically consignment store asks for 50% of the cost of luxury items, or more. Commission rates differ, like the quality and the quantity of the goods in the store. Selling one Hermes bag will definitely bring you more than selling a dozen pairs of Prada sunglasses.
The Importance Of A Business Plan
Just passion and desire won't be enough to successfully run a consignment store. Every business needs a plan to guide the entrepreneur through possible obstacles and complications. It also helps to see a bigger picture and avoid making hasty decisions without proper thinking.
A proper business plan gives an idea of your chances to succeed. It might as well be used to track achievements and attract investors. A business plan includes a full analysis of the chosen niche with all the obstacles and scenarios you may face. You create a strategy and evaluate the viability of the business.
Do Market Research
A strong foundation of all business plans is market research. At the very beginning, it will help understand what products customers want and what items are more likely to be swept from the shelves. Using this data, you start looking for goods that fit the desired criteria. Be ready to do market research constantly, because trends in fashion changes every season - you need to act fast.
Market research includes everything - looking for your target audience, knowing your competitors, picturing an ideal customer, following trends. It's the process of gathering as much information as possible. When you learn more it will be easier for you to build a winning strategy and increase sales. No business grows without market research.
Know Your Customer
Focusing on the product itself and sales is a wrong business approach, say the most prosperous entrepreneurs. The ability to find your customer, to picture their habits and lifestyle, to understand their needs and desires, and to satisfy them is the key to success. Here you should analyze your consignment store from the position of a buyer, find the most suitable strategy to please him. Try to answer the following questions:
- What is my regular customer's age, profession and income? What's his or her appearance?
- What's my ideal customer's style? Is she or he following trends or looking for rare gems of fashion?
- What does my customer expect to find in my store?
- What services does he or she want to get from me?
- Where does my customer live? How it will be possible for him or her to find my consignment store?
- What new can I do for my customer that others don't provide?
Owning a luxury consignment business narrows your target audience. Of course, its primary goal is to make high-end items affordable for everyone but, anyway, most likely your customers will be people who are attracted by everything chic and unique.
Do You Need An Offline Store If You Sell Online?
Almost everyone is ordering and buying via the Internet now. With loyal return policies there's no more need to visit overcrowded and noisy shopping malls (often in vain, as there's nothing that suits you).
When you start your consignment business online, you might think of having an offline shop that displays all the items. But do you really need one? How big are the chances that a potential customer steps inside your store to see, to touch, to try a luxury item, and also to purchase it? If you live in a big city, like New York or Miami, it might be a good idea. A random person or a tourist might come across your shop and actually buy something. But also consider that you need to pay rent and salary to staff. In most cases, consignment business doesn't require having an offline store to be successful.
If you need help with finding an online platform, here is the list of 40+ best places to sell your used clothes online for cash.
Advertising Is Top Priority
When all preparations are done, you've done a brilliant market research, you've defined your target clients, website is ready... And nothing happens! No customers, no views, no activity on the website. That means only one thing - you have forgotten about promoting your store! To get actual clients you need to reach out for them, to spread the word that you are open, to do a special offer for your first customers.
Sometimes entrepreneurs underestimate the importance of advertising. It should be your top priority to raise an interest at the beginning and remind about yourself constantly (as you remember, trends change every season, so you always have something to offer). With the development of technologies, there's no more need to print out flyers to give them away on streets and shopping malls. Digital ads work even better and will attract people to your luxury store.
Ever dreamed of turning your luxury bag side hustle into a profitable business? Watch this video or read my personal story on How to Become a Successful Luxury Handbag Seller!