As of 2018, the National Association of Resale and Thrift Shops estimates that the resale and consignment industry in the U.S. generates annual revenues of about 17 billion dollars. Consignment stores offer consumers an opportunity to buy gently used merchandise at a reduced price. Consigning means that a retail business agrees to sell a person's items, with the business and the individual each receiving a percentage of the sale. The income generated from this sale is revenue. Profit made at a consignment store is determined after subtracting expenses from the sales revenue.
Revenue from consignment stores and resale stores in general can vary. Note that larger resale stores like Goodwill Industries generated 5.37 billion dollars from its 2,000 stores in 2014, according to the National Association of Resale and Thrift Shops. Other heavy-hitters like Crossroad's Trading Company earned 20 million dollars in sales from its 32 locations in 2012. Dun's Census of American Business found that the majority of resale stores made less than 250,000 dollars in 1993, but those figures have since risen as the popularity of consignment stores has grown due to eco-conscious consumers. As of 2012, the average annual revenue of a resale shop was around 120,000 dollars per worker.
The consignment business model circumvents costly inventory purchasing and carrying costs associated with most retail businesses as consignment stores do not purchase any of the inventory they sell. Merchandise is brought to the store by the seller and owned by the seller until the sale occurs. Typically, the consignment store keeps 60 percent of the sale price and gives 40 percent back to the original owner of the item. If the item doesn’t sell in an agreed upon period of time, the consignee returns to the store to reclaim the merchandise or the item is donated according to a prearranged agreement between the store and the seller.
A geographic location with heavy foot traffic contributes to increased walk-in sales. A larger location allows more room for merchandise and with no inventory costs, more items available means added opportunity for a sale. Encouraging buyers to return with items they want to sell creates a double revenue stream from the same customer and increases the merchandise available for sale. An advertising plan builds awareness and encourages consumers to visit the store, but can also result in an expense that must be subtracted from revenue to determine profit.
Start up costs for a consignment store range from $2,000 to $10,000, according to Entrepreneur. Items needed to start a retail business include a cash register, printer, display racks, cases and shelving, sales software and a storefront space that is traditionally rented or leased. After the business is operational, fixed expenses paid each month such as electricity, water, payroll and Internet and phone service are subtracted from revenue along with variable costs such as advertising to determine profit. Controlling expenses contributes to higher profit.
The average salary for a consignment store owner is $42,000 according to Simply Hired. If receiving a salary, the store owner is likely serving as the store manager and handling duties such as scheduling employees, managing the relationship with sellers, reconciling sales, issuing payments to sellers, reviewing merchandise and accepting or declining items brought to the store for sale. In addition to earning a salary, the owner receives the profit from the store after all expenses are paid.