Consignment Shops: Best business model ever?

consignment gallery

Our local upscale consignment shop, er, I mean Gallery

Imagine you could have a business selling stuff you didn’t own.

Imagine you had no manufacturing costs.

Imagine you had no cost of goods sold.

Imagine you could stock your store with inventory that didn’t cost you a dime unless and until it sold.

Imagine you could be guaranteed a hefty profit margin.

Imagine you had no shipping costs.

Imagine you could have this stuff delivered free to your door.

Imagine you could have this delivery made with no obligation and with the complete freedom to say, “Ah, no thanks.”

Imagine you never had to run a sale to move unwanted merchandise.

Imagine you could have it removed for free if it didn’t sell, and on your time-table.

Imagine you could just give it away if the owners declined to retrieve it when you told them to.

You’ve just imagined a consignment shop. Near as I can tell, the best business model ever.

As regular readers already know, point #8 in My Plan for 2013 is selling the house. With any luck at all, by May we’ll be settling into our new and more cosy deluxe apartment in the sky. In addition to allowing us to move on to the next phase of our lives, it give me the delicious opportunity to indulge on a large-scale in one of my very favorite things: Getting rid of stuff.

I love getting rid of stuff. Each item going out the door feels like a burden lifted. Moving provides an unloading opportunity like no other. But this unloading can be surprisingly difficult and time-consuming.

But because we already run a pretty lean ship, even the things we won’t be taking with us play a currently useful role in showing the house to its best advantage. That means I don’t want to unload anything until the house is sold. Not only sold, but past inspections and any financing or other contingencies that might cause a buyer to pull out. And, of course, that means when the time comes the selling window will be small.

It’s never too soon to explore options (and I’ll have another post shortly on some of the others) and that got me over to our local consignment store this past Sunday to check it out.  I’ve been to lots of these places before and this one is the cleanest, nicest and best organized I’ve come across. It’s not a “Shop,” it’s a “Gallery.” Heh!

They tend to carry quality stuff and it is displayed as well as any retail store you might visit. If you are a buyer, let’s say looking for a dining room set (something I’ll happen to have for sale shortly — Just saying), you’ve got a couple of options.

You could buy new. It’s easy. And it’s very expensive.

You could buy used. It’s far cheaper, but can require a lot of running around.

Buying used you might search Craig’s List. Look at the pictures. Make a list of those that appeal to you. Set up appointments. Drive around town looking at them. Hopefully find one you like and then drive back to negotiate for it. You might get a killer bargain. More likely, at least in my experience, you’ll be dealing with folks who have a highly inflated idea of what it’s worth.

Or you could mosey on over to the consignment shop and see 8 to 12 sets all in one place. They’ll all be priced realistically by professionals without any pesky emotional (…remember, sob, Grandma used to sit right there each Thanksgiving before she died back in ’78…) attachments to the things. If you didn’t see what you wanted, you could stop by in another week or so and check out the new inventory.

If I were a buyer, I’d certainly take a look at Craig’s. I’d review the ads in case the perfect set was sitting there. But I’d also visit the consignment place. It’s every bit as easy as any retail store, just cheaper.

As a seller, it’s a tougher call. But, not surprisingly, the consignment store folks have come up with some strong reasons to use them. Saves me the trouble. Here’s the case our local place makes, in their own words, directly from their website:

Why use a consignment gallery?

  1. Avoid the hassle of placing newspaper ads and having strangers walk through your home.
  2. Garage sales bring low prices and a limited number of shoppers for a short time.
  3. Auctions cannot guarantee reasonable prices.
  4. Consignment Gallery in Bedford and Amherst offer excellent visibility in high traffic locations, 7 days a week.
  5. With over 20,000 square feet we are the largest consignment business in the area for pre-owned furniture and decorative accessories.
  6. We provide you with a simple agreement form which lists your items and prices.
  7. We have the experience to price and attractively display your consignments.
  8. Consignment Gallery has established a reputation for integrity and customer service.

Compelling stuff. But it comes with a price:

1. I have to get the stuff there. For small things, no problem. But for my Wing Chairs and Dining Room set arrangements need to be made.

2. They gave me the cards of two reliable guys that will cart the furniture over there, but that’s an added cost of sale to me.

3. I’ll still need to take pictures to send them, just to confirm that they’d be interested in accepting my consignment.

4. Even if they like the pictures, they reserve the right to reject the items upon arrival and inspection. More risk to me.

5. Their commission is 35% on items priced over $30. It’s 50% on items under $30.

6. They decide what the price will be and it might be lower than I want (especially after commissions and what with Grandma having sat at that table each Thanksgiving ’till she died in ’78 and all).

7. They want the inventory to turn over. That’s far more profitable for them than squeezing out the best price on my stuff for me. One cost they do have is rent for the floor space and nothing wastes that money like stagnate inventory.

8. After 30 days the price automatically comes down 10%.

9. After 60 days you can agree to another 10% reduction or collect your things.

10. If the items don’t sell, I’ll have to pay to retrieve them or agree just to donate them; which the store will arrange.

Like I said, it is a great business model. For them. And maybe for me.

Let’s look at some numbers. Let’s say my dining room set is worth, as I think it is, about $500. If it sells at the full price in the shop, I’ll net 65% of that or $325. Less whatever it costs me to get it there. So anything I can get above $325 is found money.

But I’ll need to sell quickly when the time comes.

Here’s my plan. When I’m ready, I’ll put it on Craig’s List at around $375 for a few days. If somebody recognizes it as the screaming bargain it is, they’ll get a deal and I’ll pocket a bit of extra dosh. If not, the consignment shop will get the biz. Sometimes a hammer won’t do and you need a nail-gun.

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