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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    • jlcollinsnh says

      Wow Mr. RS….

      You just very likely set an all time speed record for posting a comment after the post went up!

      Click on the link. It’s from an old sit-com theme song. Of course the fact I remember that sit-com is reason enough to believe I’m getting close to that heavenly lodging option. At least I hope that’s the one I’m getting close to.

  1. Bonnie says

    A consignment shop also has the cost of insurance and labor and if the owner it means your probably there a lot, like any small business owner. Another option is to have a “moving estate sale”. The estate sale folks come to your home and conduct an estate sale of the things you leave behind. You don’t have to move things and someone else does the sale. They’ll even negotiate with you to take care of the leftovers.

    • jlcollinsnh says

      Hi Bonnie…

      Didn’t mean to suggest there are no costs or effort, just that many typical costs are avoided.

      Not sure we have enough stuff of enough quality to be of interest to estate sales folks. Maybe next time, if we leave the country and sell every thing. Something to keep in mind. Do you know what commission levels they charge? Thanks.

      • Prob8 says

        You might want to contact a local auctioneer or two. In my area (Southern Illinois), they will typically bundle your stuff with some other estate sale. Commissions run around 10% on personal property. Of course, there are typically no reserves so you’ll likely get low-ball prices.

        I wish you luck this time around selling the house. It’s never a fun thing to do with the constant cleaning, staging, inconvenient appointments, etc. There’s also the realtor commission and other annoyances like helping buyers with their closing costs.

      • Bonnie says

        I’d have to ask, I had a friend who died and her attorney arranged the estate sale and that was my first exposure to the industry. With the crash of the housing market here in AZ, they have been doing moving estate sales too.

  2. Shilpan says

    I love getting rid of stuff. Each item going out the door feels like a burden lifted. — I am with you on this thought train. I can imagine your excitement to begin another phase in your life.

  3. Betty says

    I remember the Jeffersons. 🙂

    Not sure where to ask unrelated questions so I am posting it here.

    Can you tell me the best method of getting a passport? What should I expect
    to pay for a passport? How long does this process take?

    Does one need immunizations to travel to Ecuador? If so, who do I see for this?
    The local health dept?

    Hope you don’t mind, I could really use the information.

    • Prob8 says

      Betty – Passports will cost around $135 plus the cost of photos and mailing. You can get one at many locations including the local post office or courthouse – call ahead to see what they need and to set an appointment. The after you submit the paperwork, processing times depend on how behind they are at that time. Expect 6 to 12 weeks. You can pay an extra fee for expedited service if you need it faster.

      If you are concerned about immunizations, I would make an appointment with my doctor to discuss what they recomment. You can also visit the CDC’s website for a general discussion about health information for traveling to Ecuador.

      Go ahead and run a Google search for both of those topics and you will find everything you need.

      Good luck!

      • Betty says

        Well, I haven’t a direct plan as yet. We are still in the talking about it phase.
        However, I am going to get the passports and, see about immunizations now.

  4. Dennis Laughlin says

    Mr.JIm this blog just screamed for my reply. I believe in terms of this topic, I am the definitive, Anti-JlCollins. As you know I collect on a real basis and sell on the theoretical plane most of the time.. So far no hoarders episodes but I have a tolerant family. On the side of selling I do now have 2 re-sale operations going and I would encourage your readers to look for a sale to a re-seller rather than go the consignment route. I see dozens of people like me every week buying at auctions, estate sales and most of us look for a double on our investment, but we offer the advantage of cash on the spot. I have seen too many consignment shops that just don’t move product. The effects of that are a real push for discount. It may be ugly to be faced with liquidation value, but it is like a shot of NyQuil ( leaves a nasty taste in your mouth),you really will sleep better with the cash and not just a hope of tomorrow’s sale. Once you decide to part with something, turning your thoughts to the employment of whatever the proceeds are should be the fulfillment of your plan. I have sold many items that I would like to have kept, but the excitement of the next find is the motivation.

    Your readers who are looking for an auctioneer should go to this site will list auctioneers in their area and also give them an idea of the kinds of items they are most successful selling. All auctions don’t attract the same crowds and the same motivated buyers. Consignment auctions are a risk if your items do not fit the theme of the other lots being offered. Different horses for different courses.

    Anyway, hope the un-bundled of JLCollins continues to progress toward portability.

    • jlcollinsnh says

      Hi Dennis….

      Always great to see you check in!

      With your business savvy, I would have expected comment from you on my assessment of the consignment store business model. Not sure I’d want to run one, but they sure look like interesting investments.

      (For the benefit of my other readers, in addition to being a collector Dennis is a former banker and current venture capitalist. He holds ownership stakes in several businesses.)

      BTW, I have a very good friend who is considering selling her business. If you are willing to provide a little informal guidance, I’d like to pass along your contact info.

      How would sellers like me best find buyers like you?

      • Dennis Laughlin says

        Most antique malls are made up of independent dealers who scour the world for deals, most have extraordinary connections regarding who buys what and where to sell things. So don’t be afraid to just ask someone at these establishments about a buy out or where they think you could sell your items. Chances are good you will come away with a couple avenues to pursue..

        Happy to help your friend,email me the info or give me a call. Either way I will be happy to help her evaluate the potential of a sale.
        PS thank you for the kind words, usually when people mention my name there are more adjectives than nouns used.

  5. Johnny Moneyseed says

    I was in the local thrift store with Mrs. Moneyseed this past week buying some new-used baby clothes and I said to her “Can you imagine that EVERYTHING in this place was donated??” They have less operating costs than consignment shops, because they don’t owe anything to the person who brought the item in.

    • jlcollinsnh says

      Good point!

      But also consider that the one cost both have is rent. So the more valuable the items you can offer in a given space, the more money there is to be made. For instance, if I have space to display a chair for sale and it was donated and if I can sell it for $20, I’ve made $20 for that space.

      But if I can take a $100 chair on consignment and make 35%, I’ve made $35. And it still costs me nothing unless and until it sells.

      Mmmm. I need to go into the consignment business!

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