The Best Way to Start an Online Consignment Business
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Most of us love the idea of making money at home.
Starting an online thrift or consignment store can be a good way to accomplish the goal of increasing your income.
This type of side hustle or small business might not be as hard as you think. All you need is some basic equipment, items to sell, and a platform to sell them on. And you can use the extra funds to save for a down payment, remodel your house, or take your parents on that dream vacation.
What is an Online Thrift Store?
An online thrift store, or consignment shop, is a website or app where people can buy or sell used items.
The consignor brings items that they no longer want. When one of the items sells, you, as the consignment store owner, receive a portion of the proceeds in return for listing the item and handling the transaction. The consignor gets the remaining funds. A typical percentage split is 60/40, or 50/50 for more expensive, high-end items.
You might shop for used clothing or accessories at popular online thrift stores like thredUP or Poshmark. Resale websites are essentially large consignment stores that are great sources for high-quality, gently used clothes at a fraction of the price you would normally pay.
Can I Really Make Money Consigning Items Online?
The resale industry is a major business in the United States. The number of resale stores has grown 7% over the past two years, according to the National Association of Retail and Thrift Shops. And First Research estimates that resale stores in the US make a combined annual revenue of $17.5 billion.
Thrift and resale stores are popular with a diverse set of customers. According to thredUP’s 2019 Resale Report, 64% of women have bought or are willing to buy items secondhand. That number is up from just 45% in 2016.
Thrifting also transcends generation. Thirty-three percent of secondhand shoppers are Millennials, while 31% are Boomers. Gen X makes up a healthy 20% of thrift store shoppers. Value chain, department store, and luxury shoppers all buy secondhand in similar numbers, according to thredUP’s 2019 Resale Report.
These positive trends make the online thrift shop business an exciting option if you’re looking for an extra source of income.
Things You’ll Need to Start an Online Thrift Store
Although you don’t need a physical location to start an online thrift store, you still need a few things to get started.
Items to Consign
The first thing you need is items to consign. You can start with your own closet, of course, but eventually, you may need to source items elsewhere. You can find those at yard sales, thrift stores, or from friends and family.
To start your consigning business, think about what kinds of items you want to resell. Will you focus on something specific, like maternity clothes or luxury handbags? Or do you want your site to be more general? You can start with one niche and expand as your resale business grows.
To get your online thrift store up and running, you need to use a sales platform or create your own website.
You can choose either an all-in-one platform or set up a WordPress site plus a payment platform. People also have success in setting up Instagram accounts to list clothes for sale and receiving payments through PayPal.
Shopify is an example of an all-in-one sales solution. Just log in, post your items, and start selling. This is a quick way to get up and running, but it will cost you $29 a month or more. Fortunately, you can deduct this cost on your taxes.
If you don’t want to spend the money for a fully hosted and supported solution, you can also set up a WordPress site and pick a selling platform plugin. WooCommerce is a commonly used e-commerce platform that you can integrate into a WordPress site.
You can also use well-known apps to sell your items. Poshmark and Mercari are great, but they’ll take a portion of your sales. If you decide to list your items on Instagram and bill via PayPal, you’ll likely have to pay PayPal fees.
Pick whatever platform is the simplest for you. You can always change later if you need to.
An Organized System
Your online thrift store will likely sell many different items from multiple categories. You might also sell items for other people if your store grows. You’ll need a way to keep track of items as well as payments, fees, and shipping supplies.
There are a few different choices for tracking your inventory and payments.
When you’re small, you may be able to use a simple paper tracking system. Attach a numbered tag to each item and record the consignor of each tag number, whether that’s you or someone else. When that item sells, record the sales price, fees, and any other relevant details. You can track this information in a physical paper log or in a spreadsheet.
To automate the process and reduce your risk of errors, you could invest in software made specifically for consignment store owners. Industry-specific software can help you organize your consignor accounts, inventory, sales, and consignor payment information all in one place.
A Decent Camera
When you’re selling items online, you need to take high-quality pictures of your merchandise. Good pictures will make items sell faster.
A good quality camera can help you take appealing product photos. An inexpensive tripod will also be helpful. If you’re on a budget, a simple DIY product photography setup will be enough to get started with. You can also use your smartphone since many of those cameras are near-professional quality.
Since you’ll be shipping physical products to buyers, you need to have shipping materials on hand. Choose the minimum amount of protective packing materials to keep your product intact. If you’re shipping something soft like clothes or handbags, basic protection should be just fine. For breakable products, you’ll want something with more cushion.
You can find or buy packing materials from a variety of sources. Friends, neighbors, and family might be more than willing to donate their boxes and shipping materials to you. You can also get supplies from USPS and FedEx for free when you use specific services.
How to Start an Online Thrift Shop
Now that you’ve set up your store, there are a few other steps to follow to make sure your business is legitimate and profitable.
Check Local Tax and Business Laws
To make your business official, register it with your state’s Department of Revenue and obtain a Federal Employer Identification Number through the IRS. Check with your county clerk’s office to obtain necessary licenses and permits and apply for a sales tax permit.
You should also research local laws to understand when you need to charge your buyers sales tax. Also, open a business bank account to keep your income separate.
Establish Your Terms
Decide on the terms of your thrift store, and make them visible to your customers. You might want to include information like:
- Will unsold items be donated or returned?
- How long will the items be made available for sale before being donated?
- Will you accept returns from customers, even if you don’t believe you’ve made an error?
- Who will pay for return shipping?
- Does your store carry insurance on the items to be sold?
- When are payments due from your customers?
- What is your shipping and handling time?
Because these terms represent a legal document, you should consult an attorney if you have questions about your agreement.
Keep Excellent Records of Your Items
In order to have good records of your profits and whether or not you shipped an item, consider keeping a spreadsheet with the information below for each item you list.
- Item Name
- Item Listing Price
- Actual Sale Price
- Paid (Y/N)
- Shipped (Y/N)
If you decide to grow your store and sell items for other people, you’ll also need to track the name of the consigner and the fee you charged.
Advertise Your Business
When you’re first starting out, advertise your business for free on social media and through word of mouth. Use relevant hashtags, and tell friends, family, neighbors, and co-workers about it.
You can also post in local groups and buy Facebook ads targeted to a local audience to find more customers. If you’re selling a specific type of merchandise, target that market. For example, if you’re selling maternity clothes you can post in local mom groups.
Just be sure to follow group guidelines when posting. You don’t want to get flagged as spam and kicked out of the group.
Know Consignment Percentages
If you sell on a larger platform, you have to know what percentage of your sale the platform will take. This will help you price your items so you still make a profit. Similarly, if you sell items for other people, decide what percentage of the sales price you will take.
Consignment stores can charge anywhere between 10% to 60% of the item’s final sales price, depending on the type of item being sold.
List Items Online
Once you have items to sell, post them online. Include a few pictures of the product, an honest description of the piece, and its condition and the price.
Pay Consignors on Time
After an item has sold, you have to pay consignors on time and in accordance with your consignment agreement. Paying your consignors in a timely manner will help you avoid legal issues.
If you use a large platform like eBay or Poshmark, they will automatically deduct their fee from the final sale price. But if you’re selling for someone else, you’ll need to make sure you pay them their share.
Who Should Start an Online Thrift Store?
If you’re organized, enjoy having flexible work hours and managing an online store, an online resale business could be a great fit for you. Maximize your profits and success by choosing a product niche you’re passionate and knowledgeable about.
With recent revenue growth in the resale industry and increased consumer interest in secondhand goods, now’s a great time to start an online thrift store of your own.