Who doesn’t love a bargain when shopping for on-trend clothing, shoes and accessories?  More shoppers are turning to upscale resale stores to snag great deals on the latest fashion finds.  They’re also discovering a way to recycle their own gently-used items—and earn some cash– by selling their clothing to, or through, a used clothing shop.

The two major types– consignment stores and resale stores—have different ways of acquiring items. Both accept high-quality, gently used clothing, and both look for designer and name-brand labels from customers who want to sell their clothes.  However, resale shops like Clothes Mentor tend to be more fashion-forward, purchasing current, up-to-date fashion as opposed to the classic or vintage items often found in consignment stores.   Shoppers can get great deals at either type of place.

For store owners, though, the business models have some significant differences.  Owners need to know their comfort levels in dealing with daily operations and cash flow issues to determine which type of upscale resale clothing store is a good fit for their temperament.

For shoppers and for store owners, there are five big differences between consignment shops and resale stores.

1. Who Maintains Possession?

In a consignment situation, the owner of the item (the consignor) maintains ownership of it, but gives the right to sell it to the store, which is the consignee.

Most times, if an item doesn’t sell, the consignor can pick it up and keep it, give it to a friend, or donate it to charity.  It’s also common for the shop to arrange for a charitable donation on behalf of the consignor.

At a resale clothing franchise such as Clothes Mentor or Children’s Orchard, the store buys the items outright from a seller or a wholesaler, then displays and sells the goods at a profit.  Once an item is purchased from the seller, it becomes the property of the resale store, which then decides how to display, market and sell it.  If the items don’t sell in a reasonable amount of time, most resale stores donate them to charitable organizations in the local community.

2. Who Sells the Items?

With consignment, the shop helps the consignor sell her clothing and accessories, and pays the consignor only after the items have sold to a third party.  Each local store sets its own policy, but in general, the items are dropped off and marked for sale for a predetermined cycle, usually 30, 60, or 90 days.  If the pieces don’t sell by the end of the term, some shops will discount the items (often by 30% or more), or require the owner to pick them up.  Consignment shops often charge a seller a commission between 25% and 60%, which becomes profit for the shop.

At resale stores, the seller parts with the clothing in exchange for on-the-spot payment.  In other words, she sells her pieces of clothing to the store the same day she drops off the items.  The waiting period is minimal—basically, just the time required for the store personnel to determine the value of the items, and prepare an offer to purchase.  It’s common for the store to offer 50% or less of the price it intends to charge for the item.  Employees will then process the merchandise and tag it for resale, and the seller has nothing more to do with the items.

3. Who Controls the Pricing?

With consignment, a seller has limited control over how much her item will be priced for resale.  She can work with the shop to determine the best price so that it can potentially sell for top dollar.  Oftentimes the price drops on a set schedule, depending on how long the clothing remains in the shop prior to purchase. Still, the consignor risks the chance that the item won’t sell at all.

At a resale clothing franchise stores like Clothes Mentor, the store determines the price paid to the seller based on the condition and age of the clothing, and whether it is in high demand.  It also prices the item for resale using data provided by the franchise parent company, and current local market trends.  The store assumes the risk for the resale, so the profit to the franchise owner is often higher than in a consignment store.

4. Benefits of Opening a Resale Franchise vs. Consignment

Most franchises offer owners a proven business structure, which can be attractive for first-time owners with limited or no business experience.  The franchise parent company normally provides training in how to start up and run the operation before the doors ever open.  In many locations, owners find it easier to secure financing for a franchise than a start-up consignment or resale store.  Analyzing and implementing the pre-opening plans can help owners make informed decisions about purchasing, staffing and ongoing development.  In contrast, consignment shop owners devise their own business and operating plans, and often have higher initial startup costs than a franchise. Any pre-opening training must come from in-house, or be outsourced.  The consignment shop owner makes all decisions regarding the business.

5. Support for Ongoing Operations

A typical franchise agreement at a store like Clothes Mentor or Children’s Orchard includes ongoing support for the business operation. The franchise already has its own image, branding and marketing plans.  Owners receive ongoing sales and marketing support and access to national advertising. The franchise also has built-in buying power for bulk office and retail supplies

As for consignment shops, any support must be initiated internally, or be outsourced.  Owners must negotiate their own deals for supplies, and come up with their own marketing, training and development plans.

No matter the preference, there are options to suit every need when it comes to buying and selling used clothes—either as a customer or a business owner.

Consumers are really buying into the resale trend, whether to make money, save money, or help the environment by reducing the amount of discarded clothing.  And the resale industry is responding, with a growth rate in resale shops of approximately 7% a year.  More upscale resale clothing shops are making room for specialty items such as plus sizes, maternity and athletic wear.  It’s an economical way for a shopper to purchase clothing, and a socially-conscious way for a seller to part with unneeded garments.  It’s also a way for a business owner to become part of the fabric of the local community.

Buying and selling gently used clothing is more than a trend—it’s a movement.  And by choosing consignment or resale, savvy shoppers and sellers are guiding the flow in a fashion forward direction.

OWNING AN UPSCALE RESALE STORE IS SMART BUSINESS. HERE’S WHY.

While many traditional brick and mortar retailers continue to struggle, the upscale resale industry is booming. Consumers seek out resale to both shop and sell their gently-used stuff and entrepreneurs are cashing in on this growing trend.

A lot has changed over the years leading to this evolution; including the high-return, lucrative profit opportunities upscale resale can provide entrepreneurs now and well into the future.

WHY IS UPSCALE RESALE SMART BUSINESS?

TIGHTER CONSUMER BUDGETS

According to latest data from the Bureau of Labor Statistics, the typical U.S. household now spends about 20 percent of their annual budget outlays on health care, personal insurance, life insurance, pension-like products and social security. This is at a time when they are spending a disproportionate amount of their disposable income on communications, related technology and entertainment/experiences. Just consider what we spend on wireless, cable, internet and smartphone payments each month. Family budgets are stretched  leaving less ability to spend on full-price fashion and even full-price electronics — including our smartphones we love so much. And, the growing desire and focus on spending on experiences; such as vacations, amusement parks, salons, etc. only amplifies this crowding-out dynamic.

CULTURE CHANGE

While having less money to spend on full-price items, consumers have grown accustomed to opportunistically monetizing value for the items they no longer need. Both of these trends play right into the upscale resale industry. Whether out of necessity or not, it has become widely acceptable – and in fact often socially admirable and popular — to purchase and sell secondhand items such as clothing, electronics and household items/wares. While thrift shops have always provided this service on the low-end, the trend seemed to evolve more mainstream with the dawn of eBay. Now, it has accelerated and is moving into the high-end with upscale resale. Everybody wants in to buy stuff, sell stuff, and enjoy the thrill of the experience. This is best exhibited by Clothes Mentor, the highly successful upscale resale clothing franchise, a national franchise in the NTY Franchise Company Family of Brands. Clothes Mentor has grown from two stores (in one state) in 2006; to 145 stores (in 42 states) in 2018 — with many more in development. This upscale resale cultural evolution is booming with no signs of slowing down.

LOVE OF HUNT

Whether on eBay or at Costco, Marshalls, Ross Stores, etc. consumers have grown to love a good hunt for deals. More recently though, as a result of rapid store count growth, the selection, quality and value of merchandise at many discount retailers has waned; leaving fewer opportunities to feel satisfied finding that treasure. With a wide variety and rapidly evolving inventory of all types of unique, locally-curated brands at attractive prices, upscale resale stores provide the ultimate treasure hunt satisfaction.

LOVE OF CASH

One thing consumers appreciate more than the love of hunt is the love of cash. Upscale resale stores provide cash on the spot for items they accept from customers — another key driver of their growing popularity. This is not only good for the consumer, but also for the store owner. Initial investment is lower since there are no big, risky long-lead inventory buys (or large working capital requirements) that come along with them. Fully in control of the type, timing and level of merchandise buys from customers, the upscale resale store owners can dynamically and daily control inventory cost and cash management as they see fit.

Importantly, as James Wollman (VP of Franchising at NTY Franchise Company) notes, “Our franchises buy and sell the YES votes of what people like in fashion, electronics and other household items; we don’t deal in the NO’s that are the primary inventory of most other major discount stores.” This all results in much smarter inventory, higher inventory turnover, enhanced budgeting and working capital flexibility, and most importantly, gross profit cash margins of roughly 60 percent — well above the industry average.

PRESTIGE IN REACH

While fashion and trends change all the time, most consumers still love to have a few prestigious or conspicuously flashy items of clothing; while typically priding themselves on nameplate laptops, smartphones, headphones, etc. But in today’s economy, some top name brands are simply out of reach for many. This is the case even at discount retailers where discounts are not as great as in the past from rising product-sourcing costs — particularly freight and shipping. Upscale resale stores are not exposed to these unruly costs and provide all consumers with the opportunity to get that prestige product and feel proud and satisfied as a result.

MILLENNIALS

Often well educated, but with less money at their disposal, millennials don’t enjoy paying full price for retail but still enjoy the hunt of shopping. They typically pride themselves on bargains; especially if it will yield an environmentally friendly outcome.

Generally cash-strapped, many millennials are still saving for their own place to call home and are being encouraged to save more aggressively now for retirement. By 2020, they will represent roughly one-third of the adult population. This is a great long-term demographic trend for the upscale resale industry to leverage. This trend is expected to continue long-term as millennials’ children are brought up in — and at an early age becoming well accustomed to — the resale lifestyle.

ENVIRONMENTALLY FRIENDLY 

You may not think much about this, but a tremendous amount of global resources — such as energy, minerals, chemicals and water — are used to make a single item of clothing, electronic gadget, or household item. According to several estimates, it can take up to 1,000 gallons of water to grow the cotton for — and then produce, a single pair of jeans. A t-shirt can require up to several hundred gallons. This is why global clothing brands are now focusing so much on sustainable apparel.

The resources used to create products not only include the raw materials, design and production expense; but also packaging, shipping and marketing. A lot of energy is also used in collection and disposal. Resale provides a second or third lease on life to millions of products annually; which is not just good for the environment — it’s great. As just one example of how profound this can be, since 2007 Clothes Mentor alone has recycled more than 42 million items of mall brand and designer clothing, and paid women more than $180 million in cash for gently-used items. Importantly, while millennials are most known for appreciating environmentally friendly consumerism such as this, going green is an ongoing trend still gaining traction among all generations.

COMMUNITY FRIENDLY

Upscale resale is good for local communities. They encourage locals to keep their closets and residences uncluttered and fresh. With great values, they provide much-needed flexibility for local families’ budgets. With regular customer buzz, the shopping flow to the area benefits other businesses and the local tax base. Moreover, store owners and key employees get to know their regular clientele — establishing relationships that last for years. “Fashion is Fun,” proclaimed NTY’s James Wollman when describing how owning an upscale resale franchise can be more enjoyable on a daily basis than many other franchise concepts like eateries. While that may be the case, what’s most enjoyable is the multi-faceted annuity flow of business (and high return on investment) that can result from this unique communal retail activity.

EFFECTIVELY CHARITABLE

When upscale resellers are not successful selling items in a certain amount of time, they typically donate them to charity and are able to monetize the donation as a business deduction. While this is typically a very small percentage of the overall inventory turn, it is a win-win for those less fortunate and for the franchise owner seeking to maximize returns.

PROVEN BUSINESS MODELS

In the past, starting your own resale business without any infrastructure or support network was a fairly risky and daunting task. However, today with the proven business models and techniques of a leading franchise partner, the heavy lifting has already been done and the road to high-return success well-paved. With over one hundred years of collective upscale resale experience; and five successful major brands under its belt, NTY (New to You) Franchise Company is an ideal partner to get you fully up, running, and remaining on the path to high-returns success.

You may ask yourself, what makes the NTY business model so successful? Beyond a century of collective franchising experience and among a host of key factors is a serious focus on: 1) Bright, clean and fresh-aired stores; 2) Smart store layouts; 3) State-of-the-art inventory managing, pricing and point of sale cloud-based software systems; and 4) a firm grasp on all the “big data” needed to make wise purchase and sell decisions throughout the day — every day.

NTY FRANCHISE COMPANY AT A GLANCE

Founded in 2006 and Located in Minnetonka, Minnesota, NTY Franchise Company is a pioneering and highly-experienced force in the rapidly growing category of upscale resale retailing. It is the umbrella organization for four proven national franchise brands: Children’s Orchard (kids clothing franchise); Clothes Mentor (women’s designer clothing franchise); Device Pitstop (electronics repair and resale franchise); and NTY Clothing Exchange (teens and young adults clothing franchise).

NTY Franchise Company specializes in working with entrepreneurs at every stage of establishing one of these five successful upscale resale branded concepts including: Research and Discovery; Business Planning; Store Location and Leasing; Financing; Design and Build-out; Point of Service Software and Systems; Coaching and Managing; and Marketing.

To learn more about NTY Franchise Company — and the lucrative opportunities in upscale resale franchising — explore our main page or feel free to just give us a call! (952)-923-1223