If you’ve resold used items through Craigslist, eBay, or even by holding a yard sale, then you’re already aware that even used merchandise can still bring in some significant income. Starting a thrift store can allow you to put your reselling talents to work at a larger volume. If you’re resourceful, aware of how to evaluate and price good merchandise, and ready for the responsibility of owning a retail store, then it might be time to think about opening a thrift store of your own.
Thrift stores resell items like clothing, furniture, and home goods. They offer a wide variety of inventory that is constantly changing as new items come in, and are known for having good prices. Most of the inventory that you’ll find at a thrift store is secondhand, though some stores stock closeout and clearance items that they’ve purchased from other businesses. While some thrift stores are associated with and benefit a charity, others are operated independently as for-profit businesses.
Thrift stores appeal to shoppers for many different reasons. Some shoppers are drawn to the stores because of their low prices. Others enjoy the ability to browse and discover new items. Thrift stores also support the up-cycling movement, allowing shoppers to find new ways to put old items to use with an eco-friendly benefit. Some thrift stores specialize by offering mainly furniture, children’s clothing, or other items that appeal to certain types of shoppers.
According to IBIS World, the used good store industry experienced 3 percent annual growth from 2014 to 2019. During that time, the number of businesses increased to 84,960, and the industry’s employment also grew to 296,711. In 2019, this industry is expected to bring in $20 billion in revenue. Currently, the Winmark Corporation and Savers, Inc. hold the largest industry market share.
Traditionally, used good and thrift stores enjoy higher sales during times of economic downturn, since customers are more likely to try to buy used clothes and supplies at a discount than they are to buy new items. However, while the disposable income increased from 2014 to 2019, this industry still saw increased sales and profits. A change in fashion trends has prompted many people – including young consumers – to buy used clothing, resulting in the increased popularity of thrift stores.
According to Thred Up’s 2019 Resale Report, millennials and generation Z individuals are the driving force behind the thrifting movement. Shoppers who are 18 to 37 years old are embracing thrifting 2.5 times faster than shoppers from other age groups. An increased focus on sustainability and ethical fashion is partially behind the focus on thrift store shopping, and it bodes well for the future of thrift stores: Secondhand operations are predicted to double within the next 10 years.
To keep up with the changing demographic of thrift store shoppers, thrift stores are increasingly meeting these shoppers where they’re most comfortable: Online. Thrift stores, like Goodwill, have established websites and online auction platforms where shoppers can buy online without ever stepping foot into the store. Additionally, reselling apps like Poshmark have also evolved and gained popularity as shoppers become more determined to seek out deals on used goods.
According to the Association of Resale Professionals, clothing, cookbooks, furniture, jewelry, kitchen appliances, sporting gooeds and vintage items are strong sellers for resale shops.
Most thrift stores will target a broad audience. While generation Z and millennial shoppers make up a large portion of the thrift store market, consumers of all ages shop at thrift stores. Some thrift stores may adopt a specialty, like offering affordable children’s clothing or used furniture, so their markets may differ slightly. In most cases, though, thrift stores will target shoppers who are looking for a good deal on used clothing, accessories, furniture, or other household items.
Skills, experience, and education useful in running a thrift store
Starting a thrift store doesn’t require a business degree, but certain skills and experiences can make the experience easier and more successful.
Awareness of item values. Inventory needs to priced fairly in order for it to sell, and this can be one of the major challenges of owning a thrift store. Because inventory can be so widely varied, a store owner needs to have a sense of individual item values and of the current market. Familiarity with certain brands and products can make it easier to price items fairly.
Awareness of trends. An awareness of trends is also important in selecting inventory that will appeal to customers. A store owner who is aware of what is in demand can seek these items out and prominently display these items to draw customers into the store.
Retail experience. Previous experience in the retail industry will serve a thrift store owner well, since they’ll have a better idea of the tricks and challenges of managing a store.
Management experience. Thrift stores require multiple employees, so any experience in hiring, training, and overseeing employees will be valuable for a store owner.
Organization skills. Organizational skills are also important in managing inventory and sorting items so that customers can find what they’re looking for.
Customer service skills. Good customer service can help to gain and retain returning customers, and a store owner who is great at customer service can teach employees those same skills.
Cost to Start a Thrift Store
Many factors will affect the exact cost of starting a thrift store, including the location and size of the store’s space. Plan to spend between $20,000 and $30,000 to start a smaller store.
Common startup costs include:
- Building renovation costs
- Furniture like shelving, checkout counters, and chairs
- Cash register
Steps to Starting a Thrift Store
Step 1. Write your Business Plan
After coming up with the idea, the next step in starting your business should be to write a business plan. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Step 2. Form a Business Entity
A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from which include the sole proprietorship, partnership, corporation and LLC. Each type of entity has its own pros and cons such as liability exposure, costs and administrative requirements.
Related: Comparison of Business Entities
Step 3. Select your Location
While thrift store could benefit from being in a prime, high-traffic location, in some areas it’s cost prohibitive to do so. Most retail stores see better traffic when locating close to shopping centers and major roads.
Rent will vary based on the store’s size and location. Rent costs of building in high-traffic retail locations will be higher because of the amount of walk-in traffic they could bring in. It’s important to find a property that offers enough space for the store at an affordable rate that will allow the business to make a profit after paying its expenses.
Related: Choosing a business location
Step 4. Apply for Business Licenses and Permits
There are no licenses required specifically for thrift stores, however there are local, state and federal registrations depending on where the business is located such as a sales tax permit, resale certificate, Employer Identification Number, and occupancy permit among others.
Resale shops do have regulations under the Consumer Product Safety Improvement Act, which requires stores to adhere to guidelines when selling certain products.
Step 5. Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a thrift store is another. Funding to start a thrift store can be difficult. In order to get a loan, the borrower(s) will need to have good credit and be able invest 15-25% of their money towards the total start-up costs.
Step 6. Get your Marketing Plan in Place
A thrift store will need to market to bring in its initial customers, as well as to draw in customers once the store is established. Marketing techniques include developing a website, using social media, and even advertising in print or on the radio. The cost of marketing will depend on the technique used. Thrift store owners who can do some or all of their marketing can save costs on this ongoing expense.
Because of the rise of competition online, many thrift stores are launching their own website to sell their items to a wider audience.
Step 7. Get Insurance
To be fully covered, a thrift store will need multiple types of insurance:
- General liability insurance protects the business in case customers are ever injured while on the property, and it can cover expenses like medical bills or legal fees.
- Commercial property insurance can cover things like the cost of the building and the value of the inventory in case the store is ever damaged by a fire or other event.
- Workers comp insurance helps to cover the business in case an employee is ever injured while on the job. It can cover expenses like lost wages or medical bills.
- Commercial auto insurance covers a vehicle that is used for business purpose, and can pay for expenses like vehicle damage that could occur during an accident.
Insurance policies vary in cost depending on the value of the store’s building and inventory, the store’s location, and how many employees need to be included on the policy. To get the most accurate idea of what to budget for insurance, request quotes from multiple companies and compare different factors like premiums, coverage limits and exclusions, and deductibles.
Step 8. Hiring Employees
A thrift store will need at least a few employees to operate. According to Indeed, average hourly rates for the following thrift store employees are as follows:
- Cashier/Sales: $10.42
- Driver: $15.52
- Sorter: $9.57
- Supervisor: $13.93
In addition to budgeting for salary expenses, a store’s budget also needs to include workers comp insurance, paid time off, and health insurance contributions for employees.
Related: Hiring your first employee
Every state has specific requirements and regulations when starting a business. Select your state below to find the guide to starting a business in your state.
Amazon has several books that go into detail on starting and running a thrift store:
How To Start a Thrift Store or Consignment Store: Be a Success and Make Money!
2019 Thrift Store Reselling Secrets Revealed for Maximum eBay Profit (Free on Amazon Kindle Unlimited)
Consignment from Home: A Step-by-Step Guide Written from Two Decades in the Retail Trenches
How much can you potentially make owning a thrift store?
Owning a thrift store isn’t a get-rich-quick venture, but you will have the satisfaction of helping shoppers to find great deals on items that they need. Michelle Jackson, owner of a thrift shop, wrote on ToughNickel that thrift shop income averages $100 to $200 a day once stores are established. Thrift shops in their first year of business can expect to do closer to $50 per day.
These figures will vary according to a thrift store’s location, clientele, marketing, quality of merchandise, and more.
Things to consider before starting a shoe store
Thrift stores can be operated as non-profit or for-profit businesses. If you plan to take the non-profit route, you’ll need to operate the store according to the laws that govern non-profit charities, and that can make for a lot of paperwork. You’ll also need to donate a percentage of your profits to charity and donate to a charity that relates to the items being sold in the shop. However, operating as a non-profit can make it easier to get donated inventory.
If you operate as a for-profit business, you may need to get creative in appealing to people for donations or in finding good deals on inventory that you can purchase. This can take time, leaving you with less time to focus on running the business. There are benefits and disadvantages to each option, so you’ll need to think carefully about the type of business that you want to create and the option that works best for you.