4 tips to save on consignment inventory costs

March 13, 2019

Consignment inventory costs can easily eat up profits

“Open a consignment store!” they cheered. “It can’t cost you much,” they encouraged. “After all, you’re just selling someone else’s stuff,” they grinned. Yeah, right. As you know, that’s a consignment myth. Consignment inventory costs can easily push you into the red. Here are a few tips to help you manage those costs.

1.) Reduce storage costs

One of the hidden costs in inventory management is the rent or lease you pay for storage space. Even if you don’t lease out an entire warehouse, separate storage units can rent anywhere from $40 to $100 a month. Of course, the larger your merchandise is, the more you pay for storage. According to Entrepreneur, “As a rule of thumb, office and storage spaces take up 10 to 25 percent of the total floor area.” I can’t imagine using only 10% of any store for storage. Another myth exposed! Tighten up your storage space with a vertical design. Use the very top to store seasonal merchandise and decor. Create a written storage system, label the stockroom clearly and require everyone to stick to the plan. Keep lighter items (clothing, accessories, etc.) up high, off of the floor, and the heaviest items at the bottom. Make tidying a weekly chore.

2.) Use Vendor-Managed Inventory (VMI)

Many consignment stores today are offering sections of their sales floor for VMI. The benefits for you and the vendor are significant. You save on administration and operating costs because the vendor is responsible for replenishing stock. Conversely, the vendor gains exposure to a whole new sales market. Your target customer is already pre-disposed to buying unique, one-of-a-kind items. Find those distinctive local jewelry makers, artists or furniture painters. Build close relationships with them so you can share the history of their products. Make sure you sign an exclusive contract. Use reports to show which items are most popular and provide real-time sales data so they’re never behind on inventory.

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3.) Standardize pricing with a Price Book

As you know, time means money. Save on consignment inventory costs by standardizing your pricing with a Price Book. SimpleConsign recently added our Simple Price Book. It lets you grade your brands; set price levels within categories; specify items you don’t accept and use reports to make adjustments as needed. You customize it based on the requirements for your store. When literally anyone can add and price inventory, the process becomes even faster. For more information about our new Simple Price Book, fill out the form at the bottom of the page!

4.) Donate items

Donate consignment items for a possible tax break from Uncle SamEvery year, my husband and I donate bags of clothing and building supplies to either Goodwill or Habitat for Humanity. I keep a very specific record of the donated items and check the valuation guides to add prices. Every little bit helps when it comes to paying Uncle Sam. The same is true for your consignment store. Only charitable organizations that are listed as 501(c)(3) organizations will qualify you for a tax deduction. Not surprisingly, the IRS offers a little information on the subject. Quickbooks also provides some advice for corporations vs. sole proprietors. A few years ago, I put together a list of organizations that would love to have your donations. Read 15 ways to donate consignment items and declutter. If you choose to proceed, make sure you’ve gathered all of the information required for tax purposes and consult with your business accountant.

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Deb McGonagle

I have been a writer for various forms of marketing for over 40 years. I've written my share of radio and TV scripts, magazine and newspaper ads as well as direct mail brochures and newsletters. Currently, as the Marketing Director for Traxia, home of SimpleConsign software, I've moved into blog posts, eBooks and website text. It's been an ever changing and ever challenging journey but I've loved it all along the way.