5 common mistakes consignment shops make

December 6, 2017

This article is updated from the original post in September of 2014

Do your homework to avoid these common mistakes consignment shops make

Although no obstacle is insurmountable, there are common mistakes consignment shops make that may cause your business to fail. Here are 5 of them.

#1) The most common mistake consignment shops make…choosing the wrong location

It is all about location, location, location. Knowing the demographics, like age and income of possible shoppers in your area, is key to choosing the right location. Statistics show that nearly 75% of your business will come from the residents in your store’s immediate neighborhood. Don’t choose your location based on price alone. Consider the parking and traffic patterns. Take a close look at other businesses nearby. Is there a well-known restaurant, store or gym around the corner? Look for businesses that will draw foot traffic. Read 5 steps to a successful consignment business to learn more about choosing the right location. If you find yourself in the wrong location, now is the time to make the change. Don’t wait. Go where your shoppers are.

#2) The wrong merchandise for the right market

You’ve chosen your location, but now you have to fill it with merchandise. Incorrectly managing your merchandise is one of the common mistakes consignment shops make. Too little merchandise and you look like you’re going out of business. Adding too many items to your sales floor will also hurt you. Shoppers don’t want to fight racks and hangers to view your merchandise. Poorly constructed or flawed items that make it onto the sales floor will damage your reputation. At least twice a month, review your inventory for expired products. Move items that aren’t selling to a sale area in the back. Start having a critical eye for what you will and won’t sell in your shop. Read How to manage your consignment inventory. Review your sales data and see who and what are your top sellers.

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#3) Pricing merchandise incorrectly

You know the struggle, if you price the merchandise too high, you risk losing sales. If it is too low, the business will struggle to make a profit. Generally, clothing is tagged 30 percent off the original retail value regardless if the item was worn or not. Follow basic pricing rules like ending with the number 9 (as in $9.99). Don’t make your discount schedule too difficult to understand. Shoppers tend to follow the path of least resistance when it comes to figuring out price, so make your prices as understandable as possible. Offer merchandise in a wide variety of price ranges. Then, there is something for everyone. If your merchandise is priced right, customers will have a sense of urgency to buy because they know it won’t last long. Read 4 tips for setting correct price points.

#4) Unwritten policies

It’s critical that you develop concise, yet detailed written policies for consignors and employees. Not sticking to those policies is another one of the common mistakes that consignment shops make. Determine how long an item will be on the sales floor before a price reduction. Tell your consignors when they will get paid (typically at the end of the month) and how (cash, check, store credit). Let them know what will happen if their items don’t sell. Offer an intake sheet that outlines the contract and requires a signature. Have your consignors fill it out and list every item accepted into the inventory. Every employee and consignor must clearly understand how the intake system works. Read How to tweak your consignment acceptance policy. You’ll also want to develop brochures and a FAQs section on your website listing your policies. For your employees, make sure you have a clear employee manual. State your policies on vacation and sick days, social media use and such things as shoplifting, etc.

Not counting the cost is a common mistake consignment shops make#5)  Not counting the costs

Decide immediately if your shop is a fun, enjoyable hobby or you intend to truly build a business. That decision will make a difference in how you plan. Just because you like to shop, know a good bargain when you see one and have a basement filled with stuff, doesn’t mean you’re equipped to open and run a consignment shop. It’s been suggested that a new business owner have at least 6 months of living expenses set aside ahead of time. Problems can arise, but having a safety net not only keeps you sane, it also relieves a lot of pressure. A solid business plan is essential no matter where you are in the process. Maybe it’s time to pull it out again and take another look. Read How to improve a mediocre resale business plan.

It all seems like common sense, doesn’t it? However, in the midst of making exciting decisions for a new business venture, we often lose sight of the practical aspects. It’s never too late to re-evaluate your choices though. Do a little homework and put yourself back on the right track.

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 Coordinator 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.