“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.
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.
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.
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!
Every 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.
Like all of us, I love to trek through antique malls, thrift shops and consignment stores. It’s all about the hunt for hidden treasure, right? But when I enter a store numerous times and see the same merchandise at the door, I question whether there’s any treasure left. After all, if the same items sit week after week or even month after month in the same spot, no one must be shopping there anymore. Slow-moving consignment inventory hurts more than your sales numbers. If you want your shop to look fresh, busy and popular, you have to keep your merchandise moving. Here are 4 ways to clear it out.
Inventory can become stale if it sits in one place too long. Sometimes, all it takes is moving merchandise to another location for it to even be noticed. If you must keep it in the same place due to size, weight, etc., create new signage, lighting or redesign a backdrop. Anything that brings new attention to old inventory is a must. If possible, shift slow-moving consignment inventory closer to the door for maximum exposure.
No store wants to purposely give product away. However, if you have merchandise that simply isn’t moving, it’s time to pair it with other items. By offering a “Buy 1, Get 1 Free” deal, your sales margins will be lower, but you’ll be moving inventory. Shoppers love the idea of getting something “free” too. Bundle an older item with new merchandise to give it a fresh look. Plus, reduce the price for the package and customers will love you for the deal you gave.
Traditionally, most consignment stores work on a 30, 60 or 90-day pricing period. By the end of a designated time, merchandise is automatically reduced. Sometimes, particularly slow-moving consignment inventory needs special sales incentives. Be sure to randomly schedule special sales so your customers aren’t waiting to make a purchase. Read 17 brilliant ideas for inventory reduction for some fun quick sale ideas. A pop-up or flash sale is exciting, but if you don’t have a strong social media following, it will flop. Be sure you’re prepared with outdoor signage (read Consignment marketing on a tight budget for some guerrilla marketing tactics), social media posts and an email blast when the need for a special sale arises.
When all else fails, it may be necessary to donate slow-moving consignment inventory. If you’ve already marked items down through your existing discount schedule and they still haven’t sold, it’s time to hand it over to a charity. By donating, you’ll not only clear your sales floor, but you’ll receive a tax deduction as well. Be sure you choose an IRS-qualified charity. The amount you can deduct can change according to how you’ve set up your business, so check with your accountant to find out what is available to you. Make sure your rules for donating are clearly stated in your consignment contract.
Everyone’s shedding their indoor and outdoor holiday decorations and according to most New Year’s resolutions, they’re hoping to shed a few pounds too. Your shop needs to do the same. It’s Spring after all … at least in the eyes of every shop owner. Although you don’t want to make drastic sales a regular habit, a twice or 3 times a year clearance sale is very acceptable. I’ve put together a list of 17 brilliant ideas for inventory reduction of that heavy winter merchandise. Okay, I can say they’re brilliant because I put the list together. Pick one or two and clear out the old to bring in the new.
This is your best non-sale idea for inventory reduction. Try totally redesigning the look of your shop. Move racks, rounders, shelving units or anything else that will make your shop look and feel completely different. It’s amazing how just moving merchandise from one end of the shop to the other can make it more attractive to a buyer.
Hand out a grocery bag, laundry bag or a specially printed store bag to every customer that comes that day. Sell your merchandise at one price for the entire bag or bring in a scale and sell it by the pound.
Did you know that January 13 is Make Your Dream Come True Day or that April 7th is No Housework Day? The internet is filled with websites that list crazy, fun “holidays” that can be celebrated with a special sale or a whole event. Take one of the really crazy ones like Hoodie Hoo Day (Feb. 20th) and any shopper who comes in and says, “Hoodie Hoo” receive a special discount.
Reduce the price of your winter merchandise weekly or even daily so that by the end, whatever you have left is down to the lowest possible price. I encourage you to discount deeply the first time around. If the idea is to move merchandise quickly, start the “auction” at 40 or 50% off.
Invite only your best customers to shop the night before the regular sales event begins. Provide beverages and snacks; teach a class on furniture painting or scarf tying and offer them a deeper discount on all sale merchandise for that evening only.
Collect a bevy of diy ideas and offer them along with merchandise at a discount. For instance, offer diy ideas for turning a mirror into a tray; sweaters into mittens and leggings or jars into a decorative craft caddy. There are literally hundreds of ideas to use secondhand items for upcycling. Make a night of it and help your customers see the potential.
Each week from now through February, choose particular items that receive an extra discount. For instance, every sweater or lamp is an extra 25% off. This is especially good when you want to avoid the idea of a clearance sale. Getting a deal sounds much better than buying an item during an Inventory Reduction Sale.
Sometimes customers just can’t see the potential in putting separate items together. Showcase merchandise in a tableau creating an instantly warm and cozy feel. Whether it’s a chair, table, lamp and ottoman or a sweater, scarf, boots and hat…help your customers to envision the whole not just the individual. Then offer a special deal when they purchase the entire group of items.
Use attractive boxes or baskets and put together fun surprise packages. Don’t completely fill them with all of your unwanted items though. Be sure to add vintage knick knacks, colorful scarves, fuzzy mittens or unusual serving pieces. Put together all red or pink items and make mystery Valentine’s Day baskets. With lots of paper shred for filler and a cellophane wrapper, customers can see a little of what they’re getting, but not all.
There’s no better way to double your inventory reduction than by offering a Buy One Get One Free or Buy One Get One 1/2 off Sale. It’s a great way to move particular merchandise fast. Use a BOGO sale to move slow-moving sizes, colors, overstocks and even totally unrelated items.
Some customers just like to dig (I’m one of them). They like nothing more than to dig into a huge basket, tub, bin or box for the remaining items that are deeply discounted. Often, shops will have a special area in the back for sale items, but for an inventory reduction sale, make sure it’s right out front.
In seasons such as winter and summer, the weather can often be extreme. Choose a measuring point (i.e. any day below freezing, snow over 6″, sunny Sundays or windy Wednesdays) and then offer a discount accordingly. For instance, discount any item in your shop by an additional 10% for every 5 degrees below freezing. On a 20° day, customers would receive an extra 20% off.
The end cap or space at the end of an aisle is some of the most valuable real estate in your shop. Let each of your employees take an end cap and merchandise it with items that need to move quickly. At the end of the week, see which employee’s end cap sold the most merchandise and offer the winner a prize.
Give your sales staff the ability to give special discounts to shoppers during a specific week. Print up coupons that say “You choose your sale price up to X amount.” Of course, the customer will choose the X price but that was the discount you were prepared to offer anyway. It provides an incentive for an immediate sale (make sure the coupon has a place for the end date) and it gives your employees a chance to build relationships with customers.
Advertise a 60% off for 60 minutes one day only. Clearly state the day, hour (i.e. 11 am to 12 noon) and the 60% savings in all of your marketing. Make sure you print posters for your windows too. Close the store for the morning of the sale so that a crowd potentially builds outside your store. On the hour, open the door and let the sales begin!
Create slips of paper with a variety of discounts on them. Let customers choose a slip of paper at the register which will determine the discount they’ll receive. Punch up the excitement by putting one slip in the fishbowl with the word FREE on it.
Donating excess inventory to a charitable organization can offer certain tax benefits. If you’re not able to take advantage of the tax write-off, consider donating your items to an event that might also offer additional marketing opportunities in exchange for your merchandise. No matter what, the community goodwill that is generated from donations is always a plus.
Overall spring cleaning of your store is a must, read 6 tips for consignment shop spring cleaning.
Need help managing your inventory? Let SimpleConsign show you how easy it can be.
Despite your best efforts, you won’t be able to sell everything on your showroom floor. In order to keep inventory moving, as well as preventing the store from becoming cluttered, it’s crucial you have a system in place for handling unsold, obsolete and expired items.
Although it’s difficult to let go of unsold inventory, you have to take a hard look at what is worth selling. As a consignment shop owner, when you donate consignment items to a charity after they’ve expired you keep your store looking fresh and uncluttered. In some states, you may even be able to use the donations as a business tax deduction.
To reduce frustration and confusion, have a written donation policy in place. If you choose to give your consignors the option of either having their unsold pieces donated to charity or returned to them, make sure you indicate their choice on their consignor contract. You should also implement a pick-up policy that outlines a specific waiting period. For instance, any items left unclaimed after 30 days past the end of the contract, will not be returned. SimpleConsign offers our convenient Consignor Central that does all the notifying of consignors for you.
It’s also important to donate to programs that will not resell the items. This undercuts your profits, while boosting your competitor’s revenue. Instead offer the items to charities that can really use them.
Hold A Charity Sale
Another way to donate consignment items, is to hold an annual charity sale. The sale allows shoppers to name their price or fill an entire bag for a small fee. The proceeds are then donated to the charity of your choice. You can even tie the event to a canned food or diaper drive.
Whatever you choose to do, make sure your shoppers are aware of your support for these organizations. Try, whenever possible, to support charities in your local community. The good will generated will make everyone appreciate your store that much more.