Consignment stores profit by helping people to sell their used items – this is a great business model, which can make you a great deal of money if you do everything right. Our article will reveal a detailed guide to starting an online consignment store. We’ll tell you how to identify your niche, how to create a website, and how the top consignment stores promote their business on the Internet.
A store’s business model
Consignment is an arrangement, in which one party (a user) gives another party (a store) the goods to sell. The user is still an owner of the goods until they’re sold. The store keeps a part of the sales revenue for its services. If the goods weren’t sold during the pre-specified time, the store would return them to the owner.
This is quite a simple model, which may be used to sell anything – starting with real estate and ending with paperclips. Nevertheless, the majority of ordinary people experience it only when selling second-hand items. That is why consignment stores are usually confused with thrift stores. Notwithstanding, they’re not the same thing – there are major differences.
Monetization. The main revenue generator of an online consignment store is a percentage of each transaction, which is concluded at its mediation. Nevertheless, it’s not the only possible source of profit for such a platform. Apart from it, you can also use other monetization methods:
- Payment for listing. It’s most often implemented in the sale of expensive items or to avoid spam with ads; for example, when competitors hire people, who publish thousands of similar and/or fake ads on your platform to wean people off of your store.
- Integration with other services. For the most part, it’s the integration with postal services. However, there might be other options: repair services, insurance, local business, financial services (loans), etc.
- Promotion of separate goods on the platform due to a brighter ad or a place at the top of the listing or in the recommendations. Besides, new online stores oftentimes use Google Ads.
A niche of a consignment store
The choice of a niche plays a pivotal role in any online consignment store since it’s quite a size limited market, which happens to be bound to location. Market size is limited because you’ll collect the products not from suppliers or factories, but ordinary people. Only a small percentage of people sell unnecessary items in consignment stores.
For instance, if your store specializes in selling the used books, then you’ll probably have a lot of sellers and buyers. However, if you choose a narrower niche; for example, books about the Great depression or pin-up jackets, this store is unlikely to be successful because of the small size of these markets.
Besides, due to the fact that you’ll receive the goods from people, you should keep in mind that they tend to search for the platforms in their area or country to speed up and cheapen the delivery of these items to the online store. No one would send pants for $10 to another country even if they were guaranteed to be sold there.
Consequently, when choosing a niche you should follow two rules. Firstly, you should sell a quite popular product, which oftentimes is sold in consignment stores and thrift stores. Secondly, such products should be popular in your city or country (you shouldn’t sell the used books in Spanish in Russia or old skis in Egypt).
You can find a niche in the following ways:
- Specialized websites. You can find many useful insights about the market including data on popular trends, regulations for company registration, and marketing on such platforms as NARTS, TGTBT, Consignment Pal, and Auction Bytes.
- Analytical tools. Google Trends and Google Keyword Planner will help you analyze search queries in the needed region or country. SaleHoo Market Research Labs, Spocket, Jungle Scout, Sell The Trend, Niche Scraper and their analogs will help with the analysis of sales and competitiveness of the product.
- Studies and surveys. A lot of consulting companies, institutions, and marketplaces research consumer behavior including second-hand things, which people are willing to buy/sell. For instance, such information can be found on Statista or in the specialized thredUP section.
A showcase of your online store
. Many businessmen, who are selling second-hand goods, started with apps like Instagram
, Facebook, and Twitter because it’s easy, fast, and, most importantly, free. It’s enough to create an ordinary account and post pictures with products for sale and the online store is ready for work. Whereby you can run an advertising campaign right away or find specialized communities for them to repost your information about selling second-hand items.
E-Commerce platforms. Due to such services as Shopify, BigCommerce, WooCommerce, Magento, and their analogs, you can start an online store quite quickly with payment services, marketing tools, and other useful features connected. You don’t need to have technical skills to do so – it’s enough to pay for a subscription and select a template with necessary features.
Unique website and app. To start your online store is often the best solution because it makes it possible to implement any design ideas and add those features to the site that you need (and not buy them as a package as in the case of e-Commerce websites). Besides, only the creation of your website of an online consignment store will allow scaling this business up to the level of Amazon or eBay. Other options are not designed for really significant traffic of users.
Large marketplaces. You can arrange the sale of items of the consignment website like OLX, Amazon, eBay, LetGo, Craigslist or other marketplaces. It’s quite simple and more convenient than the sale via social networks. That said, you’ll need to give a part of your revenue to the marketplace (5-30 %). Besides, it’s almost impossible to stand out on these platforms otherwise than cutting the prices down.
How to attract sellers. The main marketing challenge of an online consignment store is to attract people, who will agree to sell their items via this platform. And the problem is not only to get in touch with the necessary target audience but also to make people trust a store, which was just opened. After all, they need to send their things to a stranger with no guarantees.
This problem may be solved in several ways:
How to attract buyers
- The simplest way is to start with selling things of your family, neighbors, friends, colleagues, and other acquaintances. You can persuade them easier especially if you’ll be doing everything by yourself and they will only bring you their stuff (although that’s not necessary either). Besides, this makes it possible to test a concept, a sales scheme, and a website/app of the online store without any major risk.
- Another option is a guarantee by a famous person or an organization; for instance, a bank, a charity fund, or other organization. This might be both a simple guarantee and a monetary guarantee (the store will pay the guarantor if it breaks the terms).
- The last way — is an assurance by way of caution money. In this case, the online store and the seller agree to reserve the goods’ sales price in the bank account or another payment solution. The easiest way to do it now is smart contracts.
. As soon as you get 5-10 items for sale, you can think of customer attraction. People usually do it with the help of ordinary marketing tools starting with advertisements on Google, Facebook, or Instagram and ending with SEO and influencer marketing. In so doing, they always bet on bright and high-quality pictures of the items, which you should take by yourself.
The rules of good photos for a consignment store are the following:
- You can’t distort the colors, texture, and sizes. Aspiring sellers of second-hand goods usually do that wishing to increase the attractiveness of the item. However, this is wrong and irrational because this might help you sell the item but its buyer is unlikely ever to buy something from you again. He might also write a bad review of your online consignment store.
- Use a contrasting background. A white background will do for most cases, but sometimes you should think of options. You can find tips on websites that are dedicated to photography, web design, and marketing.
- Use a lot of light. A well-lit product allows taking a good picture. You better use natural light, but if it’s impossible, then turn on as many light sources as possible and hold them close to the item not to distort its form.
Warehouse and equipment
Choosing a warehouse.
As far as you’ll accept the goods from the sellers, you better find a storage unit close to your house in advance. You need to select the place according to the store’s niche. For instance, optimal conditions for the clothes: temperature — +20-25 °C (about 75 ℉), relative humidity — 55 %. Interestingly, the books require +20 °C (68-70 ℉) and 40-50 % relative humidity.
Here are the average rental costs in the USA:
Choosing the equipment
. To start a consignment store, you’ll need the following things: a washing machine, an iron and ironing board, a camera (smartphone), and studio light equipment. As a rule, everything aside from studio light equipment ($150) is in every household, so you can save with this at the beginning. However, as soon as you reach a more or less impressive turnover, you won’t be able to go without a professional washing machine ($1000-3000), a steam press ($200-600), and a professional camera ($500).