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How to Start an Online Thrift Store?

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Yuri Musienko
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A thrift store is an enterprise, which is selling second-hand goods and raising money for a charity. This is also a great idea to use it when launching your online business. Today we’re going to talk about how to make a reality of this idea by starting your own online thrift store.

Form of a trade organization

When thrift stores only came around in England in the late 19th century, they used to work under a simple scheme: people brought unnecessary clothes there; then a seller sorted, cleaned, and sold them at reduced prices. All income was given to charity except for the store expenses.

Businessmen have evolved over time, who have used this scheme to make money by keeping a small fraction of the income. Besides, they’ve also started reselling second-hand products and became ordinary stores, which give a part or all of the income to charity.

Modern online thrift stores use the same model or just sell second-hand products and spend little money on charity. Form of such trade organization can be one of several options:

  • Selling high-quality products of middle and/or high-level segments with a fixed price per unit and preliminary value estimation of each item. This form is used both by big platforms such as Duds Because or Monarch Thrift Shop and by private sellers, who sell clothes via such apps like Instagram, Craigslist, Amazon or Facebook.
  • Selling second-hand items by weight with a fixed or flexible price (the highest price is on the day of delivery and thereafter it reduces every 24 hours). The fixed price is most often used by intermediaries, who buy clothes in the USA or Europe and resell them to the developing countries, where the clothes are sold using flexible pricing;
  • Mediation in P2P deals. Online store works as a bulletin board, due to which the users sell unnecessary things. The platform charges a low interest for its services, which goes to charity fully or partially. There is an option of choosing a specific charity objective on some platforms.

Niche and categories of second-hand products

Trading niche. The most widespread option is selling clothing and shoes. Such products are easy to put a price on (you can look at the label or look for the price on the internet), store and transport (there’s no need for special temperatures and protection against shaking, etc.). Also, there’s always a demand for such products. Besides, you can tell right away what condition the clothing and shoes are in by only looking at them.

People usually sell everything at once or choose:

  • women’s clothing — dresses, blouses, shirts, skirts, lingerie, costumes, turtlenecks, cardigans, outerwear, pants, etc;
  • men’s clothing — pants, shorts, underwear, shirts, sweaters, costumes, ties, turtlenecks, t-shirts, parkas, coats, etc.;
  • kids’ clothing — clothing for babies and children up to 15 years old.
Each category can be segmented even more. For instance, Duds Because is specializing in designer kids' clothing of the middle and high-price segments. Patagonia Worn Wear is solely selling hiking clothing and equipment. Poshmark is selling stylish clothing for youth. Bulk Vintage Clothing is specializing in vintage clothing.

Specialization is an important thing because when buyers are looking at clothing or shoes on the internet, they usually look for something more specific than a clothing store or a production brand. For example, users search for something like «blue business blouse» or «running shoes». The more specific the user’s query (niche) is, the more effective and cheap the marketing strategy will be.

Product quality. While searching for second-hand goods on the internet, the users might wonder about their quality. The products are usually divided into the following categories in clothing and shoe stores:

  • Quality products or popular brands in perfect condition. They have no serious damages and defects. The share of new products is small — less than 10%.
  • High-quality new or almost unused original clothes. The price is relatively high as for second-hand goods because 90% of the assortment is from warehouses or stores; only 10% is given by people.
  • Practically unworn fashion clothes. There sometimes are rare designer models and exclusive things. The products are almost new.
  • 1st Quite high-quality fashion items with no or nearly invisible defects. Damages are insignificant and usually easy to repair (scratches, scuffs, discoloration). There are almost no new clothes.
  • 2nd Outmoded models with visible signs of wear or defects: broken accessories, bleak shades, the clothes are stretched out. There are no new products.
  • 3rd Defective or completely worn-out clothes, which aren’t wearable anymore. They are selected for other needs; for instance, to make a duster or technical textile.
  • A separate category of goods, which aren’t second-hand, but they’re often sold in thrift stores. Stock includes unsold clothes from early collections from warehouses and stores, which are sold with a significant discount and often they go with all labels and in the original package.
Second-hand products are also divided by the aspect if they were sorted or not and how the products were collected: people have tossed clothes in the container or they have given them to the store worker. If the products were collected from the containers, they’re sold in kilograms or bales. If they were collected by hand, they’re sold separately with a fixed price per unit and value estimation.

Company’s legal structure

During the registration of a thrift store in the USA, there’s an opportunity to choose between charity and nonprofit businesses. If you want to simplify the paperwork, choose a nonprofit organization 501(c)(3).

Here are the advantages of having a nonprofit status:

  • People, who donate their clothes, can reduce their taxes, which may well increase how much they donate;
  • A nonprofit organization is more credible in people’s eyes, which increases the number of donations and purchases;
  • This format of entity provides proper separation between charity and personal finances.
To get a 501(c)(3) status, you need to submit relevant forms in IRS and register your business as a nonprofit organization in your state. After that, you can apply for getting a 501(c)(3) status and it will be considered within three months.

If the answer is positive, your business will obtain a provisional 501(c)(3) status and tax exemption if you submit a Form 990 (a report of the money taken in and the money spent on behalf of the charity) and fulfilling the IRS requirements.

After three years, you will be granted a permanent 501(c)(3) status if you’ll be running a nonprofit organization properly and if the IRS will be satisfied with financial records. Otherwise, IRS will withdraw your 501(c)(3) status.

A display window of your online store

Selling on marketplaces. The simplest option is to sell via social media accounts or websites like Amazon, eBay, and Etsy. Under this approach, you can start a business right away and you won’t spend a cent. The disadvantages of this option are: the reach is limited to the audience of the marketplace or social network; you can’t stand out amongst the competitors; marketing opportunities are scaled back.

A store based on an e-commerce platform. The majority of thrift stores work on Shopify because it's very easy to launch your platform with its help and to implement a lot of useful features to it; for example, payment or inventory management.

But this isn’t the only option – here’s a comparison of the most popular platforms for today by Ecommerceceo.com:

Your unique online store. People turn to that option if they’re not happy with the features and design of e-commerce platforms, which happens a lot among the market leaders because other options have problems with scaling up. Besides, launching an online store based on e-commerce platforms implies a monthly fee, which is unprofitable over the long run.

Here’s the estimated cost of your trading platform development:

Search and purchase from suppliers

How the clothes reception from people on ThredUp is organized

The reception from people can be organized following the example of the Clean Out Kit service on the ThredUp service: people submit an application on the site, the platform sends them a Clean Out Kit (a big branded bag), the users fill it with unnecessary clothes and send it back. ThredUp pays for shipping both ways. This approach attracts users with its simplicity, convenience, and cost-effectiveness.

In case of buying from second-hand things suppliers, you either go to them and choose things you like or you just order large lots with a fixed fee for a kilogram, bag, or container. In addition, the owners of online thrift stores often look for cheap clothes on marketplaces (Amazon, eBay, Etsy, Craigslist, and other) and resell them on their websites.

Here are several well-known wholesale suppliers of second-hand things:

Storage unit and equipment

When you first start, a cupboard, spare room, basement, or garage work fine as a storage unit. However, be prepared that your significant other, parents, roommate, and even a cat probably won’t take too kindly to having your whole place overrun with stock. To avoid it, you better rent a self-storage unit beforehand. Here’s how much you’ll pay for rent in the USA:

Data are taken from lifestorage.com

Apart from the storage unit, you also need a place and equipment for the photoshoot. The most important thing is a good light. To take photos, you need a full-frame bridge camera with a good lens or a smartphone with a high-quality camera. Additionally, you need diffused daylight equipment. Camera with a lens costs $150-300 (you can buy a second-hand one), light equipment costs $20-50.

Merehead does professional development of Online Thrift Store. If you have questions, contact us for a free consultation.

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