How to Start a Consignment Store

Selling on consignment is selling someone else's merchandise that you have not paid for. The merchandise can be new or slightly used. The goods belong to the consigner until it they are actually sold. When the merchandise is sold, the consigner gets his revenue and shares the profit with the consignee (who sold the merchandise) [source: WSJ]. Items sold in a consignment store can be up to 35% cheaper than similar items sold in a regular shop. A consignment store is not to be confused with a thrift shop or charity shop, where all of the merchandise sold is second hand and all the proceeds go to charity. Opening a consignment store can entail a lot of work, but once it's going it can be quite rewarding. Here's how to open a consignment store.

  1. Register your business name with the Secretary of State of your state. Apply for a business license to operate a consignment store and apply for a sales tax license [source: Maravilla].
  2. Choose a location for your store. A spot on a busy street with plenty of display windows would be a good choice. Don't look for a place in the most expensive area, as your profits will be eaten up by the rent [source: WSJ].
  3. Fix up the store nicely. Make sure you have plenty of lighting and don't forget ample dressing rooms, if you're selling clothing.
  4. Find suppliers and/or individuals who are willing to work with you and give you merchandise on consignment. It's best to hire a lawyer to advise you on how to draw up a buyer-seller contract that will outline all the terms of the consignment. Terms can include the length of time you have to sell an item, and the percentage of the profits each party will get.
  5. Advertise in all the local newspapers and distribute flyers in the neighborhood. You'll be surprised how quickly the word gets around. Before you know it, people will start coming to buy in your store and bringing you merchandise to sell.