How to open a consignment store

What you take in decides most of what follows: how much floor you need, how much time intake takes and how fast items leave. Clothing stores handle many small items. Furniture stores handle fewer, larger ones.

Start narrow. A clear category makes pricing easier and gives you a reason to turn items away at intake. You can add categories once you know what sells in your area.

Your terms are the deal every consignor signs. Decide them before you take in a single item, because changing them later means explaining it to everyone.

Put all of it in a written agreement that each consignor signs at their first drop-off. Our consignment agreement template covers these terms and is a place to start.

The paperwork is the same as for most small shops, with one difference: the goods on your floor belong to other people.

• Register the business. Choose a structure and register with your state and city or county. Open a business bank account so consignor money stays separate from your own.
• Sales tax. Ask your state’s tax agency whether you need a seller’s permit and how sales tax applies to consigned goods. If you also buy items to resell, ask about a resale certificate.
• Insurance. Ask your insurer whether your policy covers goods you hold for others, not only your own property, plus general liability for the store.
• Local rules for secondhand goods. Some cities and counties have rules for stores that sell used items. Check before you sign a lease.
• A written consignor agreement. The terms from step 2, signed by every consignor.

Rules differ by state and city. This is general information, not legal or tax advice. An accountant and your local business office can tell you what applies to you.

A consignment store needs two kinds of visitors: shoppers and consignors. Look for parking and easy drop-off as well as foot traffic. If you’ll take furniture, you need a door and a path wide enough to move it.

Plan the back room before the sales floor. Intake, sorting, tagging and items waiting for pick-up all need room, and it tends to fill up first.

On the floor, group items by category and keep new arrivals near the front, so regulars see something different each visit. Leave a clear spot for marked-down items.

If you’ll rent space to dealers, draw the booths with numbers and sizes, and set rent by size. Decide when rent is due and whether it comes off the dealer’s sales or is paid separately. Antique mall software explains how Consignia charges booth rent.

A lost tag or a missing record means a sale you can’t pay out correctly. Settle these before your first drop-off:

A normal register knows what sold and for how much. A consignment store also needs to know who owned it and what you owe them. Whatever you choose should:

• Track which consignor owns each item.
• Split each sale by that consignor’s terms, including discounts and refunds.
• Hold recent sales until the return window has passed.
• Show who you owe and record payouts.
• Give consignors a way to see their own sales and balance.

There are two common routes. Dedicated consignment POS systems do the register and the consignment tracking in one product. The other route is a general POS like Clover or Square for the register, card payments and hardware, with a consignment app on top.

Consignia is that second kind. It reads each sale from Clover or Square, splits it by the consignor’s terms, and keeps their balance for payout runs and statements. It suits stores that want Clover or Square at the counter. A spreadsheet can work for your first handful of consignors, but every sale has to be copied in by hand. Choosing between the two? See Clover vs Square for a consignment store.

A consignment store with empty racks on opening day is hard to recover from. Start taking items several weeks before you open, so the racks are full on day one.

• Start with people you know, then local parent groups, neighborhood boards and estate sale organizers.
• For booths, talk to dealers at markets and other malls about moving or adding a space.
• Hand out a one-page summary of your terms, and book intake appointments so drop-offs don’t pile up.
• Collect each consignor’s email at sign-up. You’ll need it for statements and payout notices.

Pricing. Price items to sell within the consignment period. After two weeks, look at what sold quickly and what hasn’t moved, and adjust what you accept and how you price it.

Markdowns. Run them on schedule from the start, even when it feels early. Consignors expect it from the agreement, and it keeps the floor turning over.

The first payout run. Check each consignor’s sales against their balance, leave out sales still inside the return window, and skip anyone under your minimum. Pay everyone else on the same day, and send each a statement that lists the items sold.

Keeping consignors informed. Consignors will want to see their sales between payouts. A consignor portal where they see their own sales and balance cuts down on calls asking what sold.

At the end of the month, put your real costs and average sale into the estimator above and compare them with your plan.