How To Start a Thrift Store: Our Guide To Being A Successful Second Hand Seller
Haven’t you heard?
The thrifting business is booming. In 2023 alone, the global secondhand market grew 18%—now valued at $230 billion—and is projected to account for a whopping 10% of total apparel sales by 2025. The resale market is growing 15 times faster than other apparel sales.
In fact, 52% of consumers purchased secondhand clothing in 2023. While partially driven by economic stressors, this is actually a very good thing for reframing society’s view of a product’s lifecycle. People realize buying what you need doesn’t necessarily mean buying new.
So if you’ve ever toyed with owning a thrift store yourself, there’s no better time than now in the Golden Age of Thrifting.
We’ve touched on thrift shopping tips before, but now we’re stepping behind the counter with a guide on how to start a thrift store (online or in person) coming from folks who have done it first-hand.
The Steps For Opening A Thrift Store
1. Why Open A Thrift Store?
Starting a thrift store offers a blend of financial viability, environmental sustainability, affordability, and community impact.
Low Overhead Startup Costs
One of the most compelling reasons to open a thrift store is the significantly lower overhead costs compared to traditional retail establishments. For those who want to become their own boss but don’t necessarily have the liquid capital to launch into more traditional business avenues, thrift stores are the perfect choice.
Because you can source your inventory for very cheap or even free, thrift stores typically require far less startup and operating budgets, especially if you’re incorporating a consignment model into your business.
When we started our own thrift store, we had just moved to a new town and were barely making ends meet working in a coffee shop. After we made the decision and signed a lease on a space, we were up and operational less than two months later, having only spent a few thousand in startup costs due in large part to preemptively collecting inventory on consignment from locals.
Sustainable Shopping Options
In an era of heightened environmental awareness, thrift stores play a crucial role in reducing textile waste and promoting a circular economy. Every item sold at a thrift store is one less item heading to a landfill—and one less item that needs to be produced new, not to mention all the environmental and ethical impacts that come with manufacturing.
If we were to replace new fashion production with recirculating garments already in existence, we could save 190,000 tons of CO2 and 18 billion gallons of water.
On a smaller scale, one person choosing to purchase just one used item instead of a new one would displace 17.4lbs of CO2 emissions. Collectively, that’s adds up to a LOT of carbon emissions.
A Future-Proof Business Model
For the business-minded, starting a sustainable store is also a good bet considering consumer trends toward more sustainable shopping options. 64% of Americans are willing to pay more for sustainable products—and by tapping into the second hand market, they don’t even have to do that!
Which is all the more attractive when you consider the stagnating wages, record-high inflation, and a renting and housing market with impossibly high entry barriers. Affordability is going to become more and more of a concern for shoppers.
By the same token, thrift stores provide affordable shopping options for individuals and families on a budget, thus making them a more viable and stable business model in times of economic upheaval. If folks can’t afford to buy new stuff, they’ll turn to second hand options.
Community Engagement & Social Impact
Thrift stores often serve as community hubs, fostering social connections and engagement. They can even provide opportunities for people to donate items, volunteer, or shop for a cause by partnering with local charities or organizations.
So for those with causes they care about, starting a thrift store that (to whatever degree you wish) supports these causes can be a meaningful way to give back and contribute to community well-being.
2. Establishing A Need
Now, a little background. We had previously worked at a thrift store many years ago in Philadelphia. Fast forward to 2021, and we started our own consignment thrift store specializing in reselling used sustainable outdoor clothing and gearing in a tiny Wyoming town that served as a major mountain gateway and rock climbing destination, and home to the headquarters of the famous National Outdoor Leadership School (NOLS).
It all started with the thought: man, this town could really use a place to buy and sell outdoor gear. Thrifting options in general were slim, let alone something that would specifically cater to the passions of a large majority of the locals.
This leads to the most important question you need to ask yourself before embarking on your own second hand journey: is there a market for a new thrift store in my area?
With the number of new resale locations opening in the US rising by an average of 7% each year—now totalling over 25,000—the second hand market in some places may already be oversaturated, which will severely impact the financial viability of your business.
Alternatively, you can do what we did and find a niche that the current local second hand market doesn’t cater to. Consider offering curated collections (outdoor gear, vintage, you name it, and there’s a market of folks looking for it), specialty services like repair or customization, or even collaboration with existing local businesses.
It’s also helpful to talk to both local consumers and other second hand stores about how viable the business model really is in that location. It’s easy to see something as success from the outside, when you have no idea how much profit really compares to the overhead.
If you’re opening a thrift store online, these concerns aren’t as critical, but with so many second hand stores online these days, you should still consider how you can make your business stand out.
3. Make A Business Plan
If all your research has given you the go, it’s time to start thinking about specifics.
Choose A Business Model
Will you be strictly on a donation basis, buy outright, or operate on consignment? Or maybe a hybrid model, as some shops do, where you offer a lower percentage to buy goods outright than if customers consigned?
This is a huge question because it largely determines how you’ll get your inventory and how much of the proceeds you’ll keep.
Consignment is the best solution for how to start a thrift store with no money since you don’t actually pay consignors for their items until they sell. It’s the lowest overhead model, but generally works best for mid to higher tier inventory and price points. There’s not a lot of incentive for customers to consign goods on which they only stand to make a buck or two.
That said, our shop was purely consignment and we dealt in a huge spectrum of price points, from whitewater kayaks that resold for thousands of dollars, to basic baselayer t-shirts that sold for $1. Just because consignment is typically reserved for higher end goods doesn’t mean it has to be.
But you’ll also need to consider consignment contracts and payout models, strict inventory management, and always have enough money in your bank account to pay all outstanding consignment debt.
Operating on donations is much simpler, because you take all the profit and don’t need to consider all these additional factors, but you’re often limited by both the quantity and quality of the inventory you can obtain.
Choose A Space
Brick-and-mortar? Local pop-up? Online? A hybrid of both?
This is important because learning how to start an online thrift store (on Instagram or Etsy, for example) is going to look vastly different from starting a brick-and-mortar storefront.
It may be more difficult to gain traction in the bursting world of online thrifting, but there’s generally much less risk and certainly less financial overhead involved with the process. Not having your website perfect from the start may not help your business grow as quickly as you’d like, but at least you won’t have huge outgoing rental expenses to contend with while you figure things out.
If you’re going local, know that your space will likely be the largest component of your overhead. And you know what they say—location, location, location! This can make or break a business, so think carefully before signing a lease and legally binding yourself to a space for a set amount of time.
It’s a good idea to start with a shorter term lease (with options to renew) in case things don’t work out. We were happy we did this, because we actually quickly outgrew our starting space and ended up moving just across the street to a larger one at the end of our lease term.
When choosing a space, also consider demographics, foot traffic potential, accessibility and parking, size, growth potential, maintenance demands, and overall whether it will meet the needs of your desired store.
Figure Out Your Finances
There’s no set amount regarding how much it costs to open a thrift store. It can be as expensive or budget as you want. Again, we started ours on a shoestring budget and, as such, made back all our investments and turned a profit within months of opening.
Evaluate the financial feasibility of opening a thrift store by estimating startup costs, ongoing expenses, revenue projections, and potential profitability margins. Factor in overhead costs such as rent, utilities, staffing, marketing, inventory acquisition, and legal compliance. Conduct a break-even analysis to determine the timeline for achieving profitability and assess the long-term sustainability of your thrift store venture.
Make Your Thrift Store Legal
Not to be a business-buzzkill, but don’t forget to consider the legal side of things.
Research what permits you need to open a thrift store, which can differ by state. At a bare minimum, you’ll likely need to register it as a business with the IRS (an LLC is a common choice for this type and scale of business) to obtain a tax ID and obtain a state sales tax license (which gives you the right to collect sales tax that you’ll need to pay the state monthly).
Don’t forget to get business insurance, as this will protect you from all kinds of liabilities as a business owner.
Other Operational Details
Once you have the big things figured out, it’s time to narrow your focus. Decide on what payments you will accept and how, and if you’ll accept returns or exchanges.
In our consignment model, we decided it was best not to offer returns simply because the payments were immediately issued to consignor accounts, which meant returns could potentially result in significant losses. Instead, we offered to reconsign unwanted goods. But if you don’t accept returns, be sure to clearly advertise this so you don’t end up with any surprised and upset buyers.
Another huge consideration is how you plan to track and manage your inventory. There are many consignment and thrift specific softwares out there, such as LibertyPro or subscription-based online ConsignCloud (which is what we used) and Aravenda.
Don’t forget to think about what staff you’ll need and how you’ll grow your business (a la advertising, special events, etc).
If you’re selling online, SEO (Search Engine Optimization) and regular social media content creation will be critical to your success, to make sure you’re well-versed on these subjects and have a solid plan in place.
4. Start Collecting Your Inventory
Now for the fun part: curating your collection.
Start by raiding your own closet—what better excuse to finally pare down to that minimalist wardrobe you’ve been dreaming of—and that of friends and family. You can even make a fun closet purging event out of it by giving them an excuse to finally get around to decluttering those drawers.
After that, look outside your circle. Regardless of whether you’re collecting by donation or consignment, you’ll need to get in touch with the local community and get the word out about your future business and that you’re looking for inventory. Consider hosting a clothing drive to get a lot of goods in one go.
The sooner you start ahead of time, the more inventory you’ll have for opening.
We began advertising about two months before opening, arranging scheduled meetups at the space and even local pickups of items on consignment, with contract in hand so consignors could rest easy knowing they would either get their insole items back or money in return for them.
Because our town is extremely small, we also found it helpful to pad out our opening inventory by visiting flea markets, estate sales, garage sales, and even larger chain thrift stores in larger cities and seeing what sort of hidden gems we could snag for cheap.
We specifically shopped their discount tag colors, both because this helps us obtain more inventory for less, but because these are usually the oldest items that may otherwise join the 90% of goods that don’t get resold in thrift stores and instead get thrown away or sent to overseas textile recyclers, so that was our way of reducing textile waste as much as possible.
Once you have a suitable amount of pre-loved plunder, it’s time to pop some tags on them, and flip that sign that says “Open for Business!”
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