Financials Behind Consignment, The Gamble
To explain the numbers when thinking about consignment I’m going to use the information from one of our “shopaholics” who often brings $3,000 worth of brand new items in one session to start my post.
First let’s talk best case scenario, you’ve managed to snag a brand new winter coat by Flash that’s 90% down-filled and super light. The new price tag on it says $475. At a consignment store like the one I manage, arguably they would price it at 1/3 of the retail value. In this case due to the new tags and high value, we price it slightly higher at $200. Assuming this coat sells at regular price, the consignor receives $79.
A more likely item is a heavier fall weight, wool blend coat from RW&Co regular retail about $150-200. We have it priced at $60, it sells the same day, the consignor receives $23.
A pair of used UGG boots, visible water damage on the toe area, regular retail $200 we would normally price around $60 if it was mint, but these are not, so we price them at $40 with an “AS IS” condition note. They sell at $40, the consignor receives $15.
You’re probably looking at these numbers and thinking, wow that’s not very good at all! You need to think of a few things before you go rushing to “make money” at the consignment store. Did you buy this item at the mall new last year with the intention on selling it? Not likely. There is clearly a reason you are not wearing it and its just going to hang there rotting in your closet unless you re-gift it or try online, or maybe consignment. Never expect to make your money back, much like a car, it loses its value the instant it leaves that lot.
A typical top can be priced at $20, with our system the price drops by 25% every two weeks. Let’s say this one sold at the first discount of 25% for a total of $14.25, the consignor will receive $5.70. A popular item in our store is tops, generally priced at $15. Should they sell at full price, the consignor will receive $5.60. At 25% markdown $10.50 the consignor receives $4.20. At the 50% markdown the consignor receives $2.80. At the final markdown of 75% off, the consignor receives $1.40.
This system is excellent for moving product, great for shoppers. If you’re a consignor looking to bank big on your items you need to weight the risk, the gamble of leaving it hoping it will sell at full price, or accepting that you might get only a few dollars in the end. If you’re hoping to thrift for profit, you need to accept this harsh reality that you may not make the money you were hoping to, you might break even or you might actually lose money on it… it all depends on Cinderella.