While resale shops and
thrift stores are not exactly a new premise, they seem to flourish in a
challenging economy. These shops can generate tremendous sales, whether they
are a for-profit business or a charity, if they are stocked with enough
high-quality merchandise at reasonable prices. Since these shops do not always
have a definite supplier for all of their merchandise, it can take some skill
and planning to find and maintain inventory. If you have skill as a buyer and a
passion for the industry or for a charity, consider opening your own thrift
store. Thrift stores can offer all sorts of
products from clothing to baby furniture to gardening products, or the store
may specialize in one type of product, say, gently used clothing. Scout the
competition to decide if you should generalize or focus on one type of product
and, if so, which one.
THRIFT INDUSTRY IN INDIA:
The
second-hand market in India, excluding automobiles, is estimated to be worth
anywhere between Rs 60,000 to Rs 65,000 crores out of which the business of the
gadget sector constitutes about Rs 15,000 to Rs 20,000. "With models being
launched at a feverish pace, new gadgets are being put up for sale because
people want the latest updated versions. Buying second-hand products therefore
is like buying new products at a lesser price. Electronic gadgets are hot
favourites when it comes to trading pre-owned products. Most of the customers
of this industry are trading in phones followed by other electronic gadgets
like laptops, TV sets etc. "With the current economic slowdown, we have to
look for cheaper alternatives for everything. Buying second-hand goods from
reliable platforms is worthwhile," said Taniya Gupta, 32, a frequent buyer
from a thrift store in hyderabad.
BUSINESS ENTITY:
The
business structure you choose is the legal structure of your thrift store. Your
legal structure determines the taxes you pay, the extent of your personal
liability and the governing arm of the thrift store. As a sole proprietor you
own the business and its assets and liabilities. Other options include a
partnership, which uses a partnership agreement to define roles, and limited
liability corporations, or LLC. The LLC structure is organized under state laws
and limits the personal liability of business owners, who are called members,
and provides some tax advantages. The IRS requires LLCs to file returns as sole
proprietorships, partnerships or corporations. You might choose to incorporate
the thrift store as a for-profit or nonprofit organization. Once you
choose a business structure, your local secretary of state’s office, or the
office responsible for business registrations in your state, can help you with
the legal creation of your thrift store. Incorporation usually requires the
filing of articles of incorporation with the appropriate state agency. You will
need to apply for an employee identification number, or EIN, with the Internal
Revenue Service. Your city, county or state will have requirements for business
licensing, permits and local taxes.
INSURANCE COVERAGE:
Liability
insurance protects you and the thrift store if accidents or other causes for
litigation occur. Your thrift store will need insurance coverage for the
store's location and vehicles. You can limit your liability exposure by
ensuring that your physical location is safe and meets all safety codes,
performing background checks on employees and volunteers and carefully
inspecting all items to be sold.
PROCEDURE FOR STARTING A THRIFT STORE:
Regardless
of economic climate, resale shops, also called thrift stores, can be a popular
choice with shoppers. The clientele can encompass everyone from families on
limited budgets to collectibles dealers searching for their next great
treasure. If you are interested in a fun and potentially profitable way to make
a living, you can start a thrift store business by following some basic steps.
1. Decide
if you want to start a thrift store that is a for-profit or not-for-profit
business:
Starting
a for-profit thrift store business will allow more freedom in your management
style and allow for larger profits. It may also mean you are eligible for fewer
grants and fewer low-interest loans.
2. Prepare
and file all required documents:
This
may include business licenses, insurance policies and tax account status forms.
Secure your employer identification number and sales tax license with the help
of your tax accountant.
3. Write
a business plan:
Write a business
plan that carefully outlines the way your store will operate. Include sections
about how you will acquire inventory, projected profit margins, estimated
payroll and other details that demonstrate that you understand what is involved
in the business.
4. Choose
a location:
Find a location for
your store. In most cases you will be looking for existing retail space
that you can rent, lease or have donated. It should have ample parking, good
lighting and a display-style window where you can set up prime items to entice
shoppers into the store. Placing
your shop in an area with considerable traffic will help generate customers.
5. Sketch
a basic floor plan and decide what type of products you are going to sell in
each area:
This will help you
narrow down what type of display
fixtures you need to purchase. You can buy them at fixtures stores or buy them
from businesses that are closing.
6. Get
Financial Support
Apply for
financing using your business plan. Borrow enough capital to purchase store
fixtures, a cash register and cash wrap area, shelving and other goods to
complete your floor layout. Borrow enough extra to cover payroll for three to
six months to help smooth out your business launch.
7. Stock
inventory to sell. Most thrift stores stock gently-used, previously-owned
goods with a lot of variety:
Advertise for donations to stock your store. If
possible, schedule a day in each neighborhood where people who wish to donate
can place items on the curb for you to pick up. Visit bulk distribution centers
where used goods can be purchased by the pound instead of per piece. Check your
local paper for storage unit auctions. Visit yard and estate sales toward the
end of the sale and offer to purchase the unsold items as a lot.
8. Hire
people to staff your thrift store
9. Advertise
your grand opening.
SAMPLE INVENTORY FOR CLOTHING BASED THRIFT
STORE:
- Suppliers
or donors
- Clothing
racks with hangers
- Shelving
- Cash
Registers
- Commercial
washer and drier
USEFUL
TIPS FOR OPERATING A THRIFT STORE:
·
Maintain a steady flow of salable merchandise
and clearance or discard that which is less desirable. Purchase clean, salable
merchandise when possible. Be diligent to only display merchandise that is
clean and free of damage.
·
Contact mid- to large-sized retailers to see
if you can purchase overstock and distressed goods at a substantial discount.
·
Watch for going-out-of-business sales. Visit
the store and offer to purchase all remaining inventory at a substantial
discount.
·
Consult your newspaper and other media
looking for auctions. Often clothing and knickknacks sold at auction will be
sold by the box or even the pound.
·
Offer delivery service for large items. While
you may not make a profit on the delivery itself, you will sell more large
items than if the customer has to arrange to pick them up.
For more information
or help starting a THRIFT STORE, talk to an IndiaFilings Business Advisor.
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