Is Thrift Store Business Profitable

Find Out- Is Thrift Store Business Profitable?

The profitability of your Thrift Store business depends on 4 important factors: Industry Prospects, Investments, Revenue Sources, Cost and Profitability. We have taken a deep dive to find out potential profitability from the Thrift Store business. 

Thrift Store Industry Prospects

The global thrift store market size in 2023 is expected to reach $14.2 billion (onlinedasher). This figure is supported by the forecast from thredUP, an online resale marketplace, which also estimates the secondhand and resale market to reach about $53 billion by 2023, with $27 billion accounting for resale and $26 billion for traditional secondhand (thrift) sales (census). The market size of the Thrift Stores industry in the US is estimated to have reached $14.2 billion in 2023, reflecting a compound annual growth rate (CAGR) of 4.5% over the past five years (ibisworld).

Investments

• Storefront Purchase or Renovation: If you’re buying a space, the purchase cost. Renovation costs to remodel the store according to your needs, including structural changes, painting, flooring, electrical work, etc.

• Shelving and Display Units: Durable shelving units to organize and display clothing, accessories and other items. Specialized display units or racks for different types of merchandise.

• Point of Sale (POS) System: Cash registers, barcode scanners, receipt printers and any associated software for managing sales transactions.

• Security System: Security cameras, alarm systems and anti-theft devices to protect your merchandise and store premises.

• Lighting and Electrical Fixtures: Investment in good quality lighting to enhance the shopping experience and highlight products. Any additional electrical fixtures needed for the store.

• Signage: Exterior and interior signage, including the store name, open/closed signs, promotional displays and directional signs within the store.

• Furniture and Decor: Store furniture like counters, seating for fitting rooms, mirrors and decorative elements to create a welcoming ambiance.

• Computers and Office Equipment: Computers, printers and networking equipment for managing the business. Office furniture and supplies for the administrative area of the store.

• Initial Inventory Purchase: If you are purchasing initial stock to supplement donated items, this would be a significant upfront cost.

• Transportation Vehicle: A vehicle for picking up donations, delivering large items, or handling other business-related transportation needs.

• Renewable Energy Installations (Optional): Solar panels or other renewable energy sources to reduce long-term energy costs.

• Initial Marketing and Branding: Costs associated with initial marketing efforts like website development, promotional materials and launch advertising.

• Technology for Inventory Management: Software or systems for tracking inventory, sales data and customer information.

• HVAC System: Heating, ventilation and air conditioning system suitable for your store’s size to ensure customer and employee comfort.

These CapEx items are crucial for the physical setup of your thrift store and the initial steps in establishing your business presence. Remember, the specific costs will vary based on the scale of your store, the condition of the premises and the quality of the fixtures and equipment you choose. It’s also wise to set aside a contingency fund for unexpected expenses during the setup phase.

Revenue

• Sale of Second-Hand Goods:
  • Clothing: One of the mainstays of thrift stores, including vintage, designer and everyday wear.

• Furniture: Selling second-hand furniture, which can range from budget-friendly to antique or unique pieces.

• Books and Media: This category includes used books, DVDs, CDs, vinyl records and other media items.

• Electronics: Selling refurbished or used electronics like phones, computers, speakers, etc.

• Housewares: Items like dishes, kitchenware, decorative items and small appliances.

• Toys and Games: Second-hand toys, board games and puzzles.

• Specialty Sales:
  • Vintage or Collector Items: Higher-priced items that are rare, vintage, or have collectible value.

• Artwork and Handcrafted Items: Selling artwork, crafts, or other unique items, possibly on consignment from local artists or artisans.

• Consignment Sales: Partnering with individuals to sell their items in your store for a percentage of the sale price.

• Seasonal Sales: Capitalizing on seasonal items such as holiday decorations, costumes, winter coats, etc., which can attract customers looking for timely deals.

• Online Sales: Expanding your reach by selling items through online platforms like eBay, Etsy, or your own e-commerce website, especially for more valuable or unique items.

• Rental Space: Renting out a section of your store for events, pop-up shops, or to other vendors who want to sell complementary goods.

• Workshops and Classes: Hosting paid workshops or classes on topics like DIY repairs, upcycling, vintage fashion, etc.

• Partnerships and Sponsorships: Collaborating with local businesses for sponsored events or cross-promotions.

• Donations: While not a direct sale, accepting donations can be a significant aspect of a thrift store’s operation, often leading to inventory with no purchase cost.

• Services: Offering services such as repair or customization of items, particularly for furniture or clothing.

Remember, the success of these revenue streams will depend on factors like the quality and uniqueness of your inventory, your marketing strategies, store location, customer service and the overall economic climate. Regularly reviewing and adapting your business strategy based on customer feedback and market trends is key to maximizing your revenue potential.

Cost of Goods Sold

• Inventory Purchase:

• Direct Purchases: If you buy items to stock your thrift store, the purchase cost is part of COGS. This could include bulk purchases from estate sales, auctions, or from individuals.
• Consignment Costs: If you operate on a consignment model, the cost paid to the original owner when their item sells.
• Processing and Repair Costs:

• Cleaning and Refurbishing: Costs involved in cleaning, repairing, or refurbishing donated or purchased items to make them sale-ready.
• Labor for Processing: If you pay staff specifically for sorting, pricing and preparing items for sale.
• Transportation and Handling:

• Transport Costs: If you incur expenses for picking up donations or transporting purchased items to your store.
• Shipping Costs: For items purchased online or shipped from other locations.
• Packaging Materials:

• Bags, Boxes and Wrapping: Costs of materials used to package items for customers at the point of sale.
• Payment Processing Fees:

• Credit Card and Transaction Fees: Fees associated with processing credit/debit card transactions.
• Inventory Shrinkage:

• Losses Due to Theft or Damage: This includes the cost of items that are stolen, lost, or damaged beyond repair.
• Inventory Storage:

Off-Site Storage Costs: If you rent additional storage space for your inventory, the portion of the rent attributable to storing saleable goods could be considered a COGS.

Remember, in a thrift store setting, many items might be acquired at minimal or no cost (such as through donations), which can significantly reduce the COGS compared to traditional retail operations. However, it’s essential to carefully track all costs associated with getting items ready for sale to accurately understand your business’s financial performance and pricing strategy.

Operating Expenses

• Rent or Lease Payments: Monthly cost for leasing the store space.

• Utilities: Regular expenses such as electricity, water, heating and air conditioning.

• Salaries and Wages: Payments to employees, including store managers, sales staff and any other support staff.

• Insurance: Business insurance costs, which may include liability insurance, property insurance, workers’ compensation, etc.

• Marketing and Advertising: Costs for promoting the store, such as social media advertising, flyers, local newspaper ads and website maintenance.

• Administrative Expenses: Office supplies, telephone, internet, postage and other general administrative costs.

• Professional Services: Fees for services like accountants, lawyers, or consultants.

• Software and Technology: Costs for software subscriptions such as POS system, inventory management software and any other technology used in store operations.

• Maintenance and Repairs: Regular upkeep and repair of store fixtures, equipment and premises.

• Depreciation: Non-cash expense representing the reduction in value of assets like fixtures, furniture and computers over time.

• Taxes and Licenses: Costs for business licenses, permits and property taxes.

• Loan Interest: If you have taken out loans to start or expand your business, the interest on these loans is an operating expense.

• Security: Expenses related to security measures, such as alarm systems or security personnel.

• Waste Disposal: Costs for regular trash and waste disposal services.

• Miscellaneous Expenses: Unplanned or incidental expenses that don’t fit into other categories.

It’s important to manage these operating expenses carefully, as they can significantly impact your business’s profitability. Regularly reviewing and finding ways to optimize these costs can help maintain a healthy cash flow. Additionally, accurate tracking of these expenses is crucial for financial management and tax purposes.