Resale and consignment shops, emboldened by the Great Recession, are expanding as Americans cling to their bargain-hunting ways.
No longer relegated to back alleys, these secondhand stores are moving into prime locations, taking over spaces once occupied by mainstream retailers Linens ‘N Things and Circuit City, now bankrupt, and teen clothier Abercrombie & Fitch.
And they’re going national. Bellevue, Wash.-based thrift-store chain Savers Inc. is taking on its biggest expansion in decades, spurred in large part by the cheap retail real estate left behind by big-box stores wiped out in the recession.
The movement mirrors the aftermath of the 1990s recession, when discount shopping at the likes of Target and T.J. Maxx came into vogue. Only this time, instead of pairing a Gap T-shirt with an Armani suit, the most recent financial crisis has made it fashionable to combine the likes of a new J. Crew sweater with a “gently used” Tory Burch skirt.
Thanks to Craigslist and Amazon, people are just as comfortable selling goods these days as buying them, said Ken Nisch, chairman of JGA Inc., a retail design firm in Southfield, Mich. And that is good news for secondhand stores that need a steady supply of used merchandise.
“Customers are becoming merchants and merchants are becoming customers,” Nisch said. “Retailers need to figure out how to create consumer liquidity, and this is a way to do it — taking things out of your closet that have value.”
While the thrift industry is difficult to track, estimates are that the number of independent consignment and resale stores has risen to 1,200 in 2010, from about 800 five years ago, according to the National Association of Resale Professionals. Consignment stores pay suppliers 40 percent to 50 percent of the sale price after a product has sold. Resale shops buy goods up front, but they pay less than consignment stores to make up for the risk of an item not selling.
These secondhand stores are not only expanding, but they are taking on the characteristics of traditional retail.
In Geneva, Ill., designer resale shop Anew looks just like the full-priced, independent boutique it replaced two years ago, down to the Tuscan-style natural stone walls, styled mannequins and spacious dressing rooms.
Business has been brisk enough that Anew expanded into the space next door in February, opening a bridal consignment shop. Some of the gowns have been worn. Others come from cancelled weddings or brides who didn’t lose the weight they intended.
“It’s safe to say, life as we knew it is definitely gone,” said Jan Rooney, owner of Anew, who opened the store in 2009 after losing her job as an insurance broker. “I don’t know if any of us will ever feel that kind of security again.”
Runway Revival opened next to the Barney’s Co-op in Chicago in October, moving into a shuttered Abercrombie & Fitch store. Owner Sheila Hermes furnished the 4,000-square-foot shop with gold clothing racks and a glass display case that she purchased from a Chicago Barneys last year when the retailer shut down and moved across the street.
“People want the opportunity to buy at a lower price, but they also want it to be digestible,” Hermes said. “It’s gotten to the point that at times we have more coming in than we can put out on the floor. I don’t want my store to be packed. I want it to be organized and feel like a boutique.”
Indeed, the line between new and used is blurring. The little secret of retail: Personal shoppers at luxury and department stores are boosting their own sales by encouraging customers to sell their old designer duds and use the money to come back and buy something new.
Shopper Susan Perlman had avoided consignment stores until she discovered the designer handbags at Millionaire Rejects in Chicago.
“I really just saw the quality of the bags,” Perlman said. “They’re not old and run-down. To me, these are in great condition. These bags would not be affordable for many people if they were new.”
It is these kinds of shopping discoveries that has Corri McFadden, founder of luxury consignment eBay shop Edrop-Off, betting that the consignment store is ready for reinvention. Her flagship storefront in Chicago is not a traditional resale shop. Simeone Deary Design Group, the interior design firm behind the Elysian hotel, designed the showroom. A stylist dresses a handful of mannequins each week, and the clothes are sold only online.
A second drop-off shop opened last month, and McFadden has her sights on expanding beyond Chicago next year.
“Anybody is happy to get rid of something for money, no matter what their income level,” said McFadden, who writes a fashion blog for Chicago Now, which is owned by the Chicago Tribune.
Savers, the West Coast resale chain, has been watching the demographic of its customers change in recent years. About 70 percent of its customers have some college education, compared with 50 percent before the recession, the company said. Likewise, the average annual income has risen to the $45,000-to-$65,000 range, from $35,000 to $45,000 before the recession.
As they attract new customers, the chain is opening new stores at a rate of about 20 a year.
“We’ve seen our largest customer conversion and transactional gains in our history in the last three or four years,” said Kenneth Alterman, president and CEO of the closely held company. “What has happened is so many more people have been exposed to our type of retail.”
Last year, Savers sold $680 million of secondhand clothing, books and other goods. In March, the company expanded further when it acquired Minneapolis-based Unique Thrift LLC, adding 18 stores in six states. Savers expects to end 2011 with a total of 290 stores and close to $1 billion in sales, Alterman said.
The 57-year-old firm plans to open its Chicago-area store on April 14 in Downers Grove, taking over a shuttered Circuit City. A second Savers is slated to open in May in Naperville, Ill., in a former Linens ‘N Things. Both chains went out of business during the financial crisis.
Its model differs from most resale stores in that Savers acquires most of its inventory by purchasing donated items from nonprofit organizations. The nonprofits generate cash and Savers gets goods to sell. In Chicago, Savers will be purchasing donated items from the Epilepsy Foundation of Greater Chicago.
Diana Ford, owner of the Women’s Closet Exchange in St. Louis, believes there’s a stigma attached to resale shopping in some consumers’ minds. She’s out to convert them. Last fall, she issued a Groupon charging $15 for $50 worth of goods. Of the 1,110 Groupon coupons redeemed, 900 were new customers, she said. Most spent over the $50 limit of the coupon.
“Once they come in and saw we had Louis Vuitton and Chanel, they can’t go back. Even if the economy turns around, people aren’t going to go back to their old ways,” she said.
Source: McClatchy-Tribune Information Services.