Thrift stores are businesses in which you can buy second-hand items such as clothes, furniture, and books and the thrift store sells them to the public. But the question is are thrift stores still profitable?
The short answer is yes. It is a profitable business because if you talk only about the United States then more than 10.5 million tons of textiles were generated in 2023, with only 2.9 million tons recycled. Also, according to a report by thredUP, an online thrift store platform, the secondhand market is projected to reach $64 billion in value by 2024.
The potential of this business is relatively high but there are so many aspects of the thrift stores that you should know first before you reach the conclusion.
Let’s discuss them one by one.
Table of Contents
How much profit can you make from a thrift store?
On average the gross profit margin for thrift stores typically ranges from 40% to 60%. This means that for every dollar in sales, the store retains approximately 40 to 60 cents after deducting the cost of goods sold (COGS).
Talking about the net profit margin, which reflects the overall profitability after deducting all expenses, including operating expenses, can range from 5% to 15%. This means that for every dollar in sales, the thrift store retains approximately 5 to 15 cents as net profit.
Here is the table for these figures:
|Gross Profit Margin
|40% – 60%
|25% – 35%
|Net Profit Margin
|5% – 15%
It is important to conduct thorough market research and consider specific operational costs when estimating the profitability of a thrift store.
Remember, the success and profitability of a thrift store depend upon various things such as pricing strategies, inventory quality, customer demand, and operational efficiency.
Thrift store industry statistics
According to First Research, the used merchandise industry in the United States comprises approximately 20,000 stores, generating a combined annual revenue of around $15 billion.
Additionally, thredUP, an online resale marketplace, forecasts that the secondhand and resale market will reach approximately $53 billion by 2023. Out of this total, approximately $27 billion accounts for resale, while the remaining $26 billion corresponds to traditional secondhand sales through thrift stores and donations, as reported by CNBC.
Moreover, a thredUP survey of 3,500 U.S. adult consumers and 50 fashion retailers conducted by GlobalData reveals that the global secondhand goods market is projected to grow by 24% in 2022. The same report estimates that the U.S. secondhand market will more than double by 2026, reaching a value of $82 billion.
You can read more about the industry trends and statistics on thrift stores on the NARTS website.
Pros and Cons of Opening a Thrift Store
Pros of Opening a Thrift Store:
Sustainability and Environmental Impact:
Thrift stores contribute to sustainability efforts by promoting the reuse and recycling of goods. By offering second-hand items, you can actively participate in reducing waste and the carbon footprint associated with new production. This can appeal to eco-conscious customers who prioritize sustainable shopping.
Affordability and Unique Inventory:
Thrift stores provide an affordable shopping option for customers seeking budget-friendly items. In thrift stores, you can sell many things that are not easily available in the market or are sold at very high prices. This aspect can attract customers looking for distinctive and cost-effective purchases.
Community Engagement and Social Impact:
Thrift stores often develop strong connections within their local communities. By supporting charitable causes or community programs through the proceeds of sales, you can make a positive social impact. In this way, thrift stores can contribute to the society.
Potential for Profitability:
While success can vary, thrift stores have the potential to generate profits. Acquiring inventory through donations reduces upfront costs, allowing for higher profit margins compared to traditional retail. Effective pricing strategies, inventory management, and customer loyalty can contribute to financial success.
Cons of Opening a Thrift Store:
Thrift stores heavily rely on donations for their inventory, which can lead to inconsistent quality and quantity. Acquiring desirable items can be challenging, and managing inventory turnover effectively becomes crucial to maintaining customer interest.
Operating a thrift store entails various expenses, such as rent, utilities, staff wages, marketing, and store maintenance. These costs need careful consideration and management to ensure they don’t outweigh the revenue generated from sales.
Thrift stores face competition from various sources, including online resale platforms and traditional retail stores offering discounted or clearance items. Staying relevant and competitive in a rapidly evolving market requires strategic differentiation and effective marketing efforts.
Stereotypes and Perception:
Some individuals may hold misconceptions about thrift stores, associating them with low-quality or outdated goods. Overcoming these stereotypes and building a positive reputation may require consistent effort, marketing campaigns, and providing an exceptional customer experience.
How to start a thrift store (8 steps to get started)
- Research and Planning: Conduct market research, develop a business plan, and define your target audience and location.
- Secure Funding and Resources: Determine your startup costs, explore financing options, and gather the necessary resources such as inventory, store space, and equipment.
- Legal Requirements: Register your business, obtain permits and licenses, and comply with local regulations and zoning laws.
- Acquire Inventory: Establish partnerships for donations, set up collection points, and implement an inventory management system.
- Set Up the Store: Create an appealing and organized store layout, arrange inventory displays, and invest in appropriate fixtures and signage.
- Build a Team: Hire knowledgeable and customer-oriented staff, provide training, and foster a positive work environment.
- Marketing and Promotion: Marketing is important for any business so you need to do promotion using both offline and online platforms to acquire more customers.
- Launch and Maintain: Have a successful grand opening, monitor sales and inventory, gather customer feedback, and continuously adapt and improve your thrift store operations.
Thrift stores have the potential to be profitable, but success and profitability can vary depending on various factors. Effective inventory management, strategic pricing, operational cost control, and adapting to changing consumer preferences are crucial for maximizing profitability. By embracing sustainability, community engagement, and providing unique shopping experiences, thrift stores can thrive in the retail landscape while making a positive impact on the environment and society.
Thrift stores generate revenue through the sale of donated items. The funds earned from these sales are often used to support charitable causes, fund community programs, or sustain the store’s operations.
Thrift stores offer unique advantages such as affordability, sustainability, and a diverse selection of items. While they may face competition, strategic differentiation, community engagement, and effective marketing can help them stand out in the market.
Yes, running a thrift store comes with challenges such as inconsistent inventory quality, competition, changing consumer trends, and overcoming stereotypes. However, by addressing these challenges through strategic planning and adaptation, thrift stores can overcome obstacles and enhance profitability.
Yes, online thrift stores have gained popularity and can be profitable due to their lower overhead costs, wider customer reach, and convenience for online shoppers. However, they require effective inventory management, a strong online presence, and efficient shipping and logistics to maximize profitability.