How To Start a Thrift Store Business in 2024 – The Ultimate Guide

Opening a thrift store in 2024 presents a unique opportunity to capitalize on sustainable shopping trends, affordability, and the rise in consumer consciousness around waste reduction.

Companies like Poshmark and ThredUp are experiencing tremendous growth by buying and reselling high-end fashion items.

You can profit by starting your thrift store, whether you focus on vintage clothing, furniture, or other items. However, opening a thrift store can be nerve-wracking, especially if you don’t know where to start. Here’s a comprehensive guide to help you launch a successful thrift store:

Why You Should Open a Thrift Store

Opening a thrift store in 2024 is a financially sound decision and a rewarding venture that aligns with many of today’s consumer values. Here are the key reasons why launching a thrift store can be a great business idea:

Rising Demand for Sustainable Shopping

Consumers are becoming increasingly environmentally conscious, with sustainability now playing a major role in their purchasing decisions. Second-hand stores offer a way to reduce waste and promote recycling, which resonates with the modern consumer’s desire to minimize their environmental impact. The global second-hand market is expected to reach $350 billion by 2027, growing significantly faster than traditional retail sectors.

• Eco-Friendly Option: Thrift stores help reduce the environmental footprint of manufacturing new products by reselling pre-owned goods. More people are prioritizing sustainable consumption and opting for second-hand goods over new ones.
• Fashion Industry’s Shift: Fast fashion is being challenged by circular fashion, which advocates for extending the lifecycle of garments. Thrift stores are at the forefront of this change, offering consumers a more ethical way to shop.

Lower Startup Costs Compared to Traditional Retail

Starting a thrift store generally requires less capital than opening a traditional retail business. Since you’re reselling pre-owned goods, your initial inventory costs can be significantly lower, especially if you source items from donations or consignment agreements.

• Affordable Inventory: Many thrift store owners get their inventory for free through donations or buy bulk lots at very low prices. Unlike retail stores that invest heavily in new stock, thrift store owners can increase their margins because of the low acquisition cost.
• Flexible Space Requirements: Thrift stores can operate out of smaller spaces, reducing the amount spent on rent. You don’t need a luxury retail space for a thrift store, which allows for more flexibility in choosing an affordable location.

Profit Potential

Thrift stores have a high-profit potential due to the low cost of goods sold (COGS). Since most of your inventory is acquired at little to no cost, the mark-up on second-hand goods can be substantial.

• High Markup: Even with competitive pricing, the margin on pre-owned items is often much higher than new retail products, as many items are donated or acquired at minimal cost.
• Consistent Demand: Thrift stores tend to thrive in times of economic uncertainty. As inflation rises, more people turn to thrift stores for affordable clothing, furniture, and other necessities.

Community Engagement and Social Impact

Thrift stores often become community hubs, fostering a sense of connection and mutual support. Many thrift stores also partner with local charities, offering an opportunity for you to give back while running your business.

• Support Local Causes: Many thrift stores are tied to charitable organizations or operate on a social enterprise model. This allows you to contribute to local causes, build brand loyalty, and foster goodwill within your community.
• Community Events: Thrift stores can host donation drives, swap events, or workshops on sustainable living, increasing customer engagement and foot traffic while strengthening community ties.

Opportunity for Online Expansion

The thrift store business is no longer confined to brick-and-mortar locations. In 2024, many thrift stores are combining physical and digital platforms, selling items online through websites and social media channels.

• Online Growth: Thrift store owners can reach a much larger audience through online sales channels like eBay, Poshmark, and Depop. A well-curated Instagram page or website can help attract customers from all over the world.
• Hybrid Model: Even if you start with a physical store, expanding to an online platform can provide an additional revenue stream and build your brand’s presence in the growing e-commerce market.

Easy to Diversify

Once your thrift store is established, diversifying your offerings becomes easier. You can branch out into different product categories, such as furniture, books, accessories, and home décor, allowing you to tap into multiple revenue streams.

• Flexible Inventory: Unlike traditional retail, which is often focused on a single product category, thrift stores can offer a wide range of products. You can expand into various areas based on customer demand and trends.
• Seasonal Trends: You can quickly adapt to changes in trends or seasons by introducing themed sections (e.g., holiday decorations or summer wardrobes) or running limited-time promotions based on current demand.

What Are The Steps to Starting a Thrift Store?

Before opening a thrift store, you, of course, must first do some preparatory work to set your business up for success. Here are the steps to follow before opening a retail thrift store.

Step 1: Create a Thrift Store Business Plan

As with any other business, the first thing to do before starting a thrift store is to create a business plan, including all the details and decisions about collecting your product, how many employees you will need, the most appropriate location, your marketing strategies, etc.

A business plan also helps potential partners and investors better understand your business and its vision. Since you may be starting this business without experience, you will need help writing a professional business plan. Be sure to include in it the following points:

Executive summary

• Mission statement
• Vision statement
• Sales forecasts
• 5-year profit forecast
• Potential expansion plan

Company summary

• Business structure
• Startup summary
• Startup cost

Products and services

• Inventory planning
• Supplier analysis
• Consignment vs Wholesale

Market analysis

• Market trends
• Marketing segmentation
• Target audience

Strategy & implementations

• Sales strategy
• Marketing objectives
• Advertising strategy
• Pricing strategy

Staff plan

• Average salary of employees
• Number of staff needed
• Benefits and bonuses

Financial plan

• Important assumptions
• Break-even analysis
• Projected profit and loss
• Annual profit
• Annual gross margin
• Projected cash flow
• Projected balance sheet
• Business ration

Before writing your business plan, make sure you have chosen your niche. This will allow you to write the plan’s elements accordingly and have a focused but broad enough target market.

Step 2: Register Your Business

Registering your business is an essential step in the process of opening a thrift store. It is a prerequisite for raising capital from investors, paying taxes, opening a bank account, or establishing your company’s business structure. Follow these steps to get started. And don’t forget to consult your local city hall, too:

Choose a business name and trademark it

Starting any business begins with the name. This is the most immediate thing that will set your thrift store apart from others. Make sure you choose a name that represents the identity of your business but is also memorable. After picking a name, you should trademark it to avoid any legal disputes down the road. 

To make sure the name you choose is not already in use by another company, consult the United States Patent and Trademark Office. You can trademark any intellectual property associated with your brand, not just the name.

Get your EIN

Also known as a Federal Tax Identification Number, EIN stands for Employee Identification Number and is used to identify a business entity. You will need it to open a merchant account, but also to proceed with other administrative procedures. You can obtain the EIN online on the IRS website. 

Choose your thrift shop business structure

There are several business entities, each with advantages and disadvantages. The type of business structure you choose will determine your taxes, personal liability, and business registration requirements. Here are some of the types of business entities you can choose:  

Sole proprietorship

This is the most common type of business entity. It makes no legal distinction between the business and its owner. In this type of structure, the owner is responsible for all income, debts, or liabilities incurred by the business. The owner pays taxes on the business income on their income tax return. However, keep in mind that you will have difficulty accessing bank loans or capital from other investors if you register your business as a sole proprietorship. 

Partnership

A partnership is a business structure similar to a sole proprietorship but for two or more people. As with a sole proprietorship, the owners own the profits and are responsible for any losses. In addition, each partner pays taxes on their share of business income on their income tax returns.

 Limited Liability Company (LLC) 

Unlike a partnership or sole proprietorship, a limited liability company is a business structure that protects its owners from personal liability for its debts or liabilities. Their profits and losses are passed on to the members, who report their tax returns. The regulation of LLCs varies from state to state. Most thrift stores will fall under this category.

Corporation

A corporation is a legal entity separate from its owners. Under the law, corporations have many of the same rights and responsibilities as individuals. They can sign contracts, lend and borrow money, sue and be sued, hire employees, own property, and pay taxes.

Step 3: Register for Taxes

Before paying taxes, you must obtain your Employer Identification Number or EIN. As aforementioned, this number will be helpful when filing other essential documents. 

Once you have your EIN, you must choose your tax year. From a financial standpoint, your thrift store business will operate on a calendar year (January-December) or a fiscal year, meaning a 12-month period that can begin any month. This selected period will end your tax cycle, while your business structure will determine the taxes you pay.

The IRS website also has a taxpayer checklist, and taxes can be filed online. It is advisable to consult with an accountant or other professional to help you with your taxes to ensure that you file correctly.

Step 4: Fund Your Thrift Shop

Knowing how to start a thrift store also means figuring out how to finance the projects listed in your business plan. Securing financing for your business is paramount, and there are several ways to raise capital:

Bank loans 

Bank loans are the most common form of financing for small and medium-sized enterprises. They are frequently used to finance start-up capital and larger, long-term purchases. The loan is not flexible and may not be the best capital for businesses with fluctuating financial needs.

Loan defaults can result in lower credit ratings, higher interest rates on existing and future loans, foreclosure of collateral, and legal proceedings against the company. The loan’s structure can also lead to long-term issues.

Sole proprietorships must be especially wary of large bank loans since your personal assets aren’t protected in the event of bankruptcy.

Business credit cards

Much like personal credit cards, business credit cards offer the ability to borrow up to a predetermined credit limit. At the end of each month, you must pay off the stated minimum balance, and any unpaid balance will begin to incur interest until it is paid off in its entirety. So you can avoid interest if you pay off your balance in full each month.

Unlike business loans, credit card providers generally use your income and personal credit score to extend credit, making it a viable option for businesses with little or no cash flow. This means you won’t have to provide your monthly or annual business income documentation. For most business credit cards, the minimum personal credit score is 670. However, a higher score will get you the best terms.

This route is also risky and has very high interest rates.

Business Loans

It is usually difficult to obtain a traditional business loan, as many lenders require potential borrowers to have a minimum annual income to qualify for a loan. However, some lenders are willing to provide loans to start-ups without significant revenue. 

Commercial lenders may likely require additional documentation if a new thrift store does not yet have proof of annual revenue. In this situation, you are usually required to provide financial projections and a detailed business plan to illustrate your ability to repay your debts. 

Among the institutions that grant loans to start a thrift store business is the Small Business Administration (SBA). The SBA acts as a guarantor, helping entrepreneurs obtain bank approval for a loan. The SBA has several types of loans depending on your budget, your needs, and your company’s size.

Step 5: Get Your Licenses/ Permits

No matter what business you start, there are permits or licenses that you must have in order to practice your profession or run your business without getting into trouble with authorities. If you want to run a thrift store, it is essential to know the licenses or permits that will be required:

General business license

A general business license is a license required before operating a business in almost every state in the United States. It is usually issued by the Department of Revenues and the Secretary of State, depending on the office responsible for business registration. Thrift shops, like any other, will require this.

Sales permits

A vendor permit, sometimes called a sales tax permit or sales and use tax permit, is a business license allowing you to collect tax on taxable goods and services. Your business’s responsibility is to send the collected tax to your state taxing authority.

Zoning permit

A zoning permit is a type of permit you need to have before operating your physical store. Since the thrift store business is a retail business, choosing the right location is critical to the success of your business. It should be your number one priority. However, if you want to build a retail store or lease a location for your business, obtaining a zoning permit is the first step.

Sign permit

A sign permit is another key item for many thrift shops. You can’t open a brick-and-mortar store without putting a sign on the storefront. However, any information about your business that needs to be displayed must be done lawfully. This information can be in the form of words, signs, symbols, or pictures to promote your business.

Wholesale license

As a retailer, you will often purchase your products in bulk from your suppliers. Wholesale licenses allow you to purchase items at wholesale prices and give you more credibility. You get specific discounts and other related benefits. Since business owners are exempt from paying tax on items purchased for resale, suppliers require you to show a wholesale license, hence the need to have one. Thrift store owners, however, may not have a need for this.

Most aforementioned licenses are the most obvious. You may be required to obtain additional licenses or permits depending on your state. Contact an attorney to assist you in the process. 

Step 6: Open a Business Bank Account 

Before you start earning money, you’ll need a place to keep it, which requires opening a bank account. Having your business finances separate from your personal account makes filing taxes and tracking your business income easier. 

Opening a business bank account is very simple, just like opening a personal account. Just ask your favorite bank about their rates and features. They also offer accounts tailored to businesses.  

Several banks offer different options, so it’s a good idea to review your options and select the best plan for you. Once you’ve chosen a bank, you can open a new account by bringing the necessary documents. 

Step 7: Invest in POS Technology

Technology is at the heart of effective retail management. And one of the essential tools in the industry is a great thrift store POS system. Choosing the best thrift store POS system for your business allows you to handle transactions within your store better control inventory management to avoid stockouts or excess inventory.

KORONA POS offers a robust thrift store POS platform with comprehensive inventory management software that tracks all operations taking place in your thrift store in real-time. Apart from the POS system, you should also have cameras in case of theft.

Step 8: Get Business Insurance

One of the aspects often overlooked when starting a business is the business insurance side. To be fully covered, a thrift store will need to purchase several types of insurance, including the following:

1. General liability insurance

This covers certain expenses such as medical bills or legal expenses in the event of a customer injury on the business premises.

2. Commercial property insurance

This covers items such as the cost of the building and the value of inventory if the store is damaged by fire or a natural disaster.

3. Workers’ compensation insurance

This covers the business if an employee is injured on the job. It can cover expenses such as lost wages or medical expenses.

4. Business Property

It provides coverage for your equipment and supplies.

FAQs: Opening a Thrift Store Business