Economy and Small Business

Retail survivor: resale: Consignment, thrift shops doing well despite nation's economic slowdown

May 26, 2008

As gas prices approach $4 a gallon and economic growth grinds to a standstill, many retail shops are feeling the pain. Consumers who don't have as much disposable income are cutting back on clothing and accessories purchases.

The University of Michigan's consumer sentiment index dropped to its lowest level in 26 years last month, and several reports find that consumers will likely be spending their so-called economic stimulus payments on bills, not shopping sprees.

But one retail category already is seeing more traffic, including many customers trying them out for the first time: Consignment stores that cater to clothes horses who love designer labels but are watching the bottom line.

Lynn Burrows has seen boom times before during her 22 years owning The Toggery, an upscale consignment boutique at 6349 N. Guilford Ave. When the economy dipped in the late 1980s, sales peaked.

"The last time we had a recession, our business was up about 18 percent," Burrows said. Though the economy is not officially in a recession yet, she said recent sales numbers are increasing. She declined to disclose exact figures, but said the shop's annual sales are between $500,000 and $1 million.

"The last couple of months, we're heading up again," she said. "People are looking in their closets for money."

Consignment stores take products-in The Toggery's case, women's clothing and accessories-that the original owner no longer wants and sell them at a substantial discount. Shops accept items they believe they can sell, then share as much as 50 percent of the proceeds with the former owner. Resale shops are another option, buying clothing outright and then selling it.

Renewed interest in recycling also has given way to more consignment newcomers, Burrows said.

Traditional retail shops, on the other hand, are struggling. Several large department stores such as Macy's Inc. reported retail sales dropping for the first quarter as consumers focused spending on necessities.

Indeed, used-clothing stores tend to buck the retail trend during tight times, said Adele R. Meyer, executive director of the 1,000-member Michigan-based National Association of Resale & Thrift Shops. She calls it the "recession-proof" segment of retailing.

Jennifer Martin, owner of Annie's Apparel Resale Shop at 5638 E. Washington St., agreed.

"When the economy slows, things pick up," Martin said. "It's a better business to be in than most during a recession."

There are no firm statistics about the industry, but Meyer's association estimates the number of consignment and resale shops nationwide at 25,000 and climbing-by 5 percent a year. Most such stores are locally owned small businesses.

As more people try consignment and resale, more stores open. Central Indiana is no exception.

Roxanne Parriott opened upscale women's consignment shop In Vogue last year in Carmel. Since the economic slowdown, she has received more calls from women asking how consignment works. And more consigners are dropping in to cash out their accounts so they can go to lunch with the girls or top off the gas tank without credit card guilt.

"I've noticed that more often," Parriott said.

Growing local interest in consignment also caught the attention of Dawn Pfannenstiel, who opened a central Indiana branch of the Tulsa, Okla.-based consignment franchise Just Between Friends. It holds two consignment fairs a year, selling clothes, toys and accessories-everything from booster seats to jungle gyms-at the Hamilton County Fairgrounds.

Pfannenstiel, who is a Carmel native but now lives in Tulsa, debuted the fourday event in 2007. Sales at this year's spring fair came in at about $15,000-40 percent more than last year.

Consigners drop off clothes and get early access to shop at the invitation-only first day of shopping. Then the sale is open to the public.

"Stretching your dollar is definitely what consignment and shopping consignment are all about," she said.

And Columbus, Ohio-based Rag-ORama, a resale store, opened a shop in Broad Ripple on May 1. The small chain has additional stores in Columbus; Atlanta and St. Louis.
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