Used Merchandise Stores

SIC 5932

Companies in this industry

Industry report:

This category includes establishments primarily engaged in the retail sale of used merchandise, antiques, and secondhand goods, such as clothing and shoes, furniture, books and rare manuscripts, musical instruments, office furniture, phonographs and phonograph records, and store fixtures and equipment. This industry also includes pawnshops. Dealers primarily engaged in selling used motor vehicles, trailers, and boats are classified in the Automotive Dealers and Gasoline Service Stations industries, and those selling used mobile homes are classified in SIC 5271: Mobile Home Dealers. Establishments primarily selling used automobile parts and accessories are classified in SIC 5015: Motor Vehicle Parts, Used, and scrap and waste dealers are classified in SIC 5093: Scrap and Waste Materials. Establishments primarily engaged in automotive repair are classified under Automotive Repair Shops industries.

Industry Snapshot

The used merchandise business, a branch of the retail industry, continued the growth spurt that began in the early 2000s, when consumers spent approximately $17 billion in this retail sector. New resale shops were opening rapidly in the United States into the late 2000s, and industry growth was estimated at 5 percent per year. By 2008, according to the National Association of Resale and Thrift Shops (NARTS), there were more than 25,000 resale, consignment, and thrift stores across the country.

The industry thrived in the status-conscience 1980s as people constantly upgraded their little-used possessions and consigned or donated their older items. In the 1990s the ecologically minded turned to recycling, which boosted purchases of recycled or used merchandise. Vintage clothing also became trendy, and more and more people who could easily afford new clothing instead purchased used clothing for style purposes. In the volatile 2000s the outlook was similar. In times of economic expansion, more people donate, whereas in times of recession, more people make used purchases. Either way, resale is one of the few recession-proof segments of retail, enjoying success in good times and bad.

According to industry statistics, there were an estimated 55,665 establishments engaged in the retail sale of used merchandise with combined annual income of nearly $12 million in 2009 with industry-wide employment of 177,687 workers. The majority of used merchandise stores were located in California, Texas, and Florida. Used merchandise stores represented 29.3 percent in industry market share with sales totaling $3.94 billion in 2009. Pawnshops with 12.3 percent in market share had sales of $3 billion, while antique sales constituted 42.3 percent in market share with sales of $2.22 billion. Other significant categories were secondhand clothing generating $509 million; secondhand furniture reported revenues of $233.7 million; secondhand computers and accessories sold $221.4 million; and secondhand clothing and shoes with $153.4 million.

Organization and Structure

In the late 1990s the vast majority of used merchandise businesses were privately owned and family run. The industry is attractive to small-business people because of its relatively low capital investment and relatively high returns. Consumers like used merchandise stores because they can obtain 50 to 85 percent savings off the cost of new goods. Still, the profit margin for the retailer is often higher than that realized with new goods. The cost of purchasing merchandise to sell in such operations is extremely low, and operators typically sell used products for double their cost. Used merchandise sellers buy their inventory from the public, offer goods on consignment, or receive goods for free or at very low cost from charities. Both not-for-profit and for-profit used merchandise stores buy their inventory from charities, which collect door-to-door for as little as $8 per three cubic feet of goods. "Thanks to the low cost of goods, pretax profits are around 10 percent, roughly double Wal-Mart's," wrote Lisa Gubernick in Forbes.

Women especially were attracted to the used merchandise business, particularly for clothing. Many owned and operated used merchandise stores out of their homes. Nation's Business reporter Sharon Nelton profiled two women who typified the kind of entrepreneur who is attracted to the used merchandise business. Karen Lynch, a former flight attendant, founded Children's Orchard in 1980. The store specialized in quality used children's clothing, which it sold for 50 to 80 percent less than new clothing. The store paid cash for its stock, which had to be clean and in mint condition. By 1996 Lynch's business had grown to include more than seventy franchises in nine states. Used apparel accounts for two-thirds of the sales and makes up 80 percent of the store's inventory.

At the other end of the scale was Judy Bradford, who operated I Do--I Do, a used bridal wear consignment store, out of her home. Consignees acted as agents for people wishing to sell used items, displaying used merchandise and splitting the price with the consignor after it had been sold--usually 50/50. The advantage of selling on consignment is that the risk of being left with immovable goods is virtually eliminated. The disadvantage is that consignment stores offer lower profit margins and little control over merchandise, whereas a store relies on donations and drop-offs.

Many used merchandise operations mix their means of sale among resale, consignment, and initial sale. Bradford and Lynch offer new merchandise that complements the shops' main lines. Offering new merchandise alongside used "serves an important marketing purpose by upgrading the entire store's image, bringing in customers that might otherwise never go into a secondhand store," Gubernick commented. When people look at a used clothing store as their own favorite "specialty" shop, it is wise to have a little of everything for sale.

Antique shops comprise another important segment of the used merchandise business. Antique shop owners act as dealers of old and often valuable furniture, ornaments, coins, rare manuscripts, and so on. Sometimes the dealers pay outright for the used merchandise, but others operate on consignment. The number of antique shops grew in the 1980s, mainly at the lower end of the market, with the rise of cottage-industry style antique/junk shops.

Used merchandise stores generally have been marketed by appealing to working-class consumers in need of inexpensive merchandise or by positioning themselves as dealers in rare items prized for their investment value, as is true of antique shops. A third kind of marketing became evident in the 1990s as shops geared toward middle-class but price-conscious buyers emerged. TVI, a company that runs "thrift department stores," used television advertising to lure customers--an unusual tack for thrift stores.

The industry boomed in the early 1990s, benefiting from the economic recession. More and more middle-class consumers who were short of disposable income and trying to save a buck turned to resale goods. According to the 1997 Economic Census, an estimated 17,990 used merchandise stores operated in 1996, employing 97,965 people.

More than half the customers at Washington, D.C.,-area Goodwill stores earned between $25,600 and $51,200 annually, and more than 60 percent had full-time jobs and were women between 22 and 45, according to a 1996 survey by the industry leader Goodwill Industries. More than 62 million people shopped at Goodwill stores each year. In 1996 some Goodwill stores opened "computer shops" in the backs of larger stores, a move estimated to draw in even more customers.

Joan Schindel, owner of a Virginia Play It Again Sam, said the store's typical customer is a professional or middle-class family with a couple of children. A used sporting goods store, Play It Again Sam sells merchandise for at least half what it would cost new. "Because there isn't unbounded optimism in the future, people are more aware of the choices they make," Schindel said. Even people who can afford to buy new products shop in used merchandise stores for the thrill of finding a bargain or because their children quickly wear out or grow out of their clothes.

Throughout the 1990s the used merchandise industry also benefited from increased environmental consciousness. "People are more conscious in the '90s of recycling and not wasting," Amy Helgren, co-owner of a Chicago children's resale shop told Newsweek in 1992. Karen Lynch, owner of Children's Orchard boutiques, noted, "We see the resale business as recycling at its very best."

Because of this and other factors, the number of for-profit resale shops increased an estimated 10 to 15 percent each year during the early to mid-1990s, according to NARTS. There were more than 65,000 used merchandise stores in 1996, up from 55,068 in 1992. The greatest number of shops in the 1990s specialized in women's clothes, followed by children's clothes, bridal wear, and men's wear.

Dun's Census of American Business, which categorizes used merchandise stores according to sales volume, reported that approximately 87 percent of the stores surveyed had less than $250,000 in annual sales. In 1993, 26,955 stores (45 percent) reported annual sales between $100,000 and $249,000; 13,799 (23 percent) had less than $50,000; and 11,574 (19 percent) had between $50,000 and $99,000. A very small proportion showed higher sales volume as 3,613 stores (6 percent) had sales between $250,000 and $499,000; 1,912 (3 percent) had between $500,000 and $999,000; 1,248 (2 percent) had between $1 and $5 million; and 131 (0.2 percent) had more than $5 million.

Once havens for bargain-hunting students, used merchandise stores now appeal to people from all walks of life. Between 1987 and 1995 retail grew 52 percent, whereas the resale industry grew 92 percent. One barometer of the rising popularity of such stores was recorded by New York Times reporter Felicity Barringer, who noted that young Washington, D.C., insiders no longer shunned used clothes. "With the cost of dressing for success rising faster than the cost of housing, secondhand clothes are losing their stigma for a growing crowd of legislative aides, lobbyists, journalists, and consultants." Resale shopping became a mainstream activity in the early 2000s. Greta Bonaparte, owner of the Washington, D.C.,-based used clothing store A Man for All Seasons, told Barringer: "Attitudes have changed. There's no doubt about it. It's become a kind of in thing, the bargain of it." The mid-1990s brought with it a new style of dressing. The look, "retro," was epitomized by music videos and rock stars dressing in fashions from all ages of the twentieth century. Teenagers latched onto the retro look, and shopping at used clothing stores was one way to achieve it.

More traditional retailers, in fact, were getting in on the used merchandise bandwagon in the early 2000s. Wherehouse Entertainment, Hastings Entertainment, Trans World, and Tower all began selling used compact discs (CDs) alongside new ones. The online merchant eBay's site, half.com, sold an assortment of new, used, overstocked, and remaindered books, music, video games, electronics, and more. Like Amazon.com, Yahoo introduced a used merchandise section on its Web site. Independent used-merchandise Web sites also were proliferating.

The rise in sales of used CDS on the Internet and elsewhere was a sore spot for much of the music industry in the 2000s. With buyers able to buy, listen to, download, burn, and resell CDs, music industry executives complained that secondary music sales were cutting in to their profits. Others argued that used music represented a very small percentage of music sales in general.

Most sectors of this industry also benefited from the growing popularity of selling over the Internet. Spawned and aided, in part, by the huge success of eBay's Internet business, more antique stores and used-book sellers entered the Web. Booksellersolutions.com reported that 40 percent of used/antiquarian book sellers it surveyed had their own Web sites and that 45 percent had a Web presence through home pages on used-book listing services, including Abebooks.com. Many others also expanded their businesses by buying and selling on eBay. About 8,000 used and antiquarian book sellers existed in the United States.

NARTS reported that resale was one of the fastest-growing segments of the retail industry. There were an estimated 20,000 resale shops in the United States in 2005, and by 2008 the number had increased to about 25,000. Used merchandise stores employed 128,000 in 2004, according to the U.S. Census Bureau, and had a total payroll of $2.0 billion. Resellers continued to enter specialty markets as well, including furniture, plus-size clothing, bridal items, and sporting goods.

Furniture was one of the leading segments for growth in the used merchandise industry. Some used merchandise retailers expanded existing stores to accommodate furniture, and others opened a separate location specifically for furniture. Specialty apparel was also gaining steam, specifically with an increase in plus-size stores across the United States. Men's and teens clothing also were areas experiencing growth in the apparel category. Sporting goods, computer-related items, and music also enjoyed continued expansion in the resale business.

Pawnshops were an estimated $5 billion a year business in the early 2000s. Very popular during the Depression, pawnshops were sometimes the only way for people to get money for food and essentials. Pawnshops loan money on the security of personal property. The item pawned is then offered for sale in the pawnshop. Unsold items may be redeemed by the pawner for the same price originally given by the pawnbroker. Pawnshops deal in all used merchandise, from household items to musical instruments to jewelry. The most successful chain in this sector in 2004 was Cash America International, which had 450 shops across the country. EZCORP Inc. had 280 shops, and First Cash Financial Services Inc. had 200. Combined, these three companies had more than $877 million in 2004 sales.

Current Conditions

While some retail stores were shutting their doors throughout 2008 and 2009 as the economy worsened, new resale stores were either opening or established stores were adding to their grand total. In one survey conducted by NARTS, its members' revealed sales for the fourth-quarter of 2009 increased 71.4 percent compared to the same quarter in 2008 by an estimated 35 percent. Another 74.2 percent saw new customers come through their doors. Used merchandise stores grew seven percent in both 2008 and 2009 bringing the total number of resale shops to more than 30,000 in 2010.

According to one research firm, America's Research Group, roughly 16 percent to 18 percent of U.S. consumers will visit a thrift store during the course of a year, and about 12 percent to 15 percent of U.S. consumers will visit a resale shop or consignment shop. The industry's latest development was situating the various types of resale shops within the same vicinity or what was called "clustering" similar to the popular factory outlet stores.

The importance of recycling also played a role in the reported five percent annual growth the used merchandise stores were experiencing. One area of concern, however, centered on the resale of children's toys containing lead following the Consumer Product Safety Improvement Act that was signed into law in 2008. Luckily, the government has lessened restrictions for resale stores.

Industry Leaders

The used merchandise industry is dominated by Goodwill Industries International, Inc., a private, not-for-profit company based in Bethesda, Maryland. In 2006 it operated a chain of more than 2,000 secondhand stores and provided vocational training. Founded in 1902, the company generated $1.8 billion in revenues in 2006. More than 50 million people annually donated goods to the non-profit business in the mid-2000s, and in 2002 revenue from the retail sale of donated goods accounted for 54.7 percent of Goodwill's total revenue.

Goodwill strove to update its image in the 2000s, revamping many of its stores and adding amenities like coffee shops and used bookstores within their facilities. With new professional remodels, Goodwill also began opening superstores with up to 25,000 square feet of selling space. The average Goodwill store had about 7,500 square feet of selling space.

Another large resale shop was Buffalo Exchange, which opened as a single 400-square-foot store in 1974 and grew to a chain of thirty-two stores in twelve states by 2006. The company's revenues that year were more than $43 million.

Crossroads Trading Co., based in Berkeley, California, had sales of $20 million in 2006 at its twenty-two stores.

Cash America International, Inc., based in Fort Worth, Texas, was the world's largest public, stand-alone pawnshop chain based in Fort Worth, Texas. With 487 stores nationwide, it employed 5,100 people and earned $693.2 million in 2006.

Goodwill Industries International, Inc. reported sales of $2.8 billion in 2009 from its chain of 2,324 secondhand stores. Buffalo Exchange branched out into a total of fourteen states that brought its total store count to 39. The company reported $60.5 million in revenues and employees 500 workers during 2009. Crossroads Trading Co.'s 25 stores generated $20 million in 2009 with plans of adding to their total number of stores.

Workforce

Used merchandise stores employed 128,000 people in 2004, an increase over 114,000 employees in 2000, according to the U.S. Census Bureau. The industry's total payroll in 2004 was $2.0 billion. There were more than 25,000 resale, consignment, and thrift stores in 2006, and NARTS predicted continued growth of 5 percent per year.

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