Used, consignment goods help some retailers thrive in down economy

While the word “consignment” often conjures up images of racks of used dresses and floors cluttered with old furniture and toys, increasingly, traditional outdoor and fitness retail shops find used gear can mean hidden gold. Consider that there are now more than 20,000 consignment shops in the United States that account for $8 billion in sales, according to an April report on CNN — and ellipticals, backpacks, skis and treadmills are all garnering a share of that market.

Also in April, the National Association of Resale & Thrift Shops surveyed its members (which includes more than 1,000 shops), and 63 percent of the 149 respondents said that sales had risen since the first quarter of 2009, with stores averaging a 32 percent increase. Not only are more consumers shopping consignment stores, but NARTS executive director Adele Meyer said new consignment stores are opening at a faster rate than in recent years. Traditionally, the resale industry grows about 5 percent each year, but Meyer told SNEWS that this year it would grow about 7 percent.

“Whenever the economy slows down, this is an industry that gets looked at as option for people to save money, or to make money by selling things,” Meyer told SNEWS. While some people think of consignment stores as musty shops filled with less-than-desirable goods, that’s not really an accurate picture of the market, she said. Consignments stores sell a wide range of things that attract shoppers who fall into all income levels and demographic groups.

“The demographic is completely and totally across the board,” said Meyer. “We’re dealing with stores selling a blouse for 50 cents, and on the other end of the spectrum, stores selling a purse for $2,000 that was $10,000 new.”

At Home Fitness and Wilderness Sports are two stores among a smattering of fitness, outdoor and sporting goods stores that told SNEWS they are finding that selling used equipment directly or on consignment is one way to continue to do well as most other sectors of retail continue to limp along. The reason for their success is simple: cash-strapped consumers are looking for deals.

Since the economy headed over the cliff, sales of skis and outdoor gear have dropped 12 percent at Wilderness Sports, which has shops in Dillon and Frisco, Colo. But store co-owner Tom Jones actually has reason to smile.

From Oct. 1, 2008, to March 31 of this year, sales rose 21 percent at Second Tracks, a three-year-old consignment and closeout shop in Silverthorne, Colo., run by Wilderness Sports (www.wildernesssportsonline.homestead.com).

“That’s particularly heartening for me to see, because that’s in a climate where regular, high-end retail is dropping by double digits,” Jones told SNEWS®. “The consignment shop generated some good cash flow to cover losses elsewhere in the business.”

Fitness too has seen the advantages. In Arizona, the five-store At Home Fitness chain (www.athomefitness.net) seems to have benefited since it transformed the Scottsdale store this March into a shop that sells only consignment and closeout items. “It helps us hold our price at the premium stores, and yet offer discounted products to consumers at the (Scottsdale) store,” said Greg Feeder, co-owner of At Home Fitness. “It’s also helping us get more deals out of our normal stores.”

Because consumers have less money to spend these days, they are reluctant to buy new equipment until they can sell an older piece of equipment that they no longer want to use. At Home Fitness lets customers apply the value of their old products to the purchase of a new item, Feeder said. Plus, At Home Fitness will transfer the customer’s used equipment to the store for no charge.

“Rather than the person having to put it on Craigslist or have a garage sale to get rid of it, we handle it in one fell swoop,” said Feeder.

Sales trends for outdoor and fitness products

For several years, sales of used sports and fitness equipment have increased each year by high, single-digit percentages, said Pat Quinn, brand director for Play It Again Sports (www.playitagainsports.com). “When the recession hit last year, our sales were up about 10 percent, and this year they were up about 12 to 14 percent,” he said.

Quinn said that fitness equipment is the No. 1 growth category for used products at Play It Again Sports. “While consumers have cut back on new fitness purchases, they have expanded their used fitness purchases,” he said. “Anything in fitness is hot — used treadmills, used ellipticals, anything to do with yoga, or home fitness, or the P90X program.”

But statistics from the National Sporting Goods Association don’t quite agree with those of Play It Again Sports. The NSGA reported in June that in 2008 consumers purchased $969 million in used sporting goods equipment, down from $1.08 billion in 2007 and $1.01 billion in 2006. According to the NSGA, in 2008, consumers spent $636 million on used equipment for outdoor sports (including camping, fishing and shooting sports), a 5 percent drop from 2007. In 2008, they bought $158 million in used exercise equipment, a 24 percent drop from the previous year.

The Truckee Sports Exchange in Truckee, Calif. (www.truckeesportsexchange.com), has been selling used ski and outdoor equipment for more than a decade, and Manager Max Rodatz said it’s difficult to gauge to what degree the recession has affected sales. “We’re doing really well, but it’s not clear if it’s really up or down,” he said. In addition, Rodatz noted that the Internet and sites such as Craigslist have impacted the store as much as the economy.

But Winmark, parent company of Play It Again Sports, clearly thinks the used-product market is booming like never before. This year, and each year for the foreseeable future, it will open 10 to 20 new Play It Again Sports stores. In addition, new owners will purchase about the same number of existing stores each year. “With the success of the used business, it’s drawn more interest to the Play It Again Sports stores that exist today,” said Quinn.

According to Quinn, the Play It Again sports franchise includes 364 stores, each of which carries 60 percent to 70 percent new equipment and 30 percent to 40 percent used equipment. These stores offer people several options for unloading their used equipment. The stores can purchase a person’s used equipment outright, arrange to sell it on consignment, or apply a used product’s worth to the purchase of a new item or offer credit for a future purchase. Quinn said most people want to sell their items and get a check immediately. The second most popular method is to trade in gear, while the consignment option is, by far, the least popular. According to Quinn, consignment sales make up 2 percent to 5 percent of Play It Again Sports’ overall business.

Keys to used and consignment success for smaller retailers

PreOwnedFitness (www.preownedfitness.com) has served the Houston area for a number of years. The business was a separate 2,500-square-foot shop with pre-owned equipment that sat next to a 7,500-square-foot Busy Body store, both owned by Stan Terry Jr. In the last year, Terry told us, the two have been combined into a 15,000-square-foot showroom with Busy Body and pre-owned equipment together, albeit still maintaining separate signage to help consumers be clear what’s inside the doors.

Jones of Wilderness Sports sees an advantage in having a separate shop for consignment and closeout sales, rather than housing pre-owned items in a traditional store.

“You don’t want to dilute what you do in your higher-end specialty retail,” said Jones. He said that, to some degree, used-product sales can rob from sales of items at full retail. But just as important, many small shops simply don’t have room for all the used gear that comes in. “When we started out, we had consignment products in the regular retail shop in a dedicated corner, but the concern was that there was not enough space. We had piles of backpacks, and things were literally spilling out into the rest of the store.” As a result, the store began to appear disorderly. Plus, it did not present the used items in the best light possible. “You want to have a good presentation, even though an item is used. You can’t junk it up,” said Jones.

He added that placing used gear in a dedicated shop increased his consignment sales from representing 5 percent of his overall business to 15 percent.

While At Home Fitness has sold gear on consignment in the past, the new store has definitely increased sales since opening its Scottsdale store. “We’re actually capturing more deals in the marketplace because we have a place to put the used equipment,” said Feeder. “We used to try not to have too much used stuff on the floor (of full-retail shops), because we want to sell the new stuff. We would be very picky about what we brought in, and it would have to be something we could sell very fast.”

Some consignment stores want to sell items as quickly as possible to free up floor space, and they urge customers to bring in things appropriate for the current or upcoming season. “We start accepting skis in November and begin taking warm-weather items in April,” said Jones. By contrast, the Truckee Sports Exchange will accept skis and other winter gear any time of the year. “I don’t want to put too many rules on people,” said Rodatz. “For a shop like ours you have to be flexible, or you’re going to miss out on a lot of good stuff.” And, while Play It Again Sports will accept any item year-round, it also encourages customers to keep the seasons in mind. “With consignment, there’s a 90-day window,” said Quinn. “If product doesn’t move within 90 days, the customer has to re-do the consignment deal or pick it up.”

No matter what used gear a store is selling, the other important consideration is to make the consignment process professional and organized, said Feeder. “You want to make sure with the used stuff that you’re not doing it like a used car salesman. You don’t want to seem like you’re shooting from the hip, because you can lose your integrity,” he said. To ensure that customers are treated equally and fairly, At Home Fitness has a certain pricing structure for used equipment that is used for each sale or trade-in. Feeder said that some customers will contact each of the five At Home Fitness locations trying to leverage a better deal with each call. If the customer gets the same response each time, he or she will feel like they’ve walked away with the best deal possible. Having the pricing structure also means managers are not forced to guess at pricing and wheel and deal.

While selling used products is a different kind of game, plenty of retailers recognize that consumer habits are changing, and there’s plenty of money to be made off thrifty shoppers. As Feeder noted, one thing is for certain in today’s economy: “Everyone is scratching for their deals.”

–Marcus Woolf