PRINT THIS STORY:

CHANGE TEXT SIZE:

SLIGHTLY USED

Demand grows for brand-spanking secondhand goods

BY MAURA K. AMMENHEUSER

For many years the term “secondhand store” sent shudders through shopping center owners, and may even have caused some to free-associate.

“Dark, dingy, smelly, disorganized — a garage-sale environment,” said Becky Geyer, vice president of franchise management at Minneapolis-based Winmark Corp., which operates four secondhand chains.

“We used to say, ‘omigod, a junk store,’ ” said Michael Pollack, president of Michael A. Pollack Real Estate Investments, Mesa, Ariz., which leases to three stores operated by charity thrift chain Goodwill Industries International. “We don’t say that anymore.”

At a time when developers are building luxury-laden centers in the midst of a fairly solid U.S. economy, and despite the public’s insatiable appetite for the newest consumer goods, a surprising trend is taking shape: Secondhand clothing and other merchandise is gaining popularity. The resale-clothing world includes a wide range of niches — some of them very high-end, such as wedding gowns or designer wear. The business model involves people bringing in their used clothing to sell to the store. The shop’s buyers pick and choose, offering customers cash or store credit for the good stuff. The store resells the items, netting a profit for clothes offered at prices far below regular retail.

“People are becoming more price-conscious,” Pollack said.

And consumers are certainly saving money at these rerun shops. “The price difference is mind-boggling,” Pollack said, recalling a child’s gift he bought new for $80 before finding the identical item at a resale shop for $15.

Fashion cents
Taylor Bond, president and CEO of Children’s Orchard, Ann Arbor, Mich., a secondhand children’s-goods store, cites a Columbia child’s coat that normally retails for $150; Children’s Orchard resells it for $30.

Orchard, which does about $20 million in annual sales, according to Bond, is one of several expanding chains catering to people who want to be stylish and stingy at the same time. By mid-November Orchard had 85 franchises, and commitments from franchisees for an additional 15, says Bond. Ultimately, Orchard could grow to about 300 stores, he says. The stores span 1,500 square feet to 2,000 square feet.

Like just about all secondhand chains, Orchard avoids malls in favor of open-air centers, for their greater accessibility — and affordability.

Once Upon a Child, a Winmark chain, sells children’s clothes, toys and furniture. (Two other Winmark resale concepts, Play it Again Sports and Music Go Round, don’t deal in clothing.) There are 211 Once Upon a Child stores in the United States and Canada, and five in Japan. Winmark’s concepts typically add 50 to 75 units a year, Geyer says, and the clothing stores average $400,000 to $500,000 in annual sales.

It isn’t just children who are sporting secondhand apparel. Their trendy older sisters and brothers are doing it too. Orchard is testing a concept called Howie Mack for the teen and college markets. The company opened a shop at Boston University in September. Bond wouldn’t reveal sales figures but he anticipates enough success for the company to begin selling Howie Mack franchises in the middle of this year.

Winmark’s fourth chain, Plato’s Closet, has one corporate store and 124 franchises, and aims directly at teens.

Tucson, Ariz.-based Buffalo Exchange, which sells mostly women’s clothing and some furniture, has 23 stores in 10 states, of which seven are franchised and six are in shopping centers. The company’s president, Kerstin Block, cites plans to open as many as four new stores a year. The 30-year-old company’s annual revenue is about $29 million, she says.

There are 15,000 resale stores in the U.S., according to the National Association of Resale & Thrift Shops, and the industry adds new stores at an annual rate of 5 percent. (The terms “resale” and “secondhand” cover many businesses, including charitable thrifts, consignment shops and stores that buy used goods outright to resell.)

Secondhand Rose blooms
In appearance and administration, these bear little resemblance to the secondhand stores of yesteryear.

Franchise growth has given secondhand clothing stores a higher profile and a more professional shine than many mom-and-pops can muster, Block says. Many of today’s resellers use lighting, signage and fixtures typical of conventional retailers, making them nearly indistinguishable from, say, a Fashion Bug or Dress Barn, if not a Nordstrom.

By far the toughest group to impress is the teen-agers. With all the buzz about their spending power and the legions of retailers scrambling to satisfy their every fashion whim, it’s odd to think of the high school set wearing anything but the latest, most exclusive, newest fashion.

Yet experts say style combined with savings can woo even the pickiest adolescent. The best clothing resellers are top-notch fashion whizzes.

Resalers see an opportunity in a teen-age paradox: Kids desperately want to conform with their peers, yet hanker to express an individual style, Geyer notes. At secondhand shops, they can find both “recycled” mall merchandise and quirky, one-of-a-kind pieces — things no mass merchandiser can yield.

Teens won’t be caught dead anywhere remotely musty, however, and that emphasis on style is what makes or breaks resale shops devoted to grown-ups too. “The quality standard has to be high,” Geyer said. “It has to be the right styles. We have cool stuff — cool stuff that looks brand new.” Jeans going for $68 at Abercrombie & Fitch, for example, could cost $16 at Plato’s Closet, she says.

Even landlords are opening up to secondhand stuff.

“Definitely it’s changed,” said Block. “The stigma of all that has gone.”

“It’s like anything else — there are good operators and bad ones,” said Shaheen Sadeghi, who developed The Lab, a collection of 13 shops in 50,000 square feet in Costa Mesa, Calif., dubbed “the anti-mall” for its unique, eclectic flavor. Buffalo Exchange is a 2,300-square-foot tenant there.

“I’d rather have a great secondhand store than a homogenized store,” Sadeghi said. “It’s amazing the people who walk in there. They get the 16-year-olds who might look for very unique, funky, [vintage items], or a 45-year-old woman.” The store caters more to the young end, though, and “it all has to do with style.”

Improved aesthetics, too, have made secondhand shops more appealing to landlords, sources say. Large chains led by experienced merchants who choose inventory carefully and present it well are solid additions to mid-to-upper-market outdoor centers, they say.

“It’s all about curb appeal. … It’s a trend that’s going to continue,” especially when the next economic slump occurs, Pollack speculates. “You’ll see the trend explode.”

But don’t expect to find these stores in enclosed malls or upscale new projects. The resellers want the drive-up convenience of open-air stores for two reasons: People haul in their stuff to sell, and these operations “typically can’t afford to pay the rents a mainline retailer will pay,” Pollack said.

Still, resale clothing as a category is more limited than, say, The Limited, notes Geyer, “because we have to get the merchandise from the customer,” unlike ordering truckloads from a manufacturer. And if there are two or more resellers in a market, the savvier will win out, he says.

“It’s great for our niche,” Sadeghi said, referring to her own concept. “I don’t see a huge trend of people who are going to run out and open these stores. It takes a passion. … It’s not something everybody has a flair for.”

Charity parity
Charity thrifts and local boutiques, too, are responding to the increased vibrancy of the secondhand market. These have been around seemingly forever, but today large nonprofits are investing in their stores’ appearance, and some mom-and-pops have become chains run with the professional atmosphere that consumers and landlords expect from conventional merchandisers.

Goodwill Industries, based in Rockville, Md., operates 1,950 North American thrift stores. Revenues, which were $1.22 billion in 2003 according to the company’s Web site, fund job training for the disabled and other causes.

The Salvation Army, with U.S. headquarters in Alexandria, Va., has 1,526 U.S. stores, according to its Web site. In 2003, those yielded $152 million in sales.

Savers, a private for-profit chain based in Bellevue, Wash., runs 205 stores in the United States, Canada (the 100 Canadian stores are called Value Village) and Australia. Savers expects to open about 15 new stores per year in North America for the next several years, says Robert Coron, the company’s assistant director of real estate. Seventy percent of its inventory is soft goods, he says, mostly women’s lines. (Sources point out that men are notoriously hard on their clothes, wearing them until they fall apart, and the also have little enthusiasm for shopping. That’s why resale shops devoted to menswear are extremely rare.)

Savers follows an unusual business model. Like Goodwill and The Salvation Army, it funds charities, but it does this through its expenditures, Coron says, not its income. Savers relies upon nonprofits to provide large lots of used clothing for resale. Coron would not reveal sales figures, but Savers bought $75 million worth of volume last year.

The Goodwills, Salvation Armies and Savers of the world can fill up 20,000 square feet or more, Pollack says, stressing their suitability for projects undergoing redevelopment. Which indicates just how far they’ve come in the world of retail. There was a time when thrift shops were found in centers in need of redevelopment.

But that was back when secondhand stores had landlords shuddering with dread, not delight.