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.
453310 (Used Merchandise Stores)
The used merchandise business, a branch of the retail industry, was going strong into the early 2000s. New resale shops were opening rapidly in the United States with industry growth estimated at 5 percent per year. Enjoying recent success, 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, with more and more people who could easily afford new clothing now purchasing used clothing for style purposes. In the early 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.
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 70 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, at least where 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: shops geared toward middle-class but price-conscious buyers. 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 looking 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, more than 60 percent had full-time jobs and were women between 22 and 45, according to a 1996 survey by the industry leading 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-lass 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 the National Association of Resale and Thrift Stores (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: 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." 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.
In 2000, U.S. consumers spent an estimated $17 billion in secondhand stores. Resale shopping became a mainstream activity in the early 2000s. The National Association of Resale and Thrift Shops (NARTS) reported that resale was one of the fastest growing segments of the retail industry with an estimated growth of about 5 percent a year. There were an estimated 15,000 resale shops in the United States by 2003. Resalers 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 were also areas experiencing growth in the apparel category. Sporting goods, computer-related items, and music also were enjoying continued expansion in the resale business.
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. 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 were also 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 booksellers entered the Web. Booksellersolutions.com reported that 40 percent of used/antiquarian booksellers 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 booksellers existed in the United States.
Pawnshops were an estimated $5 billion a year business by 2003. 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. From the early 1980s to 2000 the number of pawnshops in the United States more than doubled, reaching about 14,000. Again, eBay aided this sector by greatly expanding its consumer market via the Internet. Many pawnshop owners were buying and selling merchandise on eBay daily. Another reason for the success of pawnshops was the somewhat dramatic increase in the number of Americans who were forgoing traditional bank accounts and turning to pawn shops as alternative loan sources in spite of interest rates of up to 240 percent. The downturn in the economy in 2002 and 2003 also aided pawnshops. Another growing segment were flea markets, which had grown into a $7.5 billion a year business by 2000 and were growing at a rate of more than 100 new flea markets per year.
The used merchandise industry is dominated by Goodwill Industries International, Inc., a private, not-forprofit company based in Bethesda, Maryland. It operates a chain of secondhand stores and provides vocational training for young people. Founded in 1902, the company employed 60,000 people and generated more that $1 billion in revenues in 2002.
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 sq. ft. of selling space. The average Goodwill store has about 7,500 sq ft. of selling space. The company operated approximately 1,900 thrift stores. In 2002, revenue from the retail sale of donated goods totaled $1.13 billion and accounted for 54.7 percent of its total revenue.
One of Goodwill's closest competitors is Cash America International, Inc., the world's largest public, stand-alone pawnshop chain based in Fort Worth, Texas. With 400 stores nationwide, it employed 3,096 people and earned $387.8 million in 2002. Another major player was the franchise Winmark Corporation, formerly Grow Biz International, based in Minneapolis, Minnesota. Besides selling clothing, musical instruments, and tools, it sells sports equipment through its Play It Again Sports stores. The company had 2002 sales of $33.4 million and 151 employees.
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