Consignment Tips: Inventory, Pricing and Authentication

Why did you decide to focus on secondhand designer bags?

Sandra: When we started back in 2006, there were a lot of consignments here, but they were mostly selling clothing and accessories and very little bags. We thought that specializing in handbags would be a way to create a niche, and bags are an item that fits everybody, whereas with clothing, you have to fit into a certain size.

Did you know a lot about handbags before you started?

Sandra: Before I moved [to South Florida], when I didn’t have designer bags, I thought bags were just a way to carry your things: your money, your sunglasses. But in this area, I noticed that having a Chanel bag was important for a woman. Just the beauty of the items, the story behind them, the workmanship, the everlastingness of them. The quality of a Chanel bag is incomparable with anybody else. And I really started to learn about them.

One of the hardest parts about starting a consignment store, I’d imagine, is getting inventory. How did you get started?

Sandra: At that time, we lived in a very nice area in South Florida, and I told the ladies that live in that community: “Hey, I’m opening a consignment store.” They said: “Oh, what are you going to be selling?” “Whatever you want to give me,” I said. So I had a lady that had a lot of clothing and bags, and it sort of went from there. We hosted a grand opening. I invited everybody from the area. Maybe we had 50 people here. People brought their friends and families. From there, we grew from word of mouth, and today, thank God for the internet.

How do you plan inventory? It has to be much different from a store selling new goods, where you can just order a specific number of products from a vendor.

Tomas: The more [inventory] you have, the more you sell. We try to get as many handbags as we can, especially of what we know that is selling. There are certain styles that people prefer. Those are the ones that we try to acquire and put out the word about, but we don’t know what we’re getting because it really depends on what people bring you. You have to basically hope that your merchandise will be appealing enough to move. It’s a risky business compared to a regular business. Let’s say you are a distributor of different brands. You know what to order and how many [in order to] triple your profit. In the consignment business, you work with a very low margin. Fortunately, we have built up enough clientele, enough consignors who keep bringing those items. We’re the first people they call when they have a particular handbag. We tell them honestly whether we think it will move or “No, it’s doubtful.” But the biggest thing is we try hard to acquire items that we know will move.

Are your customers and consignors all from the Fort Lauderdale area, or are they from all over the world?

Tomas: We have people from as far as Argentina, Mexico, France, Germany and Spain. Sometimes people mail us the bags, but normally, the consignors come to the store. They come maybe once a year, twice a year, bring their items [and] trade them. We are not very fond of shipping because of the amount of items that get lost during the process. That’s one of the reasons why we don’t do online sales. When we have tried, a lot of items got lost either by the Postal Service or FedEx. The items never came, or the boxes were empty.

How do you price things?

Tomas: We look at comparables and at the listings in different sites on the internet: Fashionphile, eBay, etc. We try to position ourselves lower than them to keep an edge. Let’s say we see [that] an item is selling online for $1,400. We will try to price it at $1,200 or $1,300 to make it more attractive.

Your business model and reputation are based on selling people real luxury items, not fake ones. How do you prove that? Tell us about your authentication process.

Tomas: It is very important for a business like us to know the difference between a real and a fake. Some fakes are really, really good. Others, you can tell just as soon as the person walks in because of the weight of the bag or the way the chain hangs. You need to have the experience, the knowledge, to know things that make a bag authentic like where the stitches are located, how many stitches per inch there should be in a particular item. You need to know about the materials — the inside materials, the outside material — even how the inscriptions in the metals in the hardware should look. The regular customer doesn’t know the difference, as we know. We also use an AI-powered authentication system called Entrupy. It works by attaching a small microscope to an iPhone. With this microscope, we take pictures of different sections of the bag. All these pictures go to Entrupy’s database, where they have millions of algorithms collected from genuine and counterfeit products, and they compare. Within seconds, they can let us know if the item is certified as authentic or as unidentified.

Are there times when people don’t know that they’ve purchased a fake?

Tomas: Yes, we’ve had people who bought handbags through the internet or were given one as a present. They think that what they have is real. And superfakes have gotten really, really good, but still, they always make some kind of mistake like the tag of an item should have nine stitches but it has 10. That’s why we never just accept anything on the spot. Even if my mom brings it, we have to inspect it. We have to doubt everything that comes in here. We’ve had cases of people [trying to sell to us who had paid] thousands of dollars for their handbag just to find out it’s a fake. A lot of them get very upset. Maybe it’s too late for them to return it or get their money back.

There are lots of online consignment websites now, from The RealReal to Poshmark. What allows you to compete against them?

Tomas: We made the decision several years ago not to compete with them online. We decided to concentrate on our brick-and-mortar store. There still [are] people that prefer to go to a regular shop. We’re not looking for people in Idaho, say, to buy something because they could give us a credit card that isn’t good or is stolen. If we ship that item, it might never make it or the buyer will claim that the box came empty. We prefer to let people walk in, see it, try it, look at themselves in the mirror and be happy with it.

What advice would you give other entrepreneurs considering consignment shops?

Sandra: Business is not a gold mine, by any means, but it has kept us busy. It takes about five years of sacrifice to make it profitable. It doesn’t happen from one day to the next. We have seen dozens of consignment stores opening and closing within a year. We probably lost money in the first five years of operation. Perseverance is the most important trait in any business. You have to be patient, and you have to fertilize it as you fertilize a plant. Every day, you have to be calm and patient. Just make sure that you keep on working.

Tomas: Not everything that comes in is bought on consignment. Sometimes, you have to buy certain items upfront, so you need to have some capital availability and you need to be relatively certain if you buy something upfront that you are going to be able to sell it within two months because you don’t want to put money out of pocket and let it sit for two to three months. The low profit margin doesn’t give you the luxury to make mistakes.