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SECOND TIME AROUND: Resale/ Consignment/ Thrift Stores Thriving in Recession

CoStar Tenant Research Shows at Least 500 New Consignment / Resale / Thrift Stores Have Opened at Retail Properties Across the Country Since the Start of this Recession
August 19, 2009
Plato's Closet is a fast-growing resale apparel concept catering to teens and young twenty-somethings
Plato's Closet is a fast-growing resale apparel concept catering to teens and young twenty-somethings
There's nothing quite like a recession to spur growth in the consignment/resale/thrift store category. In fact, 2009 marked the first year that the National Retail Federation recognized resale shops as a bonafide category in its industry statistics and surveys. In NRF's most recent survey, which polled consumers on their back-to-school shopping plans, 18.2% of people said they plan to shop in resale and thrift stores this season.

Not only does the resale category fulfill consumers' need to stretch their dollars during this downturn, consignment shops in particular pay consumers for the quality goods they deliver to these stores, often affecting a "trade." Additionally, with the nation's emphasis on sustainable living, store owners in this category promote that consumers shopping at their stores are benefitting the environment by putting into practice the "reduce, reuse, recycle" guideline for sustainable living.

Adele Meyer, executive director of the National Association of Resale & Thrift Shops (NARTS) said in an August 3rd press release that the resale shops are thriving and the size of the industry has grown significantly during this downturn. Specifically, NARTS said the opening rate of new resale shops has increased to 7% annually - previously the growth rate was about 5%. Not only has the category gained new shoppers across all income categories in search of a "good deal," but its inventory has also benefiting from a larger pool of suppliers (people selling their goods to these shops instead of just disposing of them or giving them to friends as they did before), which has improved the selection and brands resale shops carry.

NARTS recently surveyed their membership to determine how second quarter 2009 sales figures compared to those of the same time period last year (when resale was just starting to take off early in the recession) -- 64.1% said their sales had increased; of those, the average increase was a solid 31%; which is partially the result of 77.9% of respondents reporting an increase in new customers. Additionally, the survey revealed that 62.3% are seeing a higher volume of inventory brought to them and 28.2% are receiving higher quality items.

Historically, as members of the deep discount retail category, shops in the consignment/resale/thrift category have not exactly been welcomed with open arms by retail landlords. However, the shear number of leases completed with tenants in this category since this recession started speaks volumes to a shift in this paradigm. According to CoStar Tenant, at least 500 businesses leasing space at retail properties across the country have opened new consignment, resale or thrift stores (ranging from lower-end stores that accept goods in nearly any condition to shops selling only used designer clothing and accessories) since the beginning of 2008, backfilling about 3.5 million square feet of vacant retail space. While the majority of these stores lease smaller spaces, several are candidates to backfill vacant junior anchor or anchor spaces -- of these 500 new retail leases CoStar recorded, 120 (24%) have taken spaces between 10,000 to 75,000 square feet.

Kelli Trujillo recently represented a Children's Orchard franchisee (a major player in the children's resale industry) in their lease of a 2,251-square-foot space at Highland Crossing -- a grocery-anchored community center in the Sacramento suburb of Roseville, CA. According to CoStar Property, within a one mile radius of Highland Crossing, the average household income is nearly $88,000 -- higher than one might expect to make sense for a resale store.

Trujillo said that the landlords of the retail centers Children's Orchard was interested in were all happy to consider the children's consignment franchisee as a future tenant. In addition, while one might think consignment shops would be focused on very low rental rates and short lease terms, Trujillo disputed that notion. "Contrary to what most might think, this user has a standard rental rate and could pay a fair amount for the space and also signs on for a typical retailer's lease term," said Trujillo. "This transaction went smoothly," she added. According to CoStar Property, the asking lease rate at Highland Crossing is $21.00 per square foot, triple net.

Trujillo added that like any other typical franchise business, Children's Orchard has a solid corporate structure in place. "We were referred by someone in the corporate office of Children's Orchard to find space for this franchisee. Corporate was very hands on and drove the sites with us, provided opinions and approval." Trujillo said the company accepts sites for consideration from real estate agents, as long as they have a franchisee candidate in that area.

Women's apparel/accessories and children's clothing/goods have long been the mainstay of the consignment /resale/thrift category; but within this segment, NARTS said stores that cater to plus-size women, men, and teens are growing at a quick pace. Following, we will cover the concepts, expansion pace and site criteria for some of the major chains in these resale segments, as well as others.

APPAREL & ACCESSORIES



CHILDREN'S ORCHARD
In business since 1980 and franchising since 1985, Children's Orchard bills itself as "upscale resale," only accepting used and new children's apparel, goods, and toys from higher-end brands. The company has nearly 100 stores throughout the country. Children's Orchard typically leases a 1,200 to 2,500-square-foot space in a shopping center with a population of at least 100,000 within a seven-mile radius, including a population of at least 10,000 children age seven or younger. Typically, it prefers a market with median household income of $40,000 to $50,000. Preferred co-tenants are those catering to families with young children including grocery, drug, clothing, pet, craft and discount stores, as well as family restaurants. Other requirements include significant traffic, 20' of frontage, ample parking, and delivery of the space in a "vanilla box" condition.

ONCE UPON A CHILD
With 230 store locations throughout the U.S. and Canada, Once Upon A Child is the largest national chain that that specializes in reselling clothing and other items for children from infants through pre-teens. The concept is franchised by Winmark Corporation.

The typical Once Upon A Child store is 2,750 to 3,400 square feet and located in a power center, neighborhood or community center located near a regional shopping mall. The company targets markets with a strong population of kids under age 13 and Moms age 25 to 44 and prefers to be located in middle to upper-middle income areas.

According to CoStar Tenant, Once Upon a Child has been one of the most active retailers signing leases in this segment -- since the beginning of 2008, at least 23 new stores have opened, ranging in size from 2,500 to 9,000 square feet. Currently, Once Upon a Child is targeting the markets of Atlanta, Boston, Buffalo, Denver, Houston, Kansas City, Little Rock, Los Angeles, Memphis, Miami, Philadelphia, Portland, Rochester, Seattle, and Washington, D.C.

CHILDREN'S RESALE ISSUE
Unfortunately, the children's resale industry is facing a major issue beyond its control that may force thousands of consignment and thrift shops to close across the country, according to NARTS. Following the rash of toy recalls during 2007, President Bush signed the Consumer Product Safety Improvement Act (CPSIA) into law on August 14, 2008.

In seeking to protect children from exposure to unsafe toys, the law regulates all products for children under 12 years of age, according to NARTS. This includes clothing, diapers, car seats, blankets, sheets, bibs, strollers, electronics, books, and more common items. Under terms of this law, a significant portion of these products that children's resale stores carry will become "banned hazardous substances" on February 9, 2010, according to NARTS.

PLATO'S CLOSET
The Plato's Closet chain of consignment stores has the teen market (and young twenty-somethings) cornered when it comes to resale shopping. NARTS said that teens these days are proving to be "savvy shoppers who realize the importance of value and quality" and additionally, thrift shops cater to the younger generation's desire to "take something old and make it their own." The company focuses on selling recognizable brand name clothing only.

Plato's Closet has been franchising since 1999, also under the wing of Winmark Corporation. Today, Plato's Closet has grown to have over 240 store locations throughout North America. According to CoStar Tenant, Plato's Closet has opened at least 24 new stores since this recession started, with store sizes ranging from 2,300 to 6,350 square feet and averaging about 3,500 square feet. Currently, Plato's Closet is targeting growth in California's Bay Area, Boston, Little Rock, Los Angeles, Memphis, Miami, Milwaukee, New York City, Las Vegas, Philadelphia, Phoenix, Pittsburgh, San Diego, and Washington, D.C.

BUFFALO EXCHANGE
Founded in 1974, Buffalo Exchange currently operates 37 company-owned stores in 13 states and so far, has two franchised stores open (it has yet to launch a formal franchise effort). According to CoStar Tenant, at least three of these resale stores opened during this recession. Buffalo Exchange stores typically range 2,500 to 5,000 square feet and are typically located in neighborhood or community centers, mixed-use centers, freestanding buildings, or downtown locations. Preferred co-tenants are among the discount, entertainment and fashion variety.

RESTYLE
The concept for Restyle was launched in 1992 when the first Amelia's Attic store opened in Waco, TX -- in 2005, the store owner decided to start franchising her concept as Restyle. The upscale women's apparel consignment store currently has multiple locations open in the Texas metro areas of Frisco, Austin, Pearland, Houston and San Antonio. The company aims to have 100 stores open nationally by 2010. The company prefers an 1,800 to 2,500-square-foot store in neighborhood or community shopping centers.



THRIFT STORES



According to CoStar Tenant, at least 240 thrift stores have moved into newly-leased spaces at retail properties since the beginning of 2008, having an average store size of nearly 11,000 square feet. The major difference between a consignment/resale store and a thrift store is that the latter are generally more selective in the merchandise they accept. Typically, thrift stores accept donated drop-off goods, and sort through the items later to decide what is acceptable to sell. These stores are typically non-profit organizations or run by religious groups or other community organizations. The spaces they require are typically very basic and located in markets with demographics skewed towards middle to lower incomes.

GOODWILL
According to CoStar, Goodwill has not only been one of the most active tenants signing leases in this segment, but also across all retailing segments. Since the start of this recession, Goodwill has opened at least 124 new locations across the country, with an average store size of about 11,000 square feet. More than half of Goodwill's store leases range 10,000 to 75,000 square feet, making it a very qualified tenant to backfill vacant junior anchor or anchor stores. At the end of 2008 alone, Goodwill had 2,324 stores in operation.

SALVATION ARMY
The Salvation Army has opened at least 27 new stores since the beginning of 2008. These stores range in size from 1,200 to 50,000 square feet, with an average store size of 16,300 square feet. More than half of these stores are 12,000 square feet or larger, also making it a good candidate to backfill vacant anchor stores.

THRIFT SMART
ThriftSmart says it is America's first franchised thrift store -- like most in this category, this chain also operates as a non-profit. ThriftSmart describes its ideal store location as class B, second generation retail space of 20,000 to 30,000 square feet located in a strip center with good accessibility and visibility -- freestanding or newly constructed spaces are not preferred. The first store was opened in 2004 in Franklin, TN and currently, there is only one other store open in Phoenix, AZ, but the company says other locations are coming soon as more charities jump on board.



USED GOODS



USED FURNITURE / HOME GOODS
NARTS said that furniture resale stores are a very fast growing segment within the industry. Full price furniture stores were among the first to fall victim to bankruptcy and store closings during this recession, as the residential real estate market plummeted. Stores selling used furniture and appliances have filled this void in the market, serving those young customers buying their first home, people forced to downsize, college students, and those that seek to "design on a dime." CoStar Tenant has recorded the opening of at least 20 new used furniture and appliance stores during this recession (keep in mind most thrift stores also sell such goods), with an average store size of 3,700 square feet.

PLAY IT AGAIN SPORTS
Specializing in the resale of used sports equipment and gear, Play it Again Sports has grown to about 350 stores since their founding 25 years ago. The retailer has primarily grown through franchisee, as it is part of the Winmark Corporation's family of franchise companies. According to CoStar Tenant, at least 13 new Play it Again Sports stores have opened since the start of the recession. The size of these new store leases range from 2,600 to 19,200 square feet, with an average size of about 6,300 square feet. Currently, the company is targeting growth in the markets of Boston, Dallas, Houston, Kansas City, Las Vegas, Los Angeles, Memphis, New York City, Oklahoma City, Philadelphia, Pittsburgh, San Antonio, Seattle, St. Louis, and Washington D.C.



(Editor's Note: To keep up on happenings and trends in retail real estate, subscribe to CoStar's Retail News Roundup, a weekly column covering retailer expansions and new concepts, store closings, bankruptcies, cutbacks, acquisition, mergers, sales. new shopping centers, personnel changes, and sustainability. Follow this link for access to back issues of the roundup. In addition to appearing every week in the national news and retail news sections of our web site, you may also receive the Retail News Roundup for free via email by requesting to be added to the distribution list by contacting senior editor, Sasha Pardy at spardy@CoStar.com Also, click here to subscribe to CoStar's dedicated Retail RSS Feed.





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