Secondhand Goods: First-Class Retail Idea

BEYOND THE FLEA MARKET

Wait, put down that trash can lid! The neglected baseball mitt or outgrown baby booties you're about to toss away might fetch quick cash.

Americans are increasingly turning to specialty stores to sell and buy a grab bag of used goods ranging from children's merchandise to computers. They are fueling robust growth in a potentially huge area of retailing.

"This market is so immature and has so much to go before you get to a mature business market - there is a huge national opportunity here," says Walt Hamilton, president of Children's Orchard Inc., an Ann Arbor, Mich., franchiser of stores that resell children's goods.

Between 1987 and 1995, sales at secondhand stores ballooned 92 percent, far surpassing the 52 percent growth at retail stores, according to the US Census Bureau.

Many Americans shop the growing market in used goods as a way to squeeze the most from their stagnant or eroding real incomes, industry officials say.

"It is all tied into income - people want more for their money and they are not into conspicuous consumption as much as before," says Adele Meyer, manager of the National Association of Resale and Thrift Shops in Grosse Pointe Woods, Mich.

But the secondhand market appeals to consumers across the income spectrum, including wealthy, value-conscious shoppers. It also satisfies public support for efforts in recycling. And it suits the widespread disgust for consumerism and preference for wholesome values of a small but growing simple-living movement, experts say.

Stores often mark down used goods more than 50 percent off the original retail price, making a $500 top-of-the-line canopied crib go for $250, or a $160 baby stroller sell for $60, says Nancy Argueta, manager of a Once Upon Child store in Des Plaines, Ill.

On the down side, the business of resale might cut into donations of used goods to charities. With this in mind, Children's Orchard offers to turn over to charity used merchandise below its standards. The store secures from the charity a receipt for the value of the good, which the former owner may use for a tax write-off.

Growth in the market for secondhand goods has accelerated in recent years. Between 1994 and 1995, sales at stores for used merchandise grew 15.6 percent, far outstripping the 4.9 percent growth at retail stores.

Moreover, membership in the National Association of Resale and Thrift Shops has swelled 20 percent annually in the past three years.

Not surprisingly, franchisers of resale stores are on a roll.

Children's Orchard last year saw its sales of used and new merchandise in its 60 stores surge 20 percent. The franchiser plans to open a total of 16 stores this year and at least 20 next year.

Revenues of Grow Biz International Inc. of Minneapolis - the MacDonald's of resale franchisers - jumped 20 percent last year. Since 1991, the number of its five kinds of used goods stores has expanded sevenfold to 1,050. Over the same period, total sales have rocketed from $18 million to $338 million. (The company's stock has not fared as well, falling from $16-3/4 per share in 1994 to little more than $8 today.)

Grow Biz has flourished by reselling goods that tend to be neglected, outgrown, or rapidly outmoded - musical instruments, compact discs, sporting equipment, as well as computers and children's products.

Successful resale companies are apparently reducing a stigma on used merchandise that had curbed the growth of secondhand retailing, say retailing experts.

"Used goods seem to have taken on a new status," says Nikki Goldbeck, co-author of the 1995 book "Choose to Reuse." "It is no longer a stigma and people from every socioeconomic background now feel comfortable saying they bought something used."

The companies have succeeded in making used goods acceptable if not chic by relying on clever points of style like euphemism. They call used goods "pre-owned," "gently used," or the fruits of "ultra-high-value retailing." (Used products frequently sell for about half the suggested retail price.)

But the firms also deploy bedrock retailing strategies: attentive and well trained staff; bright, clean, and well-organized stores; astute advertising; and distinctive logos and staff uniforms that lend an aura of credibility.

"It has to be merchandise of high quality presented like any retailer presents merchandise," says Ronald Olson, chief executive officer of Grow Biz.

Also, the stores stock new merchandise, giving the store a fresh look and greater options for shoppers. Most important, they build up their appeal and credibility by immediately giving the sellers of used goods cash or a check.

At first glance, Computer Renaissance, the Grow Biz venture in computer resale, appears to face a harsh challenge in gaining customer confidence; the comparatively high price and sophistication of computers seem to pose risks that would turn buyers off. But Computer Renaissance puts high price and high technology to its advantage. It resells computers with a 90-day warranty at rock bottom prices.

More important, the franchiser banks on a growing public feeling that scrambling for the newest, most powerful computer hardware is inane - and costly - because of the dizzying pace of technological progress. A used computer with last month's power is far cheaper, and just marginally weaker, than a brand new, state-of-the-art model at full retail price.

Says Renetta Hunt, a recent Computer Renaissance customer: "If you want the biggest and the bestest, it's really a hard, ongoing, expensive, and dumb thing."

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