Top 10 Ways to Build a Successful Drop-Store

Drop-shops...Drop-stores...Consignment stores...Trading Posts...

They have many names, but ultimately, they are all in the same business. Over the past couple of years, they have been a very popular and growing trend in the online auction marketplace. In spite of margins that often exceed 30 percent, many of these stores, and even whole franchises, have gone out of business. Here's how to avoid it happening to you:

(10) Become an expert. You will be competing with thousands of other sellers and consignment stores who are also looking to get offload their inventory. Knowing how to create the listings most likely to attract buyers, and how to build-up your sell-through rates will either set you apart from other sellers or lead to your demise.

(9) Keep your overhead down. Some months will undoubtedly bring about more business than others. There is no sure way to predict what your next month's sales will be, and there are often some months that are slower than others. Make sure that you plan ahead and keep overhead low. You will likely need to withstand 2-3 slow months every year, and you do not want your fixed costs to be weighing you down.

(8) Do not ignore the season. Keep in mind that people will likely be bringing you products when they no longer have any use for them-- often this means that other people have less use for them. For example, selling skis immediately after the ski season ends will not bring you the greatest return. You may want to advise your customers and wait a few months when you might be able to get twice as much for the same product. Otherwise, look to offload the item in the Southern Hemisphere, where winter is just round the corner.

(7) Although you have a big store in the brick-and-mortar world, buyers will see you just like any other store in the virtual world. Building up your feedback is very important, and without sufficient feedback you won't be getting enough bidders to get the highest sales.

(6) People often do not know how much money you can get them for the junk they have around their homes. When you reach out to someone, be equipped to let them know just how much they might be able to get for the stuff they aren't using.

(5) Word of mouth is key. You are operating in a community, and if someone has a good experience with your service, they will likely share that experience with their friends and family. Nothing will help your business grow more than satisfied customers.

(4) Pick the right franchise for you. There are literally hundreds of franchises that have cropped up since the drop-shop trend came to life. Today, a few major players still dominate the market. On the positive side, they have a business model that works. But on the other hand, they likely will be charging you larger franchise fees. Don't be afraid to shop around, but also don't settle for the cheapest option unless it's the best option. Some extra expense may provide you with the added exposure and brand reputation that you need to survive. You need to weigh these things.

(3) Talk to other franchise owners. If you feel like you've settled on the right franchise for you, don't be afraid to contact some other franchise owners. Don't settle for whatever references you receive. All the major franchises have their store listings available on their sites, and most of the store owners will spend a large portion of their time in the store itself. Get the contact information off their web site and contact these individuals to find out whether the business model has worked for them.

(2) Location, Location, Location! You probably want to start a drop-shop in your neighborhood, or a new neighborhood you want to move to, but does it make sense to open up a store in that area? How much will the rent run you? What does the competition look like? What are the demographics in your neighborhood and will you be able to attract the type of clientele that will not only use your service once but keep coming back to you? You must be able to answer these questions to make sure that you will have long-term success.

(1) Invest in retaining your customers. Remember, a store is bound by geographic constraints. Retaining customers is essential in this business. You must provide customers with a great experience to keep them coming back to use you to sell more. Customers are looking for someone who is an expert, who can get them the most value for their goods (even exceeding their expectations) and who gets them their money quickly. You must be able to deliver on all these fronts to keep the locals coming.