How to Price Consignment Inventory Part 2: Choosing Your Inventory Pricing Model
Kent Atkinson
Jul 7, 2025
NOTE: This is part 2 of a pricing series and it assumes that you have defined your resale store type (Luxury, Mid-Range, or Thrift-Style)—if you have not, we recommend reading part 1 and at least gaining an understanding of your store type. It is an important step because the inventory models we discuss below are often best paired with a certain store type.
Choosing Your Inventory Model – True Consignment vs. Buy Outright vs. Donation Thrift-Style
In the consignment business, three primary inventory models prevail, each with distinct implications for cash flow, risk, and customer perception. New store owners should understand True Consignment (profit-splitting), Buy Outright (resale), and Thrift-Style (donation) models to decide which aligns with their vision. We break down how each model functions and then explain how to choose which model (or combination of models) is best for your store. It should be noted that many stores mix two, and sometimes even three, inventory pricing models. For example, in smaller towns with smaller markets, stores can span all three models because of low competition.
True Consignment (Profit-Split Model)
In a true consignment model, you act as an agent for the seller. The consignor retains ownership of their item until it sells, and you split the proceeds according to a predetermined percentage (often around a 40/60 split in favor of the consignor), though splits can vary by item value (some stores pay higher percentages for higher-priced items). Consignors are paid only after their item sells, and if it never sells, they reclaim it at the end of the consignment period.
Perhaps the main benefit is minimal upfront cost and risk to your store. You don’t pay for inventory until it’s sold, protecting your cash flow. This model is ideal for higher-end or unique items that might take time to find the right buyer (what we call Luxury store types). Consignors are willing to wait because they usually receive a higher payout than an immediate buy-out. This model is best paired with luxury stores and mid-range stores.
From the customer side, consignment shops tend to have more curated, high-quality stock. The trade-off is operational complexity: you’ll need a system to track inventory for each consignor, manage consignment contracts and payouts, and handle unsold items after 60–90 days. Best practices for true consignment include setting clear consignment periods and markdown schedules in your contract (e.g. 60 days on the sales floor with scheduled discounts) and maintaining transparent communication with consignors about pricing and promotions.
Pros:
Low financial risk – You don’t pay for inventory unless it sells.
Better cash flow protection – No upfront inventory investment.
Higher seller payouts – Attracts consignors with premium items.
More curated inventory – Often results in higher-quality goods.
Ideal for luxury items – Consignors are patient for a higher payout.
Cons:
Lower profit margins per item – You share revenue with the consignor.
Operationally complex – Requires contracts, tracking, and payouts.
More communication required – With consignors about pricing, status, etc.
When to choose the Consignment pricing model:
You'll want to know what market you are entering. Here are some ideal market conditions:
Affluent or style-savvy customer base: Urban or suburban areas where shoppers seek premium or designer goods at a discount.
Plenty of high-end consignors: Communities with people who frequently rotate luxury wardrobes.
Strong sustainability interest: Eco-conscious buyers willing to pay for quality resale.
Limited capital for inventory: Ideal for new stores with low startup budgets.
Less price sensitivity: Buyers value curation, brand, and quality over rock-bottom prices.
Buy Outright (Store-Owned Inventory Model)
The buy outright model (also known as a resale or buy-sell-trade model) is essentially wholesale purchasing of secondhand goods. You pay the seller a fixed amount up front for their item, and then you own it and resell it at whatever price you set. Many popular retail chains like Plato’s Closet and Buffalo Exchange use this model – for example, paying sellers roughly 30–40% of the intended resale price in cash or store credit, then pricing the item for sale immediately.
The advantage is full control and instant inventory acquisition: once you purchase an item, you can price it, display it, discount it, or bundle it as you see fit without needing consignor approval. (This model also tends to attract sellers who want fast cash now instead of waiting for a payout.) However, since the store assumes all the risk (you’ve invested money in inventory that might not sell), buy-outright shops offer significantly lower payouts to sellers than consignment splits. For instance, an outright purchase might net the seller only 20–30% of the item’s value (versus 50–60% if consigning), but the seller walks away with money immediately. This inventory pricing model can fit Luxury, Mid-Range, and Thrift-Style stores.
A key best practice here is to buy selectively and knowledgeably: only invest in items you’re confident will sell relatively quickly. One luxury consignment owner notes that when they do purchase items outright, they ensure they can likely sell them within 2 months – 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. This underscores the need for strong market knowledge when buying inventory.
Pros:
Full pricing control – Set prices, discount, bundle, or promote as needed.
Higher profit per item – You keep 100% of the sale.
Fast inventory acquisition – Stock your store quickly (no consignor contracts/communication, no consignor approval needed)
Attracts fast-cash sellers – Convenient for drop-and-go intake.
Streamlined selling – No need to manage consignor relationships.
Cons:
High financial risk – If an item doesn’t sell, you absorb the loss.
Requires strong pricing intuition/strategy – You must estimate true resale value.
Cash flow pressure – Upfront payouts before recouping through sales.
Can lead to overstock – If you buy more than you sell.
When to choose the Consignment pricing model:
You'll want to know what market you are entering. Here are some ideal market conditions:
High seller traffic: College towns or urban areas where people frequently offload clothes for quick cash.
Trendy, fast-fashion market: Areas where shoppers want brands like Zara, Nike, Urban Outfitters—cheap and now.
Competitive resale landscape: Helps you react quickly to trends and market shifts.
Experienced staff: You need buyers who can assess resale value confidently.
Sufficient cash flow: You need working capital to buy inventory upfront and absorb occasional bad buys.
Donation/Thrift-Style Pricing Model
The thrift-style model—common among nonprofit shops and some for-profit secondhand stores—relies heavily on donated goods or low-cost bulk acquisitions, and focuses on high inventory turnover at low prices. In this model, inventory is typically acquired at little or no cost to the store (e.g. through donations or closeout lots), and priced for affordability and speed. Because there is no consignor or seller being paid out, the store keeps 100% of the sale, resulting in potentially high profit margins per item—especially when goods are donated.
The main advantage of this model is inventory scale and flexibility: you can stock a broad range of products—apparel, books, home goods—without complex intake procedures or payout tracking. Thrift-style pricing strategies often include flat-rate pricing (e.g. “all jeans $7”), category bins, and markdown schedules based on how long an item has been on the floor. Stores may also run fill-a-bag sales or offer bulk discounts to keep inventory moving quickly.
From a pricing standpoint, this model is all about volume over precision. Rather than individually researching item value, you price for accessibility and trust that the quantity of sales will make up for lower margins on individual pieces. For store owners prioritizing fast cash flow, community appeal, or low startup costs, this model can be especially appealing. However, the trade-off is less control over inventory quality, and a customer experience that’s more “treasure hunt” than curated boutique. Best practices include rotating inventory regularly, clearly marking down aging items, and streamlining sorting and shelving systems to manage high intake volume efficiently. This donation-based inventory model is best used at Thrift-Style stores.
In addition to the classic consignment and buy-outright models, many thrift-style stores (including donation-based resale shops and hybrid consignment-thrift stores) use their own pricing tactics to maximize turnover and appeal to bargain-savvy shoppers. These approaches emphasize quick sales and simplified pricing, ensuring inventory keeps moving.
Pros:
Extremely high profit margins – Items are free or very low cost.
No consignor management – No payouts, contracts, or split tracking.
High inventory volume – Constant flow of stock with minimal intake criteria.
Affordable for customers – Broad appeal, “treasure hunt” experience.
Minimal upfront investment – Perfect for community or nonprofit stores.
Cons:
Less pricing precision – Often use flat or bulk pricing instead of item-level.
Lower perceived value – Inventory is typically lower quality or unbranded.
Inconsistent inventory – Quality and types of items vary widely.
Operational sorting load – Staff must sort, clean, and rotate large volumes.
Not ideal for high-end pieces – Less control over pricing premium goods.
Low average sale price — Need a lot of foot traffic and sales
When to choose the Consignment pricing model:
You'll want to know what market you are entering. Here are some ideal market conditions:
High donation volume: Suburban or city populations with regular donors.
Budget-conscious shoppers: Buyers motivated by affordability over brand or condition.
Community/nonprofit presence: Ideal for partnerships with churches, shelters, or local charities.
Low overhead locations: Stores with ample space for intake, processing, and rotating large volumes.
High foot traffic: Stores where people browse often and buy multiple low-cost items per visit.
Best Practices and Final Tips
Whichever route you choose—true consignment, buy outright, or thrift-style—setting clear policies and managing expectations from the start is critical. If you opt for true consignment, use written agreements that detail the commission split, the consignment period (e.g., 60 or 90 days on the sales floor), and any markdown schedule, along with what happens to unsold items at the end of the term. Transparent terms prevent misunderstandings and help keep your consignors happy, especially when high-value inventory is involved.
If you’re buying outright, develop a consistent pricing guide so your staff can evaluate items quickly and fairly—many stores adopt a standard like paying around 30% of their intended resale price for most items. Offering a higher payout in store credit than in cash can also incentivize repeat sellers and help build customer loyalty. Be selective in your purchases and focus on items with quick sell-through potential to reduce the risk of unsold inventory tying up your capital.
For thrift-style stores that rely on donations or volume pricing, it’s equally important to set clear donation policies. Let customers and donors know what types of items you accept, during what hours, and in what condition. Because thrift-style models often involve a high volume of incoming goods, develop fast and efficient intake systems to sort, clean, price, and rotate inventory quickly. Flat-rate pricing or bulk discount strategies (like “fill-a-bag” promotions) can help move merchandise quickly while maximizing profits from low-cost or donated items. Be sure to rotate stale items out of the store regularly—often within 60–90 days—to avoid clutter and keep the shopping experience fresh.
Finally, make it a habit to analyze your pricing model regularly. You may discover that certain product categories perform better on consignment, while others are more profitable when purchased outright or handled through thrift-style strategies. Stay flexible and willing to adjust your approach as you learn more about your local market and customer preferences. With the right systems, pricing strategy, and intake model, your store can thrive regardless of the path you choose.
