Are Thrift Stores Profitable? Here’s Your Answer

Are you thinking about opening a thrift store?

Thrift stores offer affordable options for clothing, furniture, and household items — all while promoting sustainability by giving products a second life instead of sending them to the landfill.

But the real question is — are thrift stores profitable?

Some operate as nonprofits, reinvesting extra funds into their mission, while others are for-profit businesses. Either way, any thrift shop needs to generate enough revenue to cover its costs and sustain operations.

In this blog, we’ll break down what makes thrift stores profitable and share five proven strategies to help you boost revenue or launch a successful shop.

Let’s dive in.

5 Key Strategies That Make Thrift Stores Profitable

So, are thrift stores profitable? The answer is yes — but only with the right management strategies.

Achieving profitability is a multistep process that involves understanding your expenses, pricing items effectively, and adjusting your approach based on customer needs. Whether you’re opening a new store or working to keep your shop in the black, the following steps will help set you up for success.

1. Boost and Organize Donations

Thrift stores have an advantage over traditional retailers because most of their inventory is donated, not purchased, meaning cost of goods sold (COGS) is either low or zero. These contributions are the lifeblood of your shop, and to maintain your operation, you need both quantity and quality. 

Create a clear dropoff box and direct people to it with exterior and interior signage. You can also ask for supplies over social media. When possible, be specific about what type of products you need the most.

Popular thrift store items include:

• Clothing
• Shoes
• Home decor
• Books
• Electronics
• Furniture

Many customers are willing to bring donation-ready goods to your shop, but those with busy schedules may not have time to make the trip. To accommodate this group, consider offering scheduled pickups. While this option requires additional logistics, it’s an effective way to increase supply.

Some point of sale (POS) systems include tools for managing pickups. Donors can sign up for an available time window on your website, and the system can help calculate the most efficient route, saving time and fuel.

Once you have new inventory, create an organized process for sorting items so they can be priced and placed on the sales floor efficiently. Actively seeking fresh donations and following a consistent staff workflow helps keep products moving — leading to increased revenue and profits.

Related Read: Thrift Store Donation Scheduling: A Deep Dive Into ThriftCart’s Tools

2. Reduce Overhead Costs

Every brick-and-mortar retail store comes with overhead costs, including:

• Rent
• Utilities
• Staff wages
• Internet
• Insurance

Operating expenses vary widely depending on a thrift store’s size, but they often fall between $5,000 and $15,000 per month. Taking steps to reduce these expenses can have a significant impact on profitability.

Start with your location. Whether you’re evaluating a new place for a thrift store or have been in the same spot for years, determine how much square footage you actually need. If you have extra room or your inventory is spread thin across the sales floor, downsizing to a smaller location might help lower costs.

Make efficient use of space wherever you are. Tall shelving and an organized backroom allow you to store more inventory in a smaller footprint.

Many thrift stores rely on a mix of paid employees and temporary volunteers. Increasing volunteer support can lower the number of paid staff needed, cutting labor costs. Cross-training team members also allows fewer people to run the shop at any given time.

Energy-efficient LED lighting and programmable thermostats can help reduce utility expenses. Installing a basic security system and choosing an internet plan that meets — but does not exceed — your needs can help keep monthly bills under control, too.

3. Track Your Profit Margins

Profit margin is the percentage of revenue retained after expenses are covered. Because thrift stores operate differently than traditional retailers, these calculations may look a little different:

• Gross margin: The percentage of revenue from selling an item that remains after accounting for the cost to purchase or produce it. Thrift stores receive most of their inventory through donations, so costs are minimal and gross margin is high.
• Net margin: The percentage of earnings left after all expenses are accounted for — including overhead like rent, utilities, and staff wages. While gross margin measures the profitability of inventory alone, net margin gives you a clearer picture of how successful the business is overall.

Track total expenses and inventory-related costs each month, along with monthly sales totals, to calculate your gross and net profit margins. Watching these trends can reveal insights that help keep expenses down and profits up.

4. Improve Inventory Management

Careful inventory management keeps products moving and helps your thrift store stay profitable. Start by tagging each item with a barcode — this speeds up the checkout process.

Many thrift stores use color-coded tags to manage discounts. Older products might have red tags and be marked 50% off, while newer items might have blue tags and be marked 15% off. Using a POS system with this feature makes it easy to track discounts and apply them at the register.

Properly managing seasonal merchandise is another important aspect of inventory control. Shoppers may bring in winter clothes, holiday decorations, or pool gear, which sell best during a specific season. Items received outside their typical sale period can be stored in the back to preserve shelf space.

Display products in advance of peak demand. For example, holiday decorations can go on shelves in October or November. Place them prominently during high-demand periods, apply discounts as interest wanes, and move remaining stock to clearance once the season ends.

Related Read: What Is a Good Inventory Turnover Ratio for Thrift Stores? 4 Insights

5. Engage Your Community

The most successful thrift stores don’t just put products on the shelves — they connect with local residents and build a community that supports their mission. Engaging with your community can have a positive impact while also increasing profits.

One simple strategy is to ask shoppers to round up their total to the nearest dollar as a contribution to your organization. Many modern POS systems have this feature, making it easy to process donations at the touch of a button when buyers agree. While individual contributions are small, they add up over time and can generate a significant amount of funding.

You can also host public events, such as donation drives or volunteer days. When people give their time and resources, they become more invested in your thrift store and develop loyalty to your organization.

Related Read: Understanding Your Customers: The Why & How for Thrift Stores

Maximize Your Thrift Store’s Profitability With ThriftCart

Owning a thrift store can be a highly rewarding endeavor. With strategic management, you can make a difference in the community while generating meaningful revenue. If you operate as a nonprofit, surplus funds can be reinvested to hire more staff, improve your space, or otherwise add value to your organization.

To keep your thrift shop successful, actively seek high-quality donations, reduce overhead costs where possible, and pay attention to changes in profit margins. Manage inventory closely and engage with your community to build loyalty among your audience. You can also boost profits by implementing the right tools.

ThriftCart is a cloud-based POS solution designed specifically for thrift stores. It helps you plan donation pickups, track sales and profit, and communicate with customers via email and SMS.

With both general and thrift-specific features, ThriftCart offers everything you need to keep your store running smoothly. To see what our all-in-one system can do for your business, schedule a demo today!