Thrift stores have become more than budget-friendly shopping spots — they’re also at the forefront of sustainable fashion, with the resale market projected to reach more than $14 billion in 2024.
However, they aren’t like other retail businesses. Thrift stores rely on donations, fresh inventory, and community engagement to thrive.
As a potential new thrift store owner, the big question is: Are thrift stores profitable?
The answer depends on several things, from how you source your inventory to managing overhead costs. Discover what it takes to successfully run a thrift store and whether it can turn into a lucrative business venture.
Are Thrift Stores Profitable: What Can Owners Expect?
To understand how profitable a thrift shop can be, it’s important to look at your income and expenses, along with profit margins and when your sales cover your costs. Here’s what industry research shows about thrift store profit margins and other metrics:
Revenue Potential for Business Owners
Revenue for a thrift store can vary widely depending on store size, location, customer traffic, and pricing strategies.
Smaller stores in low-foot traffic areas might bring in $2,000 to $5,000 monthly. Larger stores in prime locations with higher-end or curated inventory can see monthly revenues between $20,000 and $30,000.
Urban stores or those focused on community engagement and strategic pricing tend to earn more, especially if they attract steady foot traffic and regularly update inventory with popular items.
Cost of Goods Sold (COGS)
One consideration for determining whether thrift stores are profitable is looking at the COGS. Thrift stores usually have lower COGS than traditional retail because much of the inventory is sourced through donations. Common sources include:
- Individual donations: Items donated directly by the community at little or no cost.
- Estate sales: Affordable bulk purchases of unsold items after estate sales.
- Corporate donations and overstock: Businesses donate unsold or excess items, often at no cost, making these a valuable source of inventory.
COGS are typically quite low, allowing thrift stores to operate with higher gross margins, sometimes up to 50%.
Gross and Net Profit Margins
Gross profit margin can help assess whether thrift stores are profitable by showing how much revenue is left after covering the cost of goods sold (COGS). It is calculated by subtracting COGS from revenue, dividing the result by revenue, and multiplying by 100 to get a percentage. Due to low COGS, thrift stores usually have gross margins between 30% and 50%.
Net profit margins, which factor in expenses like rent, utilities, wages, and marketing, typically range from 5% to 15%, depending on how well costs are managed. This is better than many retail businesses, which operate on margins of between 2.8% and 5.9%.
Overhead Costs
When calculating profitability for your thrift store, factor in overhead expenses, which, at a minimum, may include:
|
Category |
Average Monthly Cost |
|
Rent and Utilities |
Store rent, electricity, water, gas. Typically between $1,000 and $5,000. |
|
Staff Wages |
Salaries, benefits, payroll taxes. Ranges from $1,500 to $7,000, depending on the store. |
|
Marketing and Advertising |
Online and offline marketing and advertising materials. Between $500 and $2,500. |
|
General Liability Insurance |
Property and liability insurance. Policies cost around $100 and $500 per month. |
Your expenses will vary based on location, inventory, and staffing needs.
Other expenses may include store maintenance, sales tax, accounting and legal fees, office supplies, and a point of sale (POS) subscription. Create a business plan, including a budget, and track expenses with thrift store POS software to manage costs and maximize profitability.
Breakeven Point
The breakeven point is when your store’s total revenue equals its fixed and variable costs, meaning you’re no longer operating at a loss. For example, if your fixed costs (like rent, utilities, and wages) are $10,000 per month, and your gross margin is 50%, you would need $20,000 in sales to break even.
Knowing your breakeven point helps you understand when your store begins generating profit, which helps you set realistic sales targets and plan for financial success.
Tips for Maximizing Profit
Increasing profitability in your thrift store requires strategic planning and the right tools. Implement these actionable tips to boost your revenue while keeping costs in check.
- Leverage online sales: List items online using a POS platform with e-commerce integration. Selling online expands your customer base beyond your physical location and creates additional revenue streams.
- Engage with customers and donors: Use integrated store management tools like ThriftCart to reach customers and donors through targeted SMS and email marketing promotions. Send personalized messages to announce new items, events, and special offers, driving sales and donations.
- Optimize inventory management: Track donated items and sales trends with a specialized POS system to keep popular items like vintage pieces or seasonal goods in stock. Reduce excess inventory and use customizable reports to keep high-demand products available, increasing profitability.
- Emphasize community connections: Build stronger relationships with the local community by hosting donation drives, partnering with local organizations, and promoting events that encourage involvement. Use these connections to create a loyal customer base and increase donations.
- Automate financial reporting: Monitor expenses, revenue, and donation values with cloud-based POS software. Generate detailed sales reports, profit margins, and donation-based tax deduction summaries to help identify profitable items and reduce unnecessary costs, boosting overall profitability.
- Improve donation cycles: Create donor profiles and track contributions with your thrift store management system to streamline donation processes. Schedule convenient drop-offs, print tax receipts, and implement donation rounding at checkout to increase contributions while maintaining a steady flow of high-quality items to attract repeat customers.
Apply these strategies to keep high-demand items in stock, engage more customers and donors, and make data-driven decisions that increase your thrift store’s profitability. With the right systems, you can increase revenue and manage costs effectively.
Maximize Your Thrift Store’s Profitability With an Integrated POS System
Are thrift stores profitable? The answer is yes, they can be, with the right donation management and inventory tracking software.
If you are starting a thrift store business, give your organization an advantage with ThriftCart.
Streamlined tracking, automated reports, and real-time updates help you boost revenue and control expenses.
These insights help you make smart choices about pricing, when to run sales, and how to keep costs down. When you can easily see what's working and what isn't, you can adjust quickly to improve your bottom line.
Book a demo today to see the platform in action! Learn why it’s the best thrift store POS and how it can help you run a thrift store successfully, so you can continue your mission to help the community.
