Wall St Journal

THE WALL STREET JOURNAL .

VOL. CCXXIX NO. 13 EE/CP * * * MONDAY, JANUARY 20, 1997 INTERNET ADDRESS: http//wsj.com *** 75 CENTS

Wall St Journal Example
Second-Hand Rows:

These Thrift Shops

Are Classy - and Doing

A Booming Business

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From Honolulu to Boston, Upscale Used Clothing Lures Young and Frugal.

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Overcoming the Yuck Factor

By BARBARA CARTON

BOSTON - Jeffrey Casler prowls the hushed recesses of the designer salons at Neiman Marcus, petting the fur coats, turning over price tags on Donna Karan suits and trying to ignore the stares of security guards as he fingers the expensive knits.

"To me," he whispers, conspiratorially, "this is like the CPA exam. You can't remember every single problem. You just have to, like, get knowledge and have faith that you'll know how to do it. I'm just trying to get a feel so that I know a Donna jacket is $400-something."

Mr. Casler, 33 years old, isn't a thief; he is a competitor on a covert mission. His own small clothing store sells some of the same designer merchandise as Neiman Marcus, with one big difference: Most of his items are used.

Appealing to young professionals and other shoppers who love a bargain and don't mind dressing in clothes once worn by other people, Mr. Casler and others like him are opening upscale thrift shops in fancy neighborhoods. The stores can be found from Honolulu to Boston to Philadelphia's tony Chestnut Hill. They are a far cry from a Goodwill store.

Patterned after a specialty boutique, Mr. Casler's shop, Second Time Around,is located in the middle of Newbury Street, Boston's swankest and hippest shopping avenue. Its neighbors include Emporio Armani, Brooks Brothers and Burberrys. But Second Time's prices are far lower: A second-hand but never worn purple Prada sweater, originally priced at $350, goes for $148; a blue Escada knit sweater and skirt, priced around $1,000, sells for $248; an Isaac Mizrahi black suit, for which the original owner claimed to have paid $1,200, is priced at $398. Mr. Casler also mixes in some truly new items, although no garment's history is ever disclosed unless a customer makes a point of asking.

Used clothing isn't for everyone, a problem some in the industry call the"yuck" factor. "Maybe I'd buy jeans. Even new jeans look like someone else wore them these days," says Libby O'Brien, a tourist from Cincinnati. "But not dresses or anything. I don't know; I'd think about someone else's dandruff and second-hand stuff has those little wool balls on it."

Fortunately for thrift merchants, not everyone feels that way. Sarah McGrath,a high-school senior from North Attleboro, Mass., checks the racks in Mr.Casler's store, saying, "You can find cheaper stuff and it's more original."She's unbothered wearing someone else's former clothes. "It's washed,"she says, "and this looks like a very clean store."

Howard Davidowitz, chairman of Davidowitz & Associates, a New York retail consultant, says the resale business offers "tremendous" growth potential,both at the high and low ends. "You have a $42,000 income, but you still want to buy Armani. You have aspirations, and stores like this sell aspirations."

The thrift business, both upscale and downscale, is on an upswing. The National Association of Resale & Thrift Shops, a trade group, says its membership has jumped 12% during the past year to 1,000. So popular is second-hand shopping in Philadelphia that a company called Thrift Shop Maniac Enterprises offers frequent, all-day "Rackin' n Rollin' " guided bus tours to area stores.

Sales of used clothing take many forms. There are the traditional nonprofits,like Goodwill Industries and the Salvation Army, and specialty vintage clothiers. Some chains, such as Urban Outfitters Inc., even buy used items in bulk from distributors and recast them as "renewal" clothes for a young clientele. Some resellers buy garments outright; others work only on consignment, meaning they pay for the merchandise only if it sells. One publicly traded company, Grow Biz International Inc. of Minneapolis, having spotted potential in the used-merchandise business, owns 19 corporate stores, has 1,000 franchises and plans to add another 250 franchises this year.

With $575,000 in sales last year, Mr. Casler's shop represents the upper 5% of all resale stores. Mr. Davidowitz calls Mr. Casler's claimed $676 sales per-square-foot "extraordinary," more than triple what the average independent new clothes retailer with the same size store might do. In fact, he adds, only jewelry, couture and certain other specialty stores do as well, but Mr. Davidowitz isn't surprised. "You're asking me, `Hey,do you believe it?'" he says. "I believe it."

Mr. Casler was, in a sense, born to resell. His mother, Dottie, 64, has operated a women's second-hand clothing store for more than two decades in suburban Boston. But it wasn't until 1990, after a brief stint as an accountant, that Mr. Casler opened a men's used-clothing store in a Boston suburb. Only 4.7% of resale and thrift stores cater to men, and Mr. Casler quickly learned why: Men hang onto their clothes longer than do women,leaving much less available for resale. In 1991 Mr. Casler closed his men's shop and opened Second Time Around, which caters mostly to women in an 850-square-foot storefront.

He picked the Newbury Street location in part because it was a few doors down from another upscale resale shop, the Closet. Instead of stealing his customers, the two stores have probably brought more used-clothing shoppers downtown, says the Closet's 43-year-old owner, Kevin Kish.

Mr. Casler figured he had to sell at least $200 a day to break even. But the assumed that wouldn't be difficult, since even if the average price was $20 -- low for his store -- that's only 10 items. By 1994, Mr. Casler's annual sales were $375,000, or about $1,000 a day, he says. By 1995, the annual figure had jumped to $460,000.

Last year, his sales hit $575,000, of which $287,000 represented his share,the rest going to his consignors, who let Mr. Casler sell their clothes in return for a 50% cut. Of his take, he says he paid out expenses that are roughly in line with resale-industry averages, including $61,200 toward rent and $78,000 to compensate three full-time and two part-time employees.

That left him with about $150,000, he says. He won't specify his compensation,but says he plowed most of his profits back into the business.

The figures are just for the Newbury Street store. He recently opened a second store in Cambridge's Harvard Square, and says he is looking to open a third and talks of branching into other used "concepts." Mr. Casler doesn't rule out franchising.

Mr. Casler's largest initial cost, aside from rent, was the $20,000 he says he poured into improvements, including oak flooring. Attempting an Out-of-Africa look that would appeal to Boston's many students and young professionals, he decorated the store with old maps and striped khaki curtains. He began visiting other stores, including Banana Republic, a nearby retailer that, in his opinion, hits current fashion almost better than anyone else. He also sought to sharpen his pricing sense at Nieman Marcus and Ann Taylor,since consignors typically argue their clothes are newer and more expensive than they really are.

He constantly tries to keep up with what sells (Donna Karan) and what doesn't(orange clothes) and who buys what ("Asian students are huge into Prada,Versace, Chanel"). Many resale shops take whatever comes along, even shirts with deodorant rings.

On a recent evening, college student Jon Seder, 26, arrives with a cottons weater that is bagged-out at the bottom. "It's kind of a weird sweater,"he tells a clerk. "That's why I don't want it. But given the shape of the customer, it might fit perfectly." The clerk agrees -- it is new looking. But she rejects a Joseph A. Bank Clothiers tweed jacket on grounds the label isn't trendy enough for the store's clientele. This is the second time Mr. Seder has consigned clothes here. The last time, he made $120 on seven items that included an Armani sweater.

At Mr. Casler's store, the door is wedged like an open fishing net to catch anyone who happens by, big-band music plays from stereo speakers and the lights are trained on the never-worn $1,145 Armani suit now selling for$595. He rejects anything that smells of mothballs. To make sure merchandise doesn't sit around, Mr. Casler uses markdowns. After 90 days, consignors can reclaim any clothes that don't sell. Only about 35% of them do; he says he gives the unwanted items to charity.

His biggest initial problem, he says, was finding good consignors. across the country, competition for used clothes has heightened. Goodwill Industries Inc. of Greater New York says clothing collections are way up, but the charity also recently hired a second employee just to scope out new collection sites, since as soon as it places a bin in a parking lot, other organizations swoop in and put theirs there, too.

A golfer, Mr. Casler plumbed country-club lists, sending fliers to everyone at the Spring Valley Country Club in suburban Sharon, among others. He papered local Jewish temples and fancy downtown neighborhoods with leaflets. After two years, he says he had a roster of some 1,716 consignors, 1,000 of them active. His regular consignors typically make between $500 and $1,500 a quarter, he says.

He also began stocking some new merchandise: slightly damaged or otherwise attractively priced items he knew he could sometimes sell for far higher than the retailer's usual 100% markup. Blurring the lines between new and used also helps overcome the "yuck" factor, he says, and makes first-time resale shoppers feel more comfortable. He is now up to 60% used and 40%new, higher than most other new breed used-clothing merchants. 8 A recent morning finds Mr. Casler in New York, wandering the fur salons off Seventh Avenue, searching for inexpensive new or used mink costing less than $1,200 -- something he could turn around for, say, $2,400, the most he thinks a customer would pay.

But in the world of resale, it is always hit or miss, and today, nothing is right. The mink skins are too stiff. The fur is too shiny. A salesman holds up a leather vest, and says he'll sell Mr. Casler as many as he wants for $25 each. "You can't go wrong," he promises.

But Mr. Casler has already checked out the latest styles at Banana Republic and isn't biting. He also knows that in the past, leather vests haven't sold well at his store. "You can go wrong," he replies. "Believe me, as soon as you buy that, you've gone wrong."