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Big boxes buoy chain's growth

Charlotte Business Journal - by Fred Tannenbaum Staff Writer

Dave and Debbie Hayes hope to expand to as many as 100 stores within 10 years.
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In a business known for great deals, resale-store chain Consignment 1st is cooking up a few to launch an expansion throughout the Southeast -- and eventually nationwide.

The Matthews-based company, which sells everything from $10,000 dining room sets to Boy George record albums, plans to expand into dozens of cities mainly by capitalizing on the glut of vacant big-box stores in urban areas.

Dave Hayes, who owns the nine-store company with his wife, Debbie, hopes to expand Consignment 1st to as many as 100 stores within 10 years. Toward that end, the company will add a store in Columbia, S.C., in January, with markets such as Raleigh, Durham and Atlanta also targeted for store openings next year.

The operations will be as small as 7,500 square feet and as large as 40,000, says Hayes, who is funding the expansion through a combination of company revenue, conventional loans, a line of credit and $30,000 franchise agreements.

While details of the company's investment in the venture haven't been completed, Hayes vows to spend as much as $250,000 in advertising in each market Consignment 1st enters.

The company generated nearly $10 million in sales in 2005. Adding five large stores would boost that total to about $50 million, Hayes says.

At least initially, the new stores will likely be run by the company, but eventually they will be owned by franchisees, he says.

Hayes and his wife launched the business in 1986 and opened their 11,000-square-foot flagship store at 9601 Independence Pointe Parkway in 1993.

The couple began selling franchises in 2002, enabling Consignment 1st to add stores in the University area, Gastonia, Huntersville, Pineville, Rock Hill and Greensboro, as well as Lynchburg and Roanoke, Va.

Other chains of consignment stores operate regionally or nationwide, but the goods they sell are more narrowly defined than Consignment 1st's offerings, says local franchise consultant Mike Hall, owner of FranNet of the Carolinas.

For example, Play It Again Sports focuses on sporting goods. Plato's Closet sells teen clothes, and Once Upon A Child trades in new and gently used children's clothing, toys, furniture and equipment.

And Adele Meyer, executive director of the National Association of Resale & Thrift Shops, a Michigan-based trade group, says Consignment 1st is the first company she is aware of that is seeking to establish resale franchises in former large stores.

Usually, the resale operations in such spaces are run by nonprofits, including The Salvation Army and Goodwill Industries.

But resale stores don't need Class-A retail space, Hall says. "I'm surprised more people haven't done it."

Hayes would eventually like to build new stores, but his company will be able to grow more rapidly -- and at a far lower cost -- by moving into large, empty retail space.

Such venues typically cost little to rent, they're available in nearly every major city and they usually require minimal remodeling, he says.

In some markets, however, such space may prove more difficult to find, says Debbie Currier, principal at Currier Properties in Charlotte, which helps supermarkets and large retailers sell surplus property.

Still, she likes the idea of a consignment store breathing new life into vacant store buildings. "The fact that they don't need a lot of upfit is a good reuse."

Consignment 1st's inventory expenses also are far less than those of a traditional retailer. The company accepts merchandise and pays the owner a percentage when the items are sold. The stores pay 60% of the price for items priced at $45 or more and 50% for merchandise costing less.

Most of Consignment 1st's new stores will house traditional consignment operations, Hayes says. But they could offer estate sales or auctions and even sell items on eBay.

Sellers needing to get rid of unwanted items, and customers seeking a bargain, are driving 5% annual growth in the resale industry, according to the National Association of Resale & Thrift Shops.

And Hayes sees no slowdown in that trend -- or in Consignment 1st's potential for growth.

"Everybody needs us," he says. "I used to think there's a plateau (in retail sales). There's no plateau."

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