Starting a clothing resale business is a rewarding venture that combines a keen eye for fashion with smart business sense. The secondhand apparel market is a multi-billion dollar industry, fueled by consistent demand from budget shoppers, vintage lovers, and eco-conscious consumers alike.
This guide will take you through the practical steps of validating your business concept, acquiring inventory, building supplier relationships, and obtaining the necessary permits to help you launch a successful clothing resale business in the U.S.
Step 1: Validate your business plan
First, define your niche. Are you selling 90s streetwear or designer consignment? This choice guides your inventory and marketing. To gauge demand, you can use Google Trends to check search interest for specific styles or brands before you commit to buying stock.
Many new sellers pick a niche they love without checking its profitability. A quick search on platforms like Depop, Poshmark, or The RealReal for sold listings will show you what people actually buy and for how much. This research prevents you from holding onto unwanted inventory.
Startup cost breakdown
With a niche in mind, you can map out your initial investment. Your startup costs will likely range from $700 to $3,000. A common oversight is underestimating shipping supply costs and platform transaction fees, which can add up quickly and reduce your profit.
- Initial Inventory: $500 - $2,000
- Business Formation (LLC): $50 - $500, depending on your state
- E-commerce Platform: $30 - $100 per month
- Shipping and Packaging: $100 - $200
Here are three immediate steps to take:
- Use Google Trends to validate demand for two or three potential niches.
- Analyze the pricing and sold items of three successful sellers on a platform like Poshmark.
- Draft a startup budget that includes inventory, legal fees, and monthly platform costs.
Step 2: Set up your legal structure and get licensed
For most resellers, forming a Limited Liability Company (LLC) is a smart move. It separates your personal assets from business debts. This structure offers liability protection without the complex tax rules of a corporation. You can file for an LLC through your state's Secretary of State website.
Once your LLC is approved, get a free Employer Identification Number (EIN) from the IRS. You will need an EIN to open a business bank account. Many new owners make the mistake of mixing personal and business funds, which can cause accounting and legal headaches later.
Permits and licenses
Next, you will need a seller's permit, sometimes called a resale license. This permit allows you to buy inventory wholesale without paying sales tax. It also means you must collect sales tax from customers in your state. These are typically issued by your state's Department of Revenue.
Your city or county will also likely require a general business license to operate legally. These usually cost between $50 and $150 annually. Processing times for all permits can range from a few days to several weeks, so it is a good idea to apply early.
Here are three immediate steps to take:
- Apply for a free Employer Identification Number (EIN) on the IRS website.
- Register your business as an LLC with your state's Secretary of State office.
- Check your state's Department of Revenue website for seller's permit requirements.
Step 3: Protect your business with the right insurance
With your legal structure in place, the next move is to shield your business from risk. General Liability Insurance is your first line of defense. It covers claims of property damage or injury. Expect annual premiums to be between $300 and $700 for a small online business.
Covering your inventory
Your clothing stock is your biggest asset. Commercial Property Insurance protects it from theft, fire, and other damage. Many resellers mistakenly believe their homeowner's policy covers business inventory, but coverage is often limited to just $2,500, if it is covered at all.
If you hire employees, you will also need Workers' Compensation. For providers, you might want to consider companies like Hiscox, The Hartford, or Next Insurance. They are familiar with the risks of e-commerce and can offer policies tailored to online sellers.
Here are 3 immediate steps to take:
- Review your homeowner's or renter's policy to confirm its coverage limit for business property.
- Get a general liability insurance quote from a provider like Hiscox or Next Insurance.
- Calculate the total value of your current inventory to decide how much property coverage you need.
Step 4: Secure your space and equipment
Most resellers start at home, so dedicate at least a 100-square-foot area for inventory and shipping. Many new sellers underestimate how quickly clothing piles up. Before you start, check your city’s zoning laws for home-based businesses to avoid any compliance issues with inventory storage.
If you outgrow your home, you might consider a 5x5 foot self-storage unit, which costs about $50 to $100 per month. When you are ready for a commercial lease, try to negotiate a shorter one-year term to give your business more flexibility as it grows.
Workspace equipment and supplies
Your phone camera is a good starting point, but inconsistent lighting can make your products look amateur. A simple lighting kit can fix this. You will also need a few other items to run your operations smoothly. Here is a look at what you might spend.
- Clothing Racks: $30 - $70
- Garment Steamer: $40 - $100
- Digital Shipping Scale: $20 - $40
- Basic Photo Lighting: $30 - $80
For shipping supplies, you can order free Priority Mail boxes directly from the USPS website. For poly mailers and other packaging, look at suppliers like Uline or EcoEnclose. Buying in bulk, such as a pack of 500 mailers, significantly lowers your per-shipment cost.
Here are 4 immediate steps to take:
- Check your city’s website for home-based business zoning rules.
- Price out a garment steamer and a ring light for your photo setup.
- Compare the cost of 100 versus 500 poly mailers from a supplier like Uline.
- Order free Priority Mail shipping boxes from the USPS website.
Step 5: Set up your payment processing
Online platforms like Poshmark have payment systems built in, but you need a way to accept payments for in-person sales. Many new sellers get caught off guard by transaction fees, which often run from 2.5% to 3.5% plus a fixed amount per sale.
For clothing resale businesses that need to accept payments on-site or on-the-go, JIM offers a streamlined solution. With JIM, you can accept debit, credit, and digital wallets directly through your smartphone. Just tap and you are done.
At just 1.99% per transaction with no hidden costs or extra hardware needed, it is particularly useful for market stalls or local pickups. This rate is lower than the average commission other providers offer. Getting started is straightforward.
- Get Started: Download the JIM app for iOS.
- Make a Sale: Type the sales amount, hit sell, and ask your customer to tap their card or device on your phone.
- Access Funds: Your money is available right on your JIM card as soon as the sale is done. There is no waiting for bank transfers.
Here are 3 immediate steps to take:
- Review the payment processing fees for your primary online sales platform.
- Download the JIM app to see if it fits your needs for in-person sales.
- Decide if you will sell at pop-ups or markets to finalize your payment setup.
Step 6: Fund your business and manage your finances
Most resellers self-fund with personal savings. If you need external capital, your business plan and personal credit history are key. Lenders want to see that you have a clear path to profitability before they invest.
Explore external funding options
The SBA Microloan program is a great fit for small-scale retail. These loans go up to $50,000, with interest rates typically between 8% and 13%. You could also explore peer-to-peer lending on a platform like Kiva, which offers 0% interest loans.
For grants, you might look into the Amber Grant for women entrepreneurs. Keep in mind that grants are very competitive. You will need a compelling story and a solid business plan to stand out from other applicants.
Manage your cash flow
Plan to have at least $3,000 to $7,000 in working capital for your first six months. Many sellers focus only on the initial inventory purchase and then run out of cash for shipping or new stock. This budget keeps your operations smooth.
From day one, track every expense. A simple spreadsheet works, but accounting software like QuickBooks Self-Employed can save you hours. It helps you monitor profit and prepares you for tax season without the headache.
Here are 4 immediate steps to take:
- Calculate your estimated working capital needs for the first six months.
- Review the requirements for an SBA Microloan on the SBA website.
- Check your eligibility for a resource like the Amber Grant.
- Compare features of a bookkeeping app like QuickBooks Self-Employed.
Step 7: Hire your team and streamline operations
Once you consistently hit $5,000 to $8,000 in monthly sales, you might consider your first hire. Many resellers hire too soon and hurt their cash flow. Waiting until you have steady revenue ensures you can afford the help without financial strain.
Your first hires
Your first employee is often a part-time Inventory Assistant. This person handles sorting, steaming, measuring, and photographing items. Expect to pay between $15 and $20 per hour. A clear, one-page guide on your photo style and measurement process will make training much smoother.
As you grow, an E-commerce Lister can take over creating product descriptions and posting to your sales channels. This role typically pays $18 to $25 per hour. No specific certifications are required, but look for candidates with experience on platforms like Poshmark or Shopify.
Managing your operations
For a small team, you do not need complex software. A simple scheduling app like Homebase or When I Work helps manage hourly staff and track their time. A good rule of thumb is to aim for one full-time employee for every $100,000 in annual revenue.
Here are 4 immediate steps to take:
- Draft a one-page job description for a part-time Inventory Assistant.
- Research local pay rates for retail assistants on a site like Indeed.
- Set a monthly revenue goal that will trigger your first hire.
- Explore the free plans for scheduling apps like Homebase or When I Work.
Step 8: Market your business and find customers
Your marketing should focus on visual platforms. Use Instagram and TikTok to show your clothes in action. A Reel that styles one vintage jacket three ways gets more views than a static photo. Many new sellers only post product shots, but you should also show items on a person to drive sales.
Build your audience
Consistency is your best friend on social media. You might want to post three to five times per week to build momentum. You can also partner with micro-influencers who have under 10,000 followers. They often collaborate in exchange for free products and can expose your brand to a targeted audience.
In addition, you can build an email list. Offer a 10% discount code to anyone who subscribes. Once you have subscribers, send out weekly emails with new arrivals. A good open rate for retail emails is between 20% and 25%, so you can use that as a benchmark for your campaigns.
Here are 4 immediate steps to take:
- Plan one week of social media content, including at least two video posts.
- Identify three micro-influencers in your niche that you could contact for a collaboration.
- Set up an email signup form on your primary sales channel.
- Draft a welcome email that offers a discount to new subscribers.
Step 9: Price your items for profit
Your pricing strategy directly impacts your profit. A good starting point is the cost-plus model, where you multiply your item’s cost by 3x to 5x. For example, a jacket you bought for $10 could be priced between $30 and $50.
Many sellers forget to factor in platform fees, which can be 20% on Poshmark or 12.9% on eBay. These fees come out of your sale price, so you must price high enough to cover them and still make a profit. Aim for a 60-70% gross margin.
Competitive and value-based pricing
For rare or designer pieces, you can use value-based pricing. This means you price based on market demand, not your cost. A vintage tee you found for $5 might sell for $75 if it is highly sought after. Research is your best friend here.
Use the "sold" filter on Poshmark, Depop, or eBay to see what similar items actually sold for. This shows you real-world market value. Avoid pricing based on what other sellers are asking for, as those items may never sell at that price.
Here are 4 immediate steps to take:
- Calculate the net profit on a $10 item priced with a 4x markup after a 20% platform fee.
- Research the sold prices for three different items in your inventory on eBay or Poshmark.
- Set a target gross profit margin for your business, such as 65%.
- List five brands you plan to sell and note their average resale value.
Step 10: Maintain quality and scale your operations
Establish your quality standards
A consistent inspection process prevents returns and builds trust. Before you list an item, check it under bright light for any flaws. Many sellers miss small issues by inspecting too quickly, which can lead to negative reviews and hurt your store's reputation.
You should create a checklist for every piece of clothing:
- Flaws: Stains, holes, pilling, or discoloration.
- Function: Zippers, buttons, and clasps all work correctly.
- Odor: Free of smoke, pet, or storage smells.
Your goal should be a return rate under 5% due to item condition. This metric tells you if your inspection process is effective. A simple grading system like "New With Tags," "Excellent," or "Good" also helps manage buyer expectations from the start.
Know when to scale
Once you hit a consistent $5,000 in monthly revenue, it is time to consider help. Trying to do everything yourself is a quick path to burnout. Your first hire should take over repetitive tasks so you can focus on sourcing and strategy.
When you find yourself listing more than 20 items a day, you might want to use a cross-listing application. Services like Vendoo or List Perfectly let you post inventory to multiple platforms like Poshmark and eBay from a single dashboard, which saves hours of manual work.
Here are 4 immediate steps to take:
- Create a detailed quality inspection checklist for your items.
- Define a simple grading system (e.g., NWT, Excellent, Good) for your inventory.
- Set a monthly revenue goal that will trigger your first hire.
- Compare the features of a cross-listing app like Vendoo or List Perfectly.
You now have the steps to launch your clothing resale business. Remember that your reputation for quality is everything. It builds trust and brings customers back. With a solid plan and a good eye for what people want, you are ready to start your venture.
And for those in-person sales at markets or pop-ups, a simple payment solution helps. JIM turns your phone into a card reader with no extra hardware and a flat 1.99% fee. This keeps your checkout process smooth. Download JIM to get set.
