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Answer from our Guest Expert Peter Hupalo of Hupalo Ltd.

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Know Your Market's Demands

Another way to avoid poor pricing in your new business is by having your finger on the pulse of consumer demand. Know what's hot and what's not. The best way to learn this is by going to another neighborhood that has a trendy discount store and ask the owner for help. Find a mentor, knowledgeable in the industry, who can help you learn the ropes of pricing second-hand trendy clothing merchandise. You might find a mentor, preferably one with used retail-apparel experience, from SCORE.

By knowing what your target market craves, you can better determine if what you have on your shelves is going to sell enough in a month to have you break-even or make a profit.

Test Market Your Prices

You might also come up with some ideas for price testing on your own. For example, ask your potential customers how much they might be willing to pay for some given, used item. How much of a discount would they demand to buy used and not new? Assume the amount they would pay in actuality will be less, but it gives you some information. Or, maybe, see if the item could be sold on an online auction, such as eBay.com. This is one way to get an idea of what consumers are willing to really pay for various used items.

Consider Both New & Used Clothing

Many buyers of brand-name clothing are looking for "status" and are willing to pay more for it. You might want to evaluate if they will attribute the same "status" to used items. If the offered discount is too small, they might just decide to buy new, which you might also offer in your store. It's better having a potential customer ask himself or herself, "Which one?" rather than "Should I buy it or not?"

If you do offer new clothing, be sure you learn about return policies on what doesn't sell and manufacturer incentives to get you to carry their products. If you can find a way to shift the risk of carrying unsalable inventory to someone else, consider doing it. I know you said you don't want to do consignment, however, consignment requires no cash outlay from you, which improves your cash flow. If the item proves unsalable, you can simply return it to the owner. Buying inventory outright involves inventory risk. That's money you can lose. And, to stock a good-sized store might incur more risk than you'd like. Well-stocked stores are one key to success.

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