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Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.

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Featured Biz Question

I would like to open a teen resale shop offering name brands, such as Tommy Hilfiger, Nike, Gap, Old Navy, Mudd, Lei, Abercrombie & Fitch, American Eagle etc. All the expensive stuff that parents have a hard time affording. I want to advertise in the paper about purchasing these used items from people outright so that I can stock my shop. What kind of a price should I offer for purchase? I don't want to do consignment. I would have a couple video and pin ball machines in the shop. Also some new fad items, stickers jewelry, etc. Music playing. Iron on T-Shirts. Do you think this could be a profitable business? There's not anything like this in my neighborhood.

Answer from our Guest Expert Peter Hupalo of Hupalo Ltd.

Hi, there!

Thanks for asking such Terrific questions about starting a retail store featuring used, name brand clothing. The idea has its merits, but it also has some potential pitfalls. Let's see what we can cook up for you in terms of retail advice.

To begin, let's discuss how most new clothing arrives on the department store racks. Most retailers buy apparel from manufacturers and distributors at significant discounts from the full retail price, which you and I pay at the cash register. This substantial discount is necessary to pay help offset the retailer's other expenses, such as retail floor space and a smorgasbord of operating costs -- not to mention so the retailer can reap a profit. For more on retail details, visit the Retail Industry website.

To get a sense of this discount, go ahead and call some of the companies you listed (or their distributors) and see how much trade discount you'd receive if you were to buy the clothing new at wholesale. My guess is that your normal trade discount for new clothing would run anywhere from 30% to 50%. It might even go as high as 60% on some items.

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About the Expert

Peter Hupalo
Owner of HCM Publishing, Inc.
Peter investigates the latest computer-programming technologies and researches companies for investment. He also writes a column about entrepreneurship and small business for iSyndicate.com and reviews biz books. Peter wrote Thinking Like An Entrepreneur, about how to make savvy business decisions and take real control of your financial destiny. more