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Entrepreneur Steve Johnson says his four Plato's Closet resale clothing shops averaged $1.2 million in 2010. The Springfield store netted $1.5 million. "This is a simple concept if you're willing to listen," he says of the Winmark Corp. franchise model.
Entrepreneur Steve Johnson says his four Plato's Closet resale clothing shops averaged $1.2 million in 2010. The Springfield store netted $1.5 million. "This is a simple concept if you're willing to listen," he says of the Winmark Corp. franchise model.

Business Spotlight: Resale Revival

Posted online
One thing entrepreneur Steve Johnson has learned in this recession: Never underestimate the power of used clothing.

The Springfield businessman’s four Plato’s Closet resale clothing shops averaged $1.2 million in 2010 sales on more than 15 percent revenue gains compared to 2009.

Johnson owns four Plato’s Closet franchise stores – in Tulsa and Oklahoma City, Okla.; Wichita, Kan.; and Springfield – under Potomac Commerce Co. LLC, and in December he added another franchise marquee in Springfield. He opened Clothes Mentor through his Springfield Resale Co. LLC, and projects $500,000 in first-year sales.

Plato’s Closet buys and sells used teen clothing, while Clothes Mentor buys and sells upscale used clothing for career women. The two stores with very different target markets operate next door to each other at 1258 E. Battlefield Road, a building Johnson constructed last fall for $680,000.

The Springfield Plato’s Closet store logged $1.5 million in 2010 revenue. Johnson says on a busy day, as many as 15,000 pieces of clothing are bought or sold at the store.

Schooled in franchising
After a stint in pharmaceutical sales, Johnson’s desire in the early 2000s for a career that kept him closer to his Cincinnati home turned his attention toward franchises. Around that time, Johnson, 47, and his wife, Cindy, adopted two infants and started shopping at baby clothing resale store Once Upon A Child.

He inquired about opportunities with Minneapolis-based franchisor Winmark Corp. (Nasdaq: WINA), which owns Once Upon A Child, Plato’s Closet, Play It Again Sports and Music Go Round.

At the urging of Once Upon A Child franchisees, Steve Johnson began considering the Plato’s Closet brand.

A shopping trip to Plato’s Closet by his wife and teenage niece sealed the deal.

“They came back all excited, and I said ‘Tell me more,’” Johnson says. “They loved it. I started making phone calls to other owners.”

The Johnsons bought the Fairfax, Va., franchise and opened in November 2002. But only a year and a half into it, Steve Johnson found himself frustrated with the operation.

“I didn’t know what I was doing,” he admits. “It wasn’t working. We were barely paying the bills.”

After talking with some of the franchise’s top performing owners, Johnson learned of a few factors to successful stores: They were located in a regional business hub, a university city and where affordable advertising is found.

“I distilled down the reasons why those Plato’s were doing well (and) got permission from Winmark to move my store,” Johnson says.

He considered Boise, Idaho; Austin, Texas; and Colorado Springs, Colo., before selecting Springfield, and opened in 2004 at 3420 S. Glenstone Ave. in Primrose Marketplace.

The rise of thrift
Johnson says the Plato’s Closet chain has grown to 350 stores in North America from 30 when he came on board in 2002. Winmark’s four franchises operate 903 locations nationwide in a growing resale industry.

Clothes Mentor, which Johnson calls an upscale Plato’s Closet, operates 42 stores nationwide and requires a startup investment of $140,000 to $229,000, according to www.clothesmentor.com. The average total investment to open a Plato’s Closet store is $250,000, according to www.platoscloset.com. Franchisees must have personal resources of at least 30 percent of the startup and enough equity to collateralize the balance. The two chains charge franchise fees in the 4 percent to 5 percent range.

According to a 2007 Time Magazine article that cited Johnson, secondhand retail chain Buffalo Exchange recorded $43 million in 2006 revenue across its 32 stores at that time, and competitor Crossroads Trading Co. rang up $20 million in ’06 sales at its 22 stores.

Goodwill Industries, which the Time article called one of the largest players, sold $2.4 billion worth of donated goods – much of it used clothing – at its thrift shops in 2009, a 34 percent increase from 2006, according to www.goodwill.org.

The number of resale, consignment and thrift shops grew by 7 percent to 30,000 in 2010, according to the National Association of Resale and Thrift Shops.

Johnson credits the economy for such growth. “We’ve gained customers we wouldn’t have had,” he says, pointing to three significant groups of Plato’s Closet shoppers: those who can’t afford buying new; those who can afford new clothes prices, but don’t want to; and bargain hunters.

Heather Robichaud, Plato’s Closet manager for four years, adds to the reasons. She says Plato’s Closet, which nationally averaged $800,000 in 2009 store sales, is a fun place to shop.

“Every piece of clothing in the store is unique,” Robichaud says, noting while chain stores might have 10 pieces of the same item, Plato’s generally has one piece of that item.[[In-content Ad]]

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