Resale shops sprout up across DFW

By Scott Nishimura

snishimura@star-telegram.com

Jon and Mandy Calvin see the tight economy as the right economy for their new business, Clothes Mentor.

The entrepreneurs decided to enter the women's clothing resale business during the recession. They bought a franchise from Clothes Mentor, which buys brand-name clothes from consumers and resells them at deep discounts to retail prices.

They expect to begin buying merchandise June 1 for stores in Lincoln Square in north Arlington and at 3810 S. Cooper St., near The Parks at Arlington mall, with sales set for mid-July.

The Calvins think that the franchise's clothing exchange concept will appeal to many working women who are trying to save money.

"When a woman needs to go back to work, she can get her new wardrobe from us, and finance it by selling her maternity clothes to us," Mandy Calvin said.

Clothes Mentor is part of a growing sector of resale shops that has benefited from the downturn. Franchisees have acquired the rights to 13 stores in North Texas, said Chad Olson, the company's chief operating officer.

Chuck Bell, who opened the first North Texas store in Plano in 2010, launched the first Tarrant County location Thursday at 8849 N. Tarrant Parkway in North Richland Hills. The Calvins are searching for a site for a third store in the Alliance Corridor in far north Fort Worth.

A third franchisee owns the rights to two other stores in Fort Worth, including one in the South Hulen Street corridor, and is looking for locations.

The Tarrant County franchises will join existing or planned stores in Dallas and Denton counties, Olson said. "We've pretty much covered the market," he said.

Sales in the U.S. used-goods industry, which includes for-profit stores like Clothes Mentor and Plato's Closet and nonprofits like Goodwill Industries, grew an average 6.2 percent annually over the past five years to $14.7 billion in 2011, according to a research report by IBISWorld.

The number of stores jumped from 71,273 to 79,995 in the same period as they moved to draw in cash-strapped consumers.

As the economy continues to recover, however, IBISWorld expects consumers to shop more at traditional discount retail stores and online. IBISWorld expects sales in the used goods industry to decline to $13.7 billion by 2016, and the number of businesses to decline to 65,884.

But the women's segment will do better. Women's wear and shoes account for 19 percent of the industry's revenue, and IBISWorld expects the segment to continue growing over the next five years.

"In the next five years, this segment is expected to continue its growth as specialty stores emerge after the recession," the report said. The stores "will provide high-quality women's clothing at lower prices that will continue to attract fashion-conscious females looking to save."

Olson's father, Ron, purchased the U.S. rights to Clothes Mentor in 2006, and the company has been aggressively expanding as the recession unwound. The chain has opened 52 stores and sold franchises for 43 more, in 22 states, Olson said.

The company has been popular among franchisees for the pricing system that's included in the $250,000 startup price. The system tracks brands and specific items, and establishes market prices for buying and reselling. The stores pay cash for what they buy, typically about a third of what a product should sell for. On a hot item, the offer might go up to 50 percent. Resale prices are typically about 70 percent off of mall retail, the company says.

Clothes Mentor focuses on 1- to 2-year-old items in "great condition" in brands like Chico's, Coach, Ann Taylor and Lane Bryant, said Bell, who runs the North Richland Hills store with his wife and sister-in-law.

"If they're stained or damaged in some way, we're not going to buy them," Bell said while perusing the racks recently. On a pair of sandals, for example, the store's buyers should shy away from ones with toeprints or sweat stains.

That doesn't mean there aren't gray areas. Examining the shoes, Bell found one pair of sandals that had toe indentations but were otherwise in good condition.

"I probably would have passed on these," he said.

And one woman at the Bells' Clothes Mentor store in Plano brought in a Gucci bag, asking $600 for it, Bell said. "I told her I didn't have a buyer who would pay $1,200 for it," he said.

The stores keep label guides they use to assess goods, and most garments' tags have date information, Bell said. Buyers input the simple data into Clothes Mentor's computerized system to generate purchase offers and resale prices.

"You need consistency," Mandy Calvin said. "We want [customers] to keep shopping our stores, and they have to know that a certain brand is a certain price."

The Clothes Mentor franchises have developed a quick following among owners of two other resale chains -- the teen-oriented Plato's Closet and Once Upon a Child, both formerly owned by Ron Olson through his Grow Biz International. Olson left Grow Biz several years ago.

About 60 percent of Clothes Mentor franchisees also own either Plato's Closet or Once Upon a Child stores, Chad Olson said.

Bell and his wife own four Plato's Closets, in Plano, Frisco, Irving, and Dallas, and opened their first Clothes Mentor in Plano in 2010. The Calvins opened a Plato's Closet two years ago in Watauga.

The Clothes Mentor startup costs include franchise fee, inventory, leasehold improvements, equipment, the pricing matrix and advertising. The stores average 3,000 square feet and $625,000 in annual sales, Olson said. They also average gross margins of 62 percent, a measure of the difference between sales and the cost of those sales. Owners pay 4 percent of net sales as royalties to Clothes Mentor. About 80 percent of inventory is supposed to sell within 90 days.

"We think we can be 300-400 stores over the next three, four years," Olson said. "We think that's reasonable."

The Clothes Mentor franchisees also see themselves as recyclers, which they view as a draw.

"The average American sends 70 pounds of textiles to the landfill each year," Bell says.

Bell, a chemical engineer by training who once designed refineries, subsequently became a corporate lawyer, working at Perot Systems for 15 years before retiring in June. His wife, Catherine Bracken, opened the family's first Plato's Closet 12 years ago after being laid off.

Bracken's sister, Pat Bracken, manages the North Richland Hills Clothes Mentor and is a partner in it. Bell says the family is self-financing the startup.

The Calvins are entrepreneurs, having been in commercial real estate and child-care ventures. The couple, who also say they're self-financing their Clothes Mentor venture, came up with an idea for a teen clothing resale store before finding out that Plato's Closet had already franchised the idea.

The couple came up with the idea to enter the women's clothing resale business during the recession.

"I'm a clotheshorse," Mandy Calvin says. And during the recession, she "kept shopping, and her friends kept shopping," Jon Calvin recalls.

Scott Nishimura,

817-390-7808

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