Resale chains play to strengths as retail stages recovery

While the recession propelled growth in New Jersey’s resale market by creating an influx of budget-conscious consumers, industry experts believe supply-side strategies will stimulate further growth, even as the economy improves.

While the recession propelled growth in New Jersey’s resale market by creating an influx of budget-conscious consumers, industry experts believe supply-side strategies will stimulate further growth, even as the economy improves.

“For our stores, we’re driven more by what we buy, and that predicates what we sell,” said Steve Murphy, president of franchising for Winmark Corp., the parent company of four high-end resale chains with locations in the state. “As long as we’re buying good, quality inventory in the right styles, we won’t have a problem selling it. I think the value-oriented consumer is here to stay a little bit more, so times improving won’t have a negative impact on our sales.”

According to Murphy, Winmark plans to open more than 10 new locations in New Jersey over the next three to five years across its four brands — Plato’s Closet, Once Upon A Child, Music-Go-Round and Play It Again Sports.

Three leases have already been signed by entrepreneurial groups for stores in Deptford, Bridgewater and Fairfield, he said.

Carol Kaufman-Scarborough, associate dean of the Rutgers University School of Business-Camden, said Winmark’s franchise locations are “likely to grow in this economy,” but may not grow across 10 years if they fail to keep up with changing demographics and retail trends.

“Businesses like this respond to a trend within a specific demographic, so they need to carefully define their mission, so the business doesn’t have a wear-out effect down the line,” said Kaufman-Scarborough, who specializes in retail consumer trends. “Expanding too fast with something popular could mean too many stores are doing same thing. And if their price points are seen as comparatively similar to brand-new merchandise, then where will the consumer go?”

While Play It Again Sports and Plato’s Closet have operated for more than 10 years, Murphy said New Jersey’s commercial real estate market has prevented the company from opening more franchise locations in the state until recently.

“The commercial market lags behind the residential market, so it didn’t fall apart in 2008, and it never did hit a bottom,” Murphy said. “New Jersey is one of the higher rent states in the United States, but now that commercial real estate has come around, some of the rent structures fit our financial models, so now we’re really looking into expanding in areas like North Jersey that we couldn’t penetrate before.”

Despite possible recovery in the real estate market, Murphy said Winmark will continue to target New Jersey for franchise growth because it has an extremely dense retail market and highly populated areas.

Aside from securing prime real estate, Murphy said the Winmark franchises “won’t face any other obstacles as things improve.”

“Since it was more difficult for people to financially qualify as franchisees in the recession — with their net worth being cut in half — it’s actually easier now to open a store,” Murphy said. “People having disposable income again means there’s more money in the market, and we hope to get a fair share of that.”