The Used Clothing Business Story

                                                      The Used Clothing Business Story

                                                                        1990

                                                         A good business not to be in     

                                                     Written 2010 Re-written 04/2013

                                                                Howard Yasgar

      

            

     Whenever I read an article in the newspapers about someone doing some type of easy business, I automatically would say, hey, I could have done that.

     I always said that especially if the newspaper article makes it appear as if the business was something that was real easy to do.

    Well, that’s exactly what I thought, when in 1990, while I was having breakfast, I read a story in the Miami Herald.

     It was about how lots of people were buying used clothing from the Salvation Army and Goodwill Industries. Supposedly they were getting the used clothing for practically nothing.

     The article said people were simply buying the clothing by the pound, and they were selling it for big money.

     Wow, I thought, what could be easier than that.

     In 1990 I was looking for a new revenue source for my company, and that was when I read that article in the Herald. The article told about how much excess used clothing was available in Florida, and how cheaply it could be bought from either the Salvation Army or Goodwill Industries.

     The article in the paper was fascinating, it said that those two organizations were receiving more used clothing than they could sell in their stores, so to get rid of the excess, they were making up 1200 pound bales of used clothing and they were selling it for 12 cents a lb. 

      Now, I knew something about the used clothing business, because back in 1962, my good friend Lou Gladstein had approached me with a proposition to buy tons of used clothing that was available from hundreds of dry cleaners located in New York City.

     Lou had been approached by the head of a big dry cleaning organization in new York. They wanted him to clean out their warehouse, which was full of unclaimed clothing.

     All the clothing was all clean, on hangers, and in plastic bags.

     It was the clothing that people had never picked up from the cleaners.

     Lou said we could buy the whole deal for only six cents per pound, and Lou asked me if I had some idea of what to do with tons of clean used clothes?

    That’s when I started looking into how to sell used clothing.

     Lou told me that he had once sold an old used yellow school bus to a fellow in the used clothing business.

     I called the fellow up too ask him what he was doing with the bus and used clothing.

     He was a super nice guy and he said that he shipped the bus to the South American country of Colombia.

     In Colombia they made a route going through as many small towns and villages as they could.

     He had made steps so people could climb up and into the back of the bus. The bus was filled with used clothing.

     The customers climbed in the bus and picked out all the used clothing they wanted, then they as they got off the bus by the front door, paying for the clothing they had picked out.

     He said he was making a lot of money.

     Lou had me ask him if he would be interested in the clothing from the dry cleaners in New York City.

     The fellow replied that the clothing from the New York dry cleaners was too high class for his market, he didn’t have customers for tuxedos, business suits or cashmere sweaters, his customers just wanted jeans and cotton tee shirts.

     So I learned from him that not all used clothing was saleable.

     I should have remembered that conversation, it would have saved me a lot of aggravation.

     So now, here I was in 1990, and I was already formulating a used clothing business plan in my mind.

    The first thing I needed to do, was see if I could actually buy clothing cheap like the Miami Herald article had said anyone could do.

    Then I needed to see what the competition was, and how other people were doing the used clothing  business in Miami.

     My partner Don and I, headed for the main headquarters of Goodwill Industries in Miami, and we spoke to a manager there. Yes he said, they had plenty of clothing, but it was all spoken for and nothing was available.

     I got the feeling that the Goodwill manager had some buddies in the used clothing business, and he didn’t want us upsetting his private deal.

    Next we went to the Salvation Army, and low and behold, it was a completely different story. They were happy to show us how much donated clothing came in every day, it came in by the ton.

    They actually ad an assembly line set up to receive it, and they let us watch how they did it.

     As it came in the used clothing was placed on a conveyer.

     First the pockets were checked for money or valuables, but I didn’t ask what happened to what they found.

     Next, each item was inspected, the good items were placed on a hangar, and a price tag stapled on it.

Wrinkled, stained, damaged or unmarketable winter clothing fell into a hole at the end of the conveyer

And fell into a big bailing machine down stairs.

     When they has 12,00 pounds, a bale was made.

     We were told that any clothing that didn’t sell in their retail stores came back and went right to the baler, and they said we could buy the baled clothing for .12 cents a lb.

      Now that we had a real good source of used clothing at a cheap price, we needed to look into the other aspects of the business, as we still had no idea of how the used clothing business worked in Miami.

      But I felt confident that any clothing that could be bought for only 12 cents a pound, sounded like an easy way to make money.

      Next I looked in the yellow pages to see how many companies in Miami were dealing with used clothing, and I found that there were several. But the “Miami Rag Company” looked like they were one of the largest, and their warehouse happened to be close to our office.

     The next morning I dragged my partner Don over to see what the Miami Rag Company was doing.

     Boy, were we surprised, as they had a very big building with hundreds of bales of used clothing piled up. They also had an army of workers sorting the clothing.

     To watch their operation was a sight, the people were sorting the clothing so fast, it appeared as though the clothing was flying in the air.

     When one of the owners spotted us, he ushered us into an office. We told him that we wanted to buy some used clothing for the export market, so he gave us a menu of all their export prices.

     I noticed his price for used clothing started at $1.50 per lb., and some prices were much higher, especially for items like blue jeans.

     Next he took us to their export packing dept, where they were making bundles of  150 pounds each, covered in white plastic, ready for shipment overseas.

      We left the place, thinking that the profit spread from a cost of 12 cents a pound to a selling price of $1.50 per pound sounded too good to be true.

     There obviously was a lot of profit to be made in the used clothing business.

     Could it be possible that I discovered the true rags to riches story, and here it was right before our very eyes.

     Based on what we had seen, our conclusion was that we needed to buy at least four of the giant 1200 pound bales of clothing from the Salvation Army to experiment with, I felt that 4800 pounds of clothing would be a sufficient quantity for us to learn the business.

     I then emptied out a section of one of our buildings, and  I set up as many long portable tables I could find. I put them in a horse shoe shape.

     Then we made up some large cardboard pallet boxes, to sort the various clothing into, just like we had seen the Miami Rag Company doing.

     I was thinking that with a little advertising in Central and South America, we could probably develop a good export market just like we saw Miami Rag Company was doing.

     Next we went to the Salvation Army and bought we four 1200 pound bales of used clothing at .12 cents a pound or $576.00.

     It was then that we encountered our first problem, we had no way to get the bales moved to our building, I hadn't thought about that as being a problem.

     After several calls, we finally found a trucker that would do it for $150.00. This was our first unexpected extra cost.

     Then when the truck with the bales arrived, they were too big for our tiny forklift to move.

     The bales were not only 1200 pounds each but they were as wide as the truck and wedged inside.

     So to move the bales off the truck, we had to have all our employees come over and physically roll them out of the truck and onto the ground. Then we rolled them over and over by hand into the building.

     We wasted several hours doing this, and we made some of the clothing dirty. It was another unanticipated problem we had not planned on.

     Once the bundles were rolled inside the building, I was anxious to open one up and start sorting.

     I was in for a another surprise, when I clipped the bands on the first bundle, I hadn’t realized that they were bailed under extreme pressure, and clothing literally exploded out of the bale.

    As I cut the metal band on the bale, I heard a “Poof” and there was a mountain of clothing all over the place.

     I started sorting the clothing on the tables that I had set up, but the first thing I noticed was that there was lots of polyester clothing which I knew was no longer popular in any market, no one wanted it overseas.

     I could see there were lots of polyester shirts and skirts and they all needed to be thrown in the trash.

     That meant I needed to rent another trash container, an unexpected additional cost.

     Then I began to notice the large sizes of men’s pants. They appeared to be waist size 46 and up.

      I could see there was going to be a lot more trash than expected. We might need two trash containers.

     I then started seeing lots of  sweat shirts, and all kinds of winter clothing.

     Well I thought, that was understandable, people all moved to Florida and then threw away all their  winter clothes, but what was I going to do with them.

     Soon I saw that my big box of heavy insulated winter coats and jackets was filling up fast.

     Most of the used clothing that I was separating, appeared to have been cleaned and laundered, but also mixed in was quite a bit of used and unwashed stuff. Things like dirty underwear all  had to go into the trash.

      After several days of my sorting, our trash containers were overflowing with junk clothing, that meant we had to order an extra pickup by the waste company., at an unexpected additional cost.

     After sorting clothing for several days I realized that something was wrong, there was very little cotton clothing suitable for warm climates, but there was a inordinate quantity of heavy clothing only suitable for extremely cold climates.

     I looked in the phone book for retail stores selling used clothes. I wanted to see how other used clothing dealers were marketing this same type of crap we had gotten from the Salvation Army.

     I found a store in a rundown mall in Miami’s Inner City. The whole strip mall was nearly empty, except for the used clothing store.

    The store was big and neat, with all the clothing hanging on racks in perfect order, it was just as if  they were new.

     I looked in their back room and I saw the same clothing bales just like we had bought.

     I could see that the store was doing it the right way, but they had one major problem, there were no customers in the store.

     So that’s when I started thinking, there had to be a market somewhere, but it obviously was not in Miami. I needed to rethink this whole used clothing business all over again.

     I went back to sorting the bales of clothing we had, but by now it had become a lot of work, and the fun of sorting was all gone. I was trashing more clothing than I was keeping.

    The more I sorted, the more depressed I became, I had a big box of clothing that looked like it would be good only in Alaska. So I now realized this used clothing business was not going to be as easy as I had thought.

      In desperation I put an ad in several international trade newspapers. I was offering used American clothes for $1.25 per lb.

     It was then one of our employees named Jose, said that his mother had a booth in the market in Managua, Nicaragua, and she could sell used clothing.

     So we started to look into the cost of shipping clothing to Nicaragua, but shipping was not so simple.

     Shipping by ocean was cheapest but took a lot of time, airfreight was expensive but it was quick.

     Then there was the duty that had to be paid, customs inspectors that had to be paid off.

     A bigger problem was that Nicaraguan customers would be paying in local currency, which had to be traded for U.S. currency daily, and that also was an expense and way too complicated.

     Jose offered to fly to Nicaragua and do everything that was needed. He said, that his mother said she could sell every pair of Levi type jeans we could ship there.

     We didn’t have enough blue jeans so we called the Good Old Miami Rag Company, I remembered seeing them bundling up jeans for export.

     Yes they said, jeans were a good item and we could buy them for $2.50 a lb. So we purchased 4 100 pound bundles of blue jeans from Miami Rag for $1000.00 and we shipped them to Managua by plane along  with Jose.

     I happened to be talking to my daughter in Connecticut, and she told me that she had just had a yard sale and sold all the baby clothing she had. I got excited, I told her I had tons of unused baby clothing, that she could sell.

     I picked out a couple hundred pounds of beautiful brand new clean baby clothes and shipped it to her in Connecticut, I did it all at my expense.

     Things were looking up, we had blue jeans going to Managua, I had baby clothes going to Connecticut, and I just received an international order from Poland for 100 lbs. of heavy duty winter clothes, that I had quoted at $1.50 a pound.

     Jose called every day from Managua, the jeans were selling briskly, but he had to pay several bribes to the customs people, and every night he converted the local currency into dollars for us.

     By the end of the week, he called to tell us that the all the blue jeans that could be sold, had been sold, which was about 50 percent or half of what we had sent.

      I asked, what about the rest of the jeans?

      Jose said unfortunately most of the blue jeans left over were too big for the people in Nicaragua, as all the Nicaraguan people had small waists.

      I asked Jose and asked if his mother could have the jeans altered.

      Jose said that they already looked into that and it was impractical.

      So now any profit we would have made in Nicaragua was now gone, so I told Jose to return to Miami.

      Miami Rag, had taken advantage of us, they knew we were shipping to Nicaragua, and they sold us jeans they knew we couldn’t sell.

      I called my daughter in Connecticut to see how the baby clothing was selling. She said she wasn’t able to sell even one piece, I didn’t even ask her why.

      Then the mail came, and there was a letter of complaint from Poland.

      They said they were very disappointed in the heavy duty winter clothes I had sent them.

      I had sent them clothing suitable for Eskimo’s, but still they were complaining that the clothing was too light, and not heavy enough for Winter in Poland. 

      I now felt it was best to not lose any more money.

      My direction was now perfectly clear, every week, when the trash men came, I filled our trash dumpsters up with all the leftover clothing.

      It was almost as much work throwing the used clothes away as it was in sorting them out.

      If anyone wants to know about making money in the used clothing business, just ask me.