Simon and Eugenia Han of Yoogi's Closet

Some businesses get started with venture capital. Others get going with a second mortgage. But Yoogi's Closet -- an online retailer which specializes in re-selling pre-owned handbags, jewelry and shoes -- got off the ground after co-founder Simon Han sold his Ferrari.

Han -- who previously created the online automotive site CarDomain -- sold his 2000 Modena 360 for $102,000 just before the market crashed last year. The 35-year-old entrepreneur then plowed the proceeds from the sports car into Yoogi's Closet, laughing about diversifying his holdings into designer handbags.

"It was awfully painful," said the car enthusiast. "But it definitely has paid off."

The e-commerce site -- named after Han's wife and co-founder Eugenia Han -- is on track to do $2 million in revenue this year.

That's up from $290,000 last year. The 4-person startup -- which plans to move from the Hans' home in Wedgwood to new offices -- also has been profitable since last year.

Yoogi's Closet is growing despite the tough economy, one which has taken a bite out of other luxury retailers. According to a study from Bain & Co., the market for luxury goods is expected to decline by eight percent this year and grow just one percent next year.

"I think the appetite for luxury goods is still there," said Han. "But people are just less inclined to walk into a Louis Vuitton store and pay full retail for an item. Buying from Yoogi's Closet it gives them a way to still buy the luxury good, but at a substantial discount."

The average sale on Yoogi's Closet is just over $800, with handbags the biggest category to date. (Some handbags on the site --including the Hermes Lizard Bag -- retail for more than $9,000). At CarDomain, by comparison, Han said the average ticket was about $160.

In terms of the business model, Yoogi's Closet takes a 30 percent cut on consignment items. On direct sales, it tries to hit a profit margin of 45 to 50 percent. Unlike some online consignment shops, Yoogi's Closet also will pay cash for the goods that it sells.

Competition abounds from sellers on eBay and CraigsList. But Han said it can be a "nightmare" trying to buy and sell luxury goods through those sites because of the authentication problem.

That's also a challenge at Yoogi's Closet. But Han estimates that less than one percent of the luxury goods that sellers send into the company are fakes.

Yoogi's Closet also often draws comparisons to Seattle-based Avelle, the online handbag rental service formerly known as Bag Borrow or Steal. But Han said there's a big difference between selling pre-owned luxury goods and renting them.

"Even though you are buying a pre-owned luxury good, you still want that pride of ownership and that's what you don't get with renting a handbag," he said. Another competitor is New York-based Portero, which raised $6.6 million in venture funding earlier this year.

Because of Yoogi's Closet has hit profitability and grown sales in a tough climate, angel investors have approached the company. But, for now, Han said he wants to build the business organically.

"We are very happy right now to be internally funded and bootstrapped," he said.

And while the business is doing well, Han said he's not quite ready to purchase another Ferrari.

"Perhaps down the road," he said.

John Cook is co-founder of TechFlash. Follow on Twitter @johnhcook.