Consignment is an arrangement in which goods are left in the possession of an authorized third party to sell. Items sold on consignment are typically found in consignment shops, who will usually charge a commission for their sales services.
Products sold through consignment often include artwork, clothing, accessories, and books. Instead of outright buying stock, consignment shops sell these items on behalf of their owners for a portion of the profit. While supermarkets and big retailers buy products from wholesalers to sell at a markup, consignment arranges sale transactions between the inventor and consumer, occurring more frequently in secondhand and niche stores.
Key Takeaways
- Consignment involves leaving goods with a third party to sell.
- Sellers receive a portion of the profits, which could be a flat-rate fee or commission.
- It offers a low-commitment and low-time-investment approach to selling items or services.
- Items often include clothes, athletic goods, furniture, musical items, art, and jewelry.
- Terms are often presented but negotiations can sometimes be entertained.
- Ideal for those without an online marketplace or physical store to sell their products.
Understanding Consignment
In modern times, consignment shops are particularly appealing to those looking for specialty products, high fashion bargains, infant goods, or even pet care items. The millennial-generation favors these due to its thriftiness, debt-consciousness, and economic challenges including student loans and fluctuating incomes, all exacerbated by lingering effects of economic recessions.
Advantages of Consignment
Consignment perks include the ability to sell through platforms like eBay, which for a cut, removes the need for sellers to create their own website. From as-seen-on-TV products to online consignment stores, these setups handle the back-end works of marketing, customer engagement, and payments, relieving the producer or owner of extra legwork and costs.
Sellers beneft from not having to set aside time to personally handle the oft-tedious tasks linked to direct selling. From negotiating lower fees to leaving the efforts of sale arrangement and buyer coordination to the consignment parties—it’s a streamlined process.
Disadvantages of Consignment
A primary con is the typically high commission rates imposed by consignment shops, especially for high-value items like fine art where galleries could ask for up to 50%. This significant commission trims the profits sellers can gain.
Another negative aspect revolves around ceding control over the product’s marketing, which is typically managed by the consignment store. Sellers lose control, possibly discontented with how the product is showcased or managed, despite any initial or negotiated terms.
Consignment Payment Structure
When an individual opts to sell an item via consignment, an agreement detailing the split is required before handing over the goods. Consignment shop fees vary, typically ranging between 25% and 60%, and there’s some room for negotiation particularly for big-ticket products.
The duration of consignment agreements is also decided upon. If an item doesn’t sell within the time frame, it’s returned to the owner, or an extension could be agreed upon.
Products Sold Through Consignment
Common items sold this way include everything from clothing to musical instruments. For instance, an artist with no personal gallery might opt to showcase their artwork in a consignment gallery, where space isn’t necessarily charged but commission on sold pieces forms an integral part of the arrangement.
Another example: someone finds vintage clothing at their relative’s house, takes a fraction and ventures into selling the rest at a thrift shop. The thrift shop then allocates a split agreement on sales revenue, embodying the essence of second-hand store consignment.
FAQs on Consignment
What Does Consignment Mean?
Consignment is when goods are left with an authorized third party to sell, who pays the owner a portion of the income from sales.
What Does “Consignment Only” Mean?
It describes a setup where stores hold goods on the owner’s behalf until sold, returning ownership should the items remain unsold.
Is Consignment Worth It?
It can be worthwhile. Having goods on consignment means exposure to more buyers, but entails sharing profits which can affect net gains.
Conclusion
In the retail domain, consignment agreements are invaluable, allowing for economical and time-efficient sales practices. Consignment strategies aid those with niche items like clothing, art, and musical gear, by ensuring items are sold in environments geared to foster premiums. The convenience though, comes balanced with proportional profit-sharing drawbacks.
Related Terms: commission, retail sales, wholesaling, markup, student debt, brick-and-mortar, revenue.
References
- Cornell Law School-Legal Information Institute. “48 CFR § 816.770 - Consignment Agreements”.
