Consignment is a hot topic for new entrepreneurs, and many I meet ask if I think consignment is right for them. There’s no simple answer, but there are pros and cons to consignment that you should weigh before making your choice.
Many store owners, especially smaller boutiques don’t want to take a chance on new product lines right away. Consignment lets them test their market for your product safely and have their customers decide. This in itself is one of the pros of consignment. When stores don’t have to take a big risk, they are more likely to try your product on their shelves the first time you inquire.
Selling on consignment also offers you the opportunity to show the storeowner you have confidence that your product will be a hit with their customers.
When your product does sell, consignment percentages are usually 60%-70% of the sale price, as opposed to wholesale, which is usually 50%.
The most obvious con to consignment is the wait. You don’t receive payment for your merchandise until it sells. If you manage your cash flow carefully you can avoid the problems that can arise from this.
Ensure your consignment agreement contains a time frame to ensure that you don’t end up having long out of stock items returned to you, and notes on responsibility for lost or stolen goods, and the display and upkeep of the merchandise.
Another factor to consider when deciding to sell your items on consignment is the shop itself. Look at the other products on sale in the shop, how they are displayed, and the shop’s traffic. If you think your products will sell well in the shop, definitely approach the owner or buyer to see if consignment might make sense for both of you.
Remember, consignment only works for you if your products sell, so do everything you can to ensure that happens.
Andreea Ayers works with creative entrepreneurs to help them get media attention for their products and to increase sales by getting their products in stores. For advice, insight and lots of free resources, check out AndreeaAyers.com.
Main image courtesy of Indy Charlie.
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Another really important consideration for consignment is when you will be paid. The hardest I've dealt with is every three months. I had no report of what sold for three months and of course, no check. Best case scenario is once a month for both a report and a check. that also gives you a chance to bring in new items and clean anything that happens to get dirty (or remove old stock that isn't selling).