C - Consignment
Consignment is a business arrangement where a supplier (consignor) provides products to a retailer (consignee) to sell, but the supplier keeps ownership until the items are sold. The retailer earns a commission from each sale. If products don’t sell, they can be returned to the consignor.
Consignment helps businesses sell more products, reach new markets, and reduce the risk of unsold inventory.
What is consignment?
In consignment, the consignor supplies goods to the consignee to sell in their store or online. The consignee doesn’t pay for the goods upfront. Instead, the consignor gets paid after the items are sold. If products don’t sell by a certain date, they are either returned or kept for further sale.
This setup benefits both parties by allowing products to reach more customers without large upfront costs.
How consignment works
- Agreement – The consignor and consignee agree on the selling terms, including commission, pricing, and sales period.
- Delivery of goods – The consignor delivers products to the consignee’s location. The consignee doesn’t purchase the inventory.
- Selling products – The consignee sells the items and collects payment from customers.
- Payment to consignor – The consignee deducts their commission and pays the remaining amount to the consignor.
- Return of unsold goods – Unsold products are returned to the consignor or sold at a discount, depending on the agreement.
Why is consignment important for business owners?
Consignment offers benefits to both retailers and suppliers by minimizing risk and increasing product availability. Here’s why consignment can be a great strategy:
1. Test new products with minimal risk
Consignment allows product makers to introduce new items to stores without upfront costs. If the product sells well, the retailer may request more. If not, the consignor takes the items back.
Example: A potter places handmade bowls in a home goods store. The store sells the bowls and returns any unsold pieces after the season.
2. Sell more without large upfront costs
Retailers can expand their product selection without paying for large amounts of inventory in advance. This preserves cash flow while offering more products to customers.
Example: A bookstore accepts consigned stationery, increasing product variety without additional expense.
3. Expand market reach
Consignors can get their products in front of more customers by placing them in multiple stores, boosting sales and brand recognition.
Example: A local bakery consigns cookies to nearby coffee shops, attracting new customers.
4. Build strong business relationships
Consignment creates lasting partnerships between retailers and suppliers. Both parties benefit when products sell, encouraging mutual growth.
Example: A painter consigns art to local galleries, sharing profits with each sale and building long-term partnerships.
Real-life example
Coastal Candle Co. wanted to increase sales during the holidays but didn’t have a storefront. They partnered with local boutiques through consignment.
Details:
- Coastal Candle Co. delivered 100 candles to five boutiques.
- The boutiques received a 30% commission on each sale.
- Over two months, 80 candles were sold. Coastal Candle Co. collected the remaining 70% of the sales revenue.
How consignment helped Coastal Candle Co.
- Increased sales without overhead: Coastal Candle Co. grew sales without renting retail space.
- More exposure: The boutiques introduced Coastal Candle Co. to new customers.
- Limited risk: Unsold candles were returned, preventing financial loss.
About CoCountant
At CoCountant, we make consignment easy to manage by tracking sales, commissions, and inventory. Whether you’re supplying products to stores or selling for others, we ensure every transaction is recorded accurately, and payments are made on time.
We handle the financial side of consignment so you can focus on creating products and growing your business. With our bookkeeping and accounting services, you’ll have clear records and peace of mind knowing that every sale is accounted for.