Consignment is an arrangement typically involving an individual and a business. The individual who has specific item(s) to sell but may not wish to deal with the process of actually selling the item may leave their product with a company to sell. The company would enact a sales agreement with the seller where they would receive a percentage of the sale price in exchange for handling the transaction. Typically, the consignment is for a specific amount of time, and the item is returned to the owner in the event it does not sell. Consignment can be used for a variety of products ranging from art work, books, clothing and more. Consignment shops have become a popular way for individuals to have a retail presence without the hassle of having their own shop.
Consignment allows companies to ‘try-out’ products that they are not confident they can sell. When a supplier is confident of their product’s ability to sell and the customer is hesitant to stock the product, a consignment arrangement can be an option that has little risk for both sides. Allowing the product to be put in front of end-users will give the company opportunity to see how the item sells, while the supplier can showcase their product. At the end of the consignment agreement, the supplier can take back any unsold merchandise or the customer can decide to renew the sales agreement.
Consignment transactions can be handled in a variety of ways, and it is up to the involved parties to determine the arrangement before entering into the deal. The consignor may wish to be paid per transaction – or every time their item sells. Alternatively, they may reach an agreement where they payout occurs on a set schedule – the end of the month, for example. Depending on the market, the agreement may stipulate that the payouts only occur at the end of the consignment period. As long as both consignor and consignee are in agreement, the consignment process is a viable means of selling items.