What Is Consignment?

What Is Consignment?

Let me explain consignment directly: it's an arrangement where you leave your goods with an authorized third party to sell them for you. When those goods sell, they're considered 'consigned' to that party. You'll find this in consignment shops that take a cut of the revenue—sometimes a big one—as their commission.

These deals often cover items like artwork, clothing, accessories, and books. Some retail setups look similar, with producers depending on stores to move their products, but consignment is most common in secondhand and thrift stores. Don't confuse it with big retailers like Walmart or supermarkets; they buy goods outright from wholesalers and mark them up for sale.

Key Takeaways

Consignment is straightforward: a third party sells your goods and keeps a commission from the profits. You can sell things like clothing, jewelry, art, or furniture this way, reaching more buyers without your own store. Be aware, commissions can be high—up to 50% for art—which impacts your bottom line. On the plus side, you avoid handling sales and marketing yourself. Terms are negotiable between you and the third party.

How Consignment Works in Today's Market

In the 21st century, consignment shops are gaining traction, especially for specialty items, baby clothes, pet products, and luxury fashion. Millennials drive this trend with their budget-conscious habits, skipping high-end stores for deals in thrift and consignment spots. Factors like student debt, flat wages, and the fallout from the 2007-2009 recession push younger buyers toward these options.

Benefits of Selling on Consignment

If you don't have a physical store, consignment fits well, and it works online too. Platforms like eBay act as consignment shops by taking a fee to let you list and sell your items, saving you from building your own site, drawing in customers, or setting up payments. Even TV sales, like 'as-seen-on-TV' products, follow this model. If you're short on time or interest in direct selling, the fees might be worth it—especially if you haggle for a lower rate.

Challenges of Selling on Consignment

The main issue for you as a seller is the high commissions charged by consignment shops. For artwork, galleries often take 50%, which cuts deeply into your returns. You also give up control over how your products are marketed and sold—the shop handles it all, and it might not match what you want. Agreements sometimes address this, but consignment usually means handing over a lot of say to the shop.

How Consignment Payment Agreements Work

When you want to sell something on consignment, you deliver it to the shop or third party, but first, you agree on how revenue splits when it sells. Most shops have standard fees showing what percentage goes to them and what to you, but they're often open to negotiation, especially for big-ticket items like art that promise more revenue. You might end up giving away 25% to 60% of the sale price in fees.

These arrangements last for a set time; if nothing sells, you get your goods back, or you can agree to extend the period.

Popular Items Sold on Consignment

Common consignment items include clothing, sports gear, furniture, musical instruments, art, and jewelry. Take an artist with five large artworks but no display space: they might use a gallery that charges a commission on sales, built into the price, without upfront fees for the space.

Or consider finding vintage 1940s clothes at a relative's house—you keep some, sell the rest at a thrift store on consignment, agreeing to 60% for you and 40% for the store. This is how many secondhand stores operate.

What Does Consignment Mean?

Consignment means you leave goods with an authorized third party to sell, like a shop that sells your items and pays you a share of the profit.

What Does 'Consignment Only' Mean?

Many secondhand shops use this term: it means goods stay in the store's care until sold, with you retaining ownership until the buyer pays.

Is Consignment Worth It?

It depends on your situation. Consignment can expose your goods to a larger audience and boost sales, but you'll pay a commission—often a hefty one—on each sale.

The Bottom Line

Consignment lets authorized third parties sell your items, giving you a cut of the proceeds via flat fee or commission. It's useful if you lack a marketplace, expanding your reach without managing sales. High commissions can eat into profits, but it's still popular for clothing, art, and furniture, providing market access without the hassle.