Selling on consignment is a business arrangement where goods are provided by one party, known as the consignor, to another party, known as the consignee, who then sells the goods on behalf of the consignor. The consignee does not purchase the goods upfront but takes possession of them to sell them. The consignor retains ownership of the goods until they are sold. If the goods do not sell within a specified period, they can be returned to the consignor without any financial obligation on the part of the consignee.
| Consignment Category | Percentage of Sales Online |
|---|---|
| Clothing & Apparel | 40% |
| Accessories | 25% |
| Shoes | 15% |
| Handbags | 10% |
| Jewelry | 5% |
| Home Decor | 3% |
| Electronics | 2% |
What Is Consignment in fashion?
Consignment of clothing and accessories is simple. You leave your items with someone else to sell them. This someone is the consignee. They get a fee or a percent of the sale as their payment. It's a good way to sell things without a lot of effort. Things like clothes, sports gear, furniture, music instruments, art, and jewelry are often sold this way. Before you sell, make sure you understand the rules. These rules are usually set but might be talked about.
How Consignment Selling Works
The process of consignment selling involves several key steps:
- Agreement: The consignor and consignee enter into a consignment agreement that outlines the terms and conditions of the sale, including the duration of the consignment period, the percentage split of the sales proceeds, and the responsibilities of each party.
- Delivery of Goods: The consignor delivers the goods to the consignee. These goods remain the property of the consignor until they are sold.
- Display and Marketing: The consignee displays the goods in their store or online platform and markets them to potential buyers. This may involve setting up attractive displays, advertising, and providing information about the products to customers.
- Sale of Goods: When a customer purchases an item, the consignee processes the sale and collects the payment.
- Payment to Consignor: After deducting their commission or fee, the consignee pays the consignor the agreed-upon portion of the sales proceeds.
- Return of Unsold Goods: If any goods remain unsold at the end of the consignment period, the consignee returns them to the consignor.
Rebag Example Scenario
Let’s walk through an example scenario to illustrate the process:
Step 1: Sign In and List Your Item Jane logs into her Rebag account and navigates to the "Sell" page. She uses the Clair tool to scan her Louis Vuitton Neverfull MM bag.
Step 2: Provide Item Details Jane provides details about her bag, noting that it is in excellent condition with minimal signs of wear.
Step 3: Receive and Accept Your Quote Within minutes, Jane receives an instant offer of $1,800-$2,200 for her bag. She accepts the quote and receives a free shipping label via email.
Step 4: Send in Your Item Jane packages her bag securely and drops it off at her local UPS store using the provided label.
Step 5: Authentication and Listing Rebag receives Jane’s bag, which its experts authenticate. The bag passes the authentication process and is listed for sale on Rebag.com.
Commission and Pricing Based on the estimated resale price, Jane’s bag falls into the $2,000-$5,000 category, so the commission rate is 25%. If the bag sells for $2,000, Jane will receive $1,500 after deducting the commission.
Payment Process The bag sells for $2,000, and after the 15-day pending period, Jane’s proceeds of $1,500 are deposited into her Rebag Wallet. She decides to withdraw the funds to her bank account.
If the Bag Doesn’t Sell If Jane’s bag doesn’t sell within a few months, Rebag will relist it. Jane also has the option to request the return of her bag if she prefers not to wait any longer.
Advantages of Consignment for Seller (Consignors)
The consignment model has benefits for the seller:
- No need for a physical storefront or online marketplace to sell goods
- Increased exposure, no requirement to handle marketing, advertising, or sales tasks
- Consignees handle logistics like shipping and delivery
- Sellers retain ownership of goods until they are sold
Benefits for Retailers (Consignees)
- No Upfront Costs: Retailers do not need to purchase inventory upfront, which reduces their financial burden and risk. They only pay for the goods once they are sold.
- Diverse Inventory: Consignment allows retailers to offer a wider variety of products without significant investment. This can attract more customers and increase sales.
- Higher Potential for Sales: With a diverse range of products, retailers can cater to different customer preferences and increase their chances of making sales.
- Reduced Storage Needs: Since the consignor owns the goods, retailers do not need to allocate extensive storage space for unsold items.
- Flexibility: Retailers can easily return unsold goods to the consignor, allowing them to adapt quickly to changing market trends and customer demands.
Disadvantages of Consignment for Seller (Consignors)
But, there can be issues for sellers too:
- Consignment shops typically charge high commissions, sometimes 50% or more of the sale price
- Sellers cede control over how their products are marketed and presented
- Sellers may experience delayed payments from consignees
- Sellers have limited ability to collect customer data or build direct relationships with buyers
Drawbacks for Retailers (Consignees)
- Commission Splits: Consignment shops usually take a commission on each sale, commonly around 40%, though it can vary. This means that a significant portion of the sales revenue goes to the consignor, reducing the retailer's share.
- Damage and Shopper Abuse: Retailers cannot always prevent damage or abuse of the merchandise by shoppers. Consigned goods are subject to the same risks as any other inventory, but since they do not own these items, retailers may be less vigilant in protecting them from harm.
- Logistic Limits: Managing the logistics of consigned goods can be challenging. Retailers must coordinate with consignors for restocking and returns, which can complicate inventory management and disrupt normal store operations (Alice POS).
- Return Logistics: When consigned items do not sell, retailers must return them to the consignor. This process involves logistical coordination and can incur additional costs, such as shipping and handling fees.
Most Popular Luxury Consignment Stores
| Store | Specialization | Website |
|---|---|---|
| The RealReal | Luxury fashion, accessories, and home decor | therealreal.com |
| Vestiaire Collective | Luxury fashion and accessories | vestiairecollective.com |
| Rebag | Luxury handbags | rebag.com |
| Fashionphile | Luxury handbags and accessories | fashionphile.com |
| Tradesy | Luxury fashion, handbags, and accessories | tradesy.com |
Conclusion
The consignment model helps sellers grow their reach without the big costs or duties of running a store. Sellers work with consignment shops to showcase their items, which can bring in extra money and new customers without needing their own shop or lots of ads.
The consignment benefits are pretty clear. You don't need much cash to start, don't have to store a ton of things, and can try out new items without much risk. It also lets you show your stuff to a bigger group and learn what people like. But, there are consignment drawbacks too. These include paying high fees, not being fully in charge of how your stuff looks, and getting paid later than you might want.
