Wholesale or Consignment: Which One is Right For You?

Contributor post by Rena Tom

As you start to envision your products on the shelves of stores, you should also think about how you’d like them to get there. If you wholesale your work, you sell inventory to stores, who then double that price (more or less) and sell it to their customers. If you consign your work, you are entrusting it to the store owner, but you retain full ownership of your products up until the time of sale.

While it seems like consignment is always in favor of the retailer, in reality there are pros and cons for each method for both the retailer and the vendor.

Selling wholesale is good for the vendor because you get paid for work you deliver. You are in a mutually beneficial relationship with a retailer (after all, they can’t make money without you) which implies a level of professionalism and reliability that will help you grow your business.

The hard part, of course, is that you must maintain that professionalism at all times. As a wholesaler, you’ll have many competitors who would love to take your place if you mess up a delivery, can’t produce enough product, or don’t spend time or money on marketing.

Buying wholesale is the usual way to merchandise a store, but it requires the retailer to have intimate knowledge of customer taste and trends, as well as the budget to purchase the right work at the right time. A retailer might not have leeway to stock risky or unique work and may have to stick with tried and true sellers.

The upside of buying wholesale is the profit margin; once a retailer owns your work, they can charge whatever they like for it, except for items with a mandated MSRP. With wholesale orders, a retailer can also plan for specific delivery dates; some vendors who sell both ways might favor their wholesale accounts over their consigned stores, and produce their wholesale orders first.

Buying on consignment happens a lot with independent retailers who don’t have a lot of cash on hand for inventory. They can take a chance on new designers without incurring much cost if they did not guess correctly. At the other end of the price scale, some jewelry stores work “on memo”, which is basically consignment, because they cannot afford to carry all of the work.

The downside for stores is that new designers are not always as professional and not under any particular constraints to deliver their work in a timely manner, since they don’t get paid at the time of delivery. There is also additional paperwork to tracking consignment sales and paying designers that make it less worthwhile for some stores.

Selling on consignment is a good way for designers to test the waters with stores who are not entirely sure the work will sell. Designers receive the benefit of feedback from store owners and customers that will help them improve their brand. Many consignment fees are split 60/40 or even higher so there is a potential to earn a lot more than doing wholesale.

Despite this, some designers refuse to consign their work. If a store is not prompt with payments or good at recordkeeping, it’s up to the vendor to chase down their money, and if a store is not careful with the work, it could end up damaged. (It’s a good idea for vendors to only consign work to local stores that you can check in with personally.) Also, some stores don’t invest as much time in promoting the consigned work as their wholesale goods which make them a better margin.

In conclusion - consignment is a great help to newer designers but should be done sparingly, with the goal of turning every consigned account into a wholesale account. Actually, I would give the same advice to retailers; consign when you are unsure of the designer or love them but don’t have the budget, but try to convert to wholesale if the product is selling well and the company has matured.

Do you work on consignment, and have any tips for designers who are thinking of consigning their work?


Rena Tom is a retail strategist for creative business owners. Rena blogs about personal projects as well as retail trends and small business tips at renatom.net. She lives in San Francisco with her husband and baby boy in an apartment filled with too many laptops, Sprecher root beer, half-finished craft projects and overdue library books. Look out for her new e-book, Retail Readiness coming soon!

Jan Halvarson

No comments: