The Pros & Cons of consignment
Many Creative business owners approach me and ask if I will stock their products. Many seem to think taking products on consignment is no issue for a shop owner; ‘It’s free stock’, ‘Just take it for a week or two’, ‘Try it out, see how it goes’! They actually get quite offended when I say I don’t take ANY products on consignment and will not consider it.
Consignment, is the practice of loaning products to a stockist. No money changes hands at the time of the ‘loan’. If the items sell, the store get a percentage of the retail price. The word IF stands out, there is no guarantee the work will sell. When things do sell, they only get paid for those items. So it’s perfectly possible for a creative to hand over stock worth R1000 and only get R100 at the end of the month.
There are some advantages to the creative and the shop owner of offering products on consignment…
// Get your foot in the door of a potential stockist
// Gets your product ‘out there’ and on shelves in front of customers
// Only have to restock as it sells – the creative makes small amounts at a time
// No initial outlay to the shop, they can try before they buy
But, it is my decision at The Ruby Orchard, not to take any products on consignment, and here are my reasons why…
// Your items can be stolen, whose loss is it?
// Your items can get damaged or shop soiled while on display, who’s responsible?
// You and/or the shop keeper can lose track of or disagree on quantities that have been sold / been paid for.
// The problem with consignment is that all the risk stays with the creative, the shop owner has a much smaller risk. I want creative businesses to flourish not flounder!
// Consignment products can get forgotten and left in a corner to gather dust. If a shop keeper has invested in the product, they have to sell it! They will promote it, move it around the store and sell it to customers!
// A shop that can outlay cash and products up front has cash flow… which should tell you something about that store.
// The store owner pays staff, rent, the card machine fees, electricity, internet and provides the wrapping and packet for the purchase, and for usually 15%-30% of the sale. This is simply not enough to cover the overheads a shop has to cover.
// Consignment can be a way of saying ‘I’m not really sure it will sell, so will take it on consignment’. If a shop owner believes in the products, the person behind them and knows they will sell, they will allocate time, money and effort into them.
If you are a creative business owner, these are just a few things you should keep in mind when approaching potential outlets. At the end of the day both the creative and the shop owner have the same goal: to be able to stock and sell a beautiful new product!
