How to Sell Consignment
Recently on our Facebook Page, someone asked about selling their products consignment. If one person is having that question, you can bet others are. Selling consignment is often a first step to getting into a retail store. Consignment means that a store owner will take your product and instead of buying it, they will pay you for the product when they sell it. You own the product, in their shop, and are responsible for stocking the store shelves. You and the shop owner work out a deal for a percentage of the sales – generally a 70/30 or a 60/40 split with the store getting 30% or 40%. The reason that the store gets less than 50% is because you, the small business owner, are taking all the risk. First you will need a contract with the shop owner.
(1) The percentage split – Are you getting 70% of the sales price? Less?
(2) Rent or extra fees – Is there administration cost every month? Is there any rent that the owner would like you to pay for your part of the store?
(3) Theft and damage – Mistakes happen and unscrupulous people happen. Who pays for that inventory? You or the shopowner? Or, is it a split?
(4) Payment – How often are you paid?
(5) Removal – If things aren’t selling, when and how can you pick up your products?
(6) Inventory – Are you keeping track of inventory or is the store? What if there is a discrepancy?
(7) End Date – How long does this contract last? Under what circumstances can you get out of the contract?
Other things that you will want to take into account are general business questions – is this store in a good location? Will the store owner give you good placement in the store? Can you work with them on in-store promotions? Will you be proud to have your merchandise in the store?
It’s important for you to do the research into the store before you approach the shop owner. Is the store in good traffic location? Will the store owner do a good job promoting her store (and your products)? Your soap will be tied up in the store, while you still own it. It is a big risk and that’s why you are normally paid more than 50%. If you get a chance, talk to other people that are consigning in the store about how their products are being treated in the store and how their products sell through. Past experience predicts future experience.
So You Want to Sell Your Soap? (Part One)
Gettin’ On My SoapBox – Sell! Sell! Sell!
Bramble Berry Supplies
ELF Soap Molds
Otion – The Soap Bar
Soap Queen Blog
Soap Queen TV
Teach Soap
I was planning on asking this myself. Thanks.
Yay! Glad to be of help =)
Thanks, Anne Marie! I really appreciate this blog! It is very hard decisions whether to pursue wholesale, individual sales or consignment sale. Some of the things on contract are very confusing to understand and even when I do understand, fear of unknown factor in consignment end up getting me. This article has very good point for me to think about and It is nice to review all those key points to check on before entering anything. additional things that I had to think of- not that you did not touch it but want to point out, that duration of the contract and termination- when and how. I think it is very important to know how long I will be bounded with the contract and how do I terminate it if and when I want to and stuffs.
Thanks again for great article!!! Great knowledge!
Often times, you’ll find that stores will only agree to bring you on after they’ve tried you out for a small amount of time on consignment to see how well your products sell so sometimes, it’s a stepping stone to a “real” account where the store owner takes all the risk.
Great reminder re: time for contract. I am so adding that point to the blog post right now =)
Thank you, A-M! You are so awesome!
I know that many soapmakers do not like to sell through consignment because of the risk. I’m lucky enough to have found one that has been excellent for me. And I hope that others will at least give it a try if they have the chance. I would suggest that one of the most important things to consider is whether the whole store is stocked on consignment or just some of the items. If it’s the whole store, then the owner is more likely to be motivated to sell your product (along with the other sellers’) since that’s how SHE gets paid, too. And ask to talk with other sellers that are already in contract with the store owner. They will be a great source of info.
Great advice. When I was 18 years old and selling soap, I had several consignment accounts and the store owner’s motivation definitely plays a part in sales – 100%. One lady let me pile my soaps HIGH as the first thing people saw when they walked into the store. Yes, I had more damage and theft BUT sales were way better than in stores that had smaller displays closer to the back. I think that the store owner where I sold more also was a fan of her youngest vendor =) Her motivation was definitely a factor for sales I think.
THANKS FOR SHARING
I HAVE A BOOTH AT FT. JACKSON IN COLUMBIA, SC,
I HAVE TO PAY A VENDOR FEE EACH WEEK BASED ON SALES
PERCENTAGE RANGE FROM 20% TO 22%
Fantastic – so you pay 20-22% and don’t have a booth rental fee? How are sales? Are you happy with the arrangement? 20-22% is a great rate if there’s no extra fees on top of that.
THANKS!!!
NO EXTRA FEES AT ALL, SALES ARE GREAT, DISPLAY IS EVERYTHING AND HAVING INVENTORY IS A MUST!!!
Hi Anne Marie,
Great article (as always)! Would someone mind posting a copy of what they’ve used for a consignment contract in the past as an example? (All personal info blacked out of course.)
I would love to see what a blank consignment contract looks like as well.
Thanks for all the great advice Anne- Marie!
I too would love it if someone could post a blank contract!
I found this one. And it is nice and clear. It is for an artist and a gallery – but I think it still applies
http://www.harriete-estel-berman.info/profguidelines/Consignment_Contract.pdf
Thanks Anne-Marie!
One time put my soap in an antique store on consignment. The store went out of business 4 month later, and when I went to get the left over inventory, it all smelled like musty old furniture. I only sold about half of the inventory, so it was a bust. The soap that smelled bad, was not good to resell. I tried re-batching some of it and adding more fragrance, It still smelled a little musty, so I just ended up using it myself. Lesson learned.
That sounds awful! I am so glad you got your stuff back but such a waste of time for you. I am sorry to read about the bad experience.
This post came in time as I was thinking about how to even start handling this part of the business as store owners have been asking me about carrying my soaps in their stores. I agree with those that are asking for a blank consignment form. Thanks Anne-Marie
Here you go – something similar to what you’d see from a shop owner:
http://www.harriete-estel-berman.info/profguidelines/Consignment_Contract.pdf
Hey Ann Marie,
I am new to skin care products but have been in the candle biz for a while now. I consigned to a local mom and pop shop and kept excellent records and made sure she knew it! I walked in every time with a store folder with all previous invoices, signed receipts, payments from her, etc…. when she doubted what she had sold due to ‘her’ poor records I showed her what she had signed for the previous months and what was in actual inventory. She still doubted my records and told me to get our of her store as she was throwing things at me! I had to call the sheriff to get my inventory out of her shop and later send her a letter letting her know she in breech of our contract and must pay in full within 10 days of notice or will go to small claims court. She paid me in full! We obviously quit our relationship! I don’t consign anymore because if they don’t sell your product and the season for that fragrance/flavor is over, your stuck with old product. I only wholesale now and customers must meet certain qty requirements for me to wholesale. This way if they don’t sell the product then they are stuck with it and not me. Sometimes the exposure of the shop is worth taking a little less profit and considering it a ‘marketing’ expense….
Wow, what a terrible story. It sounds like that was a big growing experience for you. I’m sorry it had to happen to you. And bottom line is that business owner did not act honorably or ethically. Even if she disagreed with you, obviously, there are better ways to act and if she did that to you, she would act unkindly towards other customers and vendors as well.
Also, excellent point re: outdated fragrances and scents.
I hope the rest of your retailing experiences (consignment or not) turn out to be much better! =)
Morning Anne-Marie
Thanks for the info on consignment – my question is when working out say a 70/30 or a 60/40 split do you take out your cost of making the soap or just a split of the selling price – hope this is not a dumb question.
Mae
UK
You just split the selling price.
If you have any other questions, let me know =)))
Thanks for your reply – it is our first time doing consignment – love your articles.
Regards
Mae