Consignment vs Final Sales

Re: [spiers] Consignment vs Final Sales

----- Original Message -----
From: "Daniel Purwadi"
> I'm wholesaling gift and craft stuff made of any kind of materials. When
> dealing with customers, sometimes I found many of them only selling goods
> on consignment basis and are not willing to buy. Does anyone ever have
> such experience? Should we disregard these kinda customers and focus to
> those willing to buy only? What's the fair rate for consignment sales in
> gift and craft industry?

Daniel,

You will go broke consigning merchandise to multiple stores. You will have
collection problems, bookkeeping nightmares, lower sales, and other
problems. Not to mention tying up cash in their inventory. IMHO these are
not a REAL gift businesses if they only do consignment. Rarely does such an
arrangement work out -- EXCEPT when you have a long history with the
reliability of that business, and the purpose is primarily to market
overstocks, discontinued, and other odds and ends.

Right now we have a store that stiffed us for $3400 from the holidays, when
we had excess inventory, and after several months, we have collected all but
the last $1000, and this is without charging interest or fees, etc.

Note that if a customer is in their store, is the owner going to do a better
job of selling the products they already own/purchased? Or your consignment
goods? Think about it from the store owner's cash flow position.

If you do consign, there is a negotiated rate issue. For the couple of
accounts we still use this way, we:

A) Pre-price goods at keystone, or double the normal wholesale price (taking
into account psychological pricing, e.g. wholesale is $10, retail price is
$19.95 rather than $20).
B) If they do all the merchandising, etc and we just drop stuff off, we let
them keep 30 to 35%. (The difference of 15 to 20% from normal wholesaling is
the cost of money, and risk of no sale, product obsolescence, etc)
C) If some merchandizing/rack jobbing is required on our part, more like 25%
is their share.
D) Have a written agreement where they are responsible for shrinkage (shop
lifting and employee theft), plus other terms such as what dates they will
pay and how often, how sales records are kept, how often physical
inventories (done by you) will be matched against sales reports, venue for
legal action in case of dispute, interest on unpaid balances, etc etc etc.
E) All changes in inventory (whether left or removed) require a signed,
itemized sheet for the store personnel.

Good luck. But as the voice of experience... DON'T!

In rare occasions, I've heard of someone consigning products to a store, and
if they liked it, would inventory via regular purchasing. In our experience,
a better sales incentive is to offer a qualified repurchase guarantee on
first orders, etc. But again, I would not do this unless I absolutely had to
and was pretty sure the products would sell.

Malcolm Dell

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