Wholesale Vs Consignment
If you choose to sell your handmade items in traditional stores, two common methods are wholesaling and consignment. Here are some of the issues and benefits of each method.
I will start off by giving a basic definition of each. If you wholesale your items to a store you are selling your items to the store. You get paid up front before delivery or shipping and the store will usually expect a 50% discount off of the retail price. If you consign with a store you are giving your items to the store and will only be paid once an item is sold.
There are a few pros and cons to doing wholesaling. One con is that is it is more difficult to get these types of agreements, especially in this economy. Stores are less likely to pay up front for items that may not sell. Another con is that the 50% discount is more than you are likely to pay to a consignor.
A positive aspect of wholesaling is that you will be paid up front so you will have the funds to continue producing products and for purchasing materials. You also have control. You can set your own policies and minimum order requirements. Stores are more likely to market your items and display them correctly since they have a vested interest. Once you sell your items to the store you do not have to be concerned about any damage or thefts that may occur. If the store did happen to go out of business you would not lose your items or investment since you were paid up front. You are also not limited to local stores. You can have wholesale agreements with stores all over the country and can ship your items to them.
A positive aspect of doing consignment is it is generally easier to set up than wholesale agreements. Since stores will not be paying you up front they are more likely to take in your items. You may also end up paying less of a percentage to the store. A 30% commission is common vs the 50% discount you would give to a wholesaler.
The first issue with consignment is cash flow. You will be spending your time and money to build your items and pay for materials and will not be reimbursed until the item sells, if it even does sell. Since you will be dealing with consignors locally you will also have expenses related to delivery of your items and pick-up in the case where they have not sold after a certain amount of time.
You also have less control with a consignment agreement. Even if you have everything in writing you are still not protected. In this economy stores can close overnight and leave their consignees out in the cold. Your items can also be damaged or stolen and you cannot rely on a store to reimburse you.
You will also have to keep track of sold items and payouts. You are relying on the consignment shop to be honest and send you your profits. You also have no control of how long it takes to receive your percentage after an item sells. You are trusting in the store to do the right thing.
The longer your items stay in a store the more wear and tear they will receive. This will make them less likely to sell. After a specified period of time you may get your items back but you may have to refurbish them in order to try and sell them yourself.
Consignment shops may have large inventories of unrelated items. They may not be experts in your particular items and may not promote or display them correctly. Since the store did not pay for your items they may not take proper care of them either. You will need to check on your items regularly to make sure they are being properly taken cared for.
There are a few tips for doing consignment deals. The first is to provide the store with an inventory sheet that will keep track of what has sold, which items they have, and payments that need to be paid out. Keep a copy for yourself as well.
Make sure that the store you choose to consign with is professional. Is the store organized and clean? Do they sell similar items to yours and are they knowledgeable? Do they have an effective way of tracking inventory and paying consignees?
Unlike wholesaling, it is recommended that you only deal with local consignment shops. You will need to deliver your items, possibly pick up the payments, retrieve unsold items, and will just want to keep an eye on the store. Do not ship your items to them. If something happened you would be out all your investment in your items in addition to the shipping expense.
Hopefully this had shed some light on the topic of wholesaling vs consignment and will help you choose the best way to sell your products.