Consignment?

[Jane42]

We were approached at our show yesterday and asked if we were interested in carrying our candles, on consignment, at an area gift shop. We are familiar with this shop and have been there often - it is a favorite stop for our out-of-town guests.

At this point, we have not dealt with wholesale or consigment. Wholesale seems out of the question because, even though we have tried our hardest, we cannot seem to get the COST down low enough.

The owner said that they would take 25% - and an additional 3% if it is a credit card sale.

For those of you who do consigment, is the above reasonable and, if so, what kind of contract do you usually use for this type of transaction?

Thanks so much. As always, I appreciate the advice.

Jane

[Buttercup]

It sounds like they are offering you a good deal. We have a retail shop and we have 1 person who does consignment on hand painted items. We charge her 30% and charge her an additional 5% on credit card sales. She pays no rent until she makes a sale and we make 30% of the sale. I really do not like working with consignment and will not take any more. The girl who does the consignment is a real pain and wants her items displayed in the front window. I have a couple of people who rent a space and pay flat rate rent every month and they keep everything they sell. Because they are paying rent every month, they get one of the window fronts. Good Luck to you in what ever you decide to do.

[Jane42]

Thanks for the info, Buttercup. It is nice to hear it from the shop owner's point of view.

Do you have a contract with this person? I was thinking of writing something up that outlines our agreement. How do you show whether the sale was a credit card sale and has the extra 5% charged.

We carry approximately 33 scents right now and I am not sure how much stock we should take her - whether to take an assortment, or just choose fall/winter scents and stock her up with a couple of each?

[Dustpuuppy]

Make sure to address who's responsibility it is, if your merchandise gets damaged or stolen.

To me broken candles equals sold candles but some shop owners don't see it that way.

If some kid comes in and turns over your display, dumping 100 candles in the floor and breaking them, I'd expect to be paid for 100 candles. Same for shoplifting. You can always soften your position later, if there's a situation that warrants it. But you don't want to come in and find all your stuff gone and the shopkeeper refusing to pay you for any of it. Take the hard line up front. You can do them a favor later, if need be.

I think I'd avoid the % on credit cards, too. Maybe you could up the base % to 26% or 27% ? Personally, I'd let them worry about the credit cards.

Make sure you have an understanding about product placement.

You have to remember that you have your time and materials sitting there and the shop owner really has no incentive to promote them. They have nothing invested. They make more money off of merchandise they've bought and they have their own money tied up in those products. This sometimes gets your stuff shoved into the back corner.

[Kitn]

I do 1 consignment and it is going very well . They have sold 106 bars of soap in the last 3 weeks , I am the only soaper there . I know the business owner so maybe that helps , I know there are many horror stories about consignment out there . I would make up a short contract . Who pays for damage or stolen items etc .

Good luck with whatever you decide .

[grama]

I do consignment with 3 and have very good luck with them. I give them 25% and they are happy with that. I don't leave to much at a time, just a good selection for time of year usually.

[Dustpuuppy]

I do consignment with 3 and have very good luck with them. I give them 25% and they are happy with that. I don't leave to much at a time, just a good selection for time of year usually.

I used to like doing consignment. I was about to think I was the only one here that did. If you're getting a decent turnover, the money is better than with wholesale. Plus the consignment can lead to wholesale, if you'd prefer to do that.

If your products move well, the consignee will naturally want to get the extra money they'd make from buying wholesale.

[grama]

That was my thought also dustpuuppy. In fact one place had several customers asking the lady if I had brought anything new!

Edited November 23, 2009 by grama

[SoapDiva]

I've had my consignment go wholesale on me, which was nice. She was taking only 15% on sales, now she makes much more money, which is nice for me as well, because I don't have to go in and do stock, she just orders more when she wants more.

I've got my stuff in another store, which I usually have to restock every two weeks. I don't have a lot there, but she is an awesome saleswoman and is excited about my products. She takes 30%, which is still better than wholesale for me.

[deb426]

I like consignment. I am in one shop with a 60/40 arrangement which is a little high but they have a "steal no thunder" policy which means I am the only candlemaker. I do really well. I like it because I can try new things and I don't have to convince someone to buy it. I just take it in and see if it sells. I'm not a salesman so it works for me. Takes the pressure off. Also, the store that I am in has a computer hook up so you can check each night to see what you sold that day.

Glad to see I'm not the only one.

[grama]

Yea! I was beginning to feel like the Lone Ranger earlier when everyone was against consignment:)

[Jane42]

I must admit, I was a little nervous about posting since I had also gotten the feeling that everyone was against consignment. I am glad to see that it can work.

I found a general contract onliine, so I will make it work for what I need and put in the clause about damaged merchandise.

I stopped in today and checked out the shop. It is quite an assortment of local artists wares - jewelry, artwork, knit items, soap, etc. There is another candle company there - and their candles smell yummy. Their scents seem to run more to the grape/wine scents (we are in the Finger Lakes, where vineyards are aplenty) and a totally different look than ours. Checking out her display, I noticed that everything was nicely set up, dusted - looked great! Even if we don't sell alot, it will be nice to have our candles out there. After so many years, people are finally stopping by our booth and saying "Oh, I am so glad you are here - I need to pick up some more........" A good feeling!

We still have yet to get a website together.....always something to do!

Thanks for the advice - you all ROCK!!

[Dustpuuppy]

Jane, when you do the contract, if you don't feel like a bit of an asshole, either you're not a very nice person or you're not doing it right.

You have to cover your ass, in writing. Like I said before, you can always make exceptions if you feel the need, later. But you don't want to leave them in a position to take advantage of you.

Also, with everything laid out like that, nobody gets any surprises. Everything is clear going in, so there's no misunderstandings later. You're not expecting one thing and them another. Everybody is on the same page. No guess work, no assumptions.

[Jane42]

I do have another question. We sell our 8 oz candle for $8.00. Since I will be doing consignment, who sets the price on the candles we bring in?

If she wants to sell them for $9.95, would I get 75% of $9.95 or $8.00, which is what I have them priced at right now.

Since I do tend to fall all over myself trying to please people :rolleyes2 I will definitely have the contract spell everything out. I really want this to be a positive experience. I don't see us making alot of money in these small shops, but it will be good experience for other opportunities that may come along.

[ladysj]

I'm so glad I saw this thread because I'm thinking of trying to find shop for consignment.

[ladysj]

I do have another question. We sell our 8 oz candle for $8.00. Since I will be doing consignment, who sets the price on the candles we bring in?

If she wants to sell them for $9.95, would I get 75% of $9.95 or $8.00, which is what I have them priced at right now.

Since I do tend to fall all over myself trying to please people :rolleyes2 I will definitely have the contract spell everything out. I really want this to be a positive experience. I don't see us making alot of money in these small shops, but it will be good experience for other opportunities that may come along.

I maybe wrong on this but I would think you would get the % on your price. I thought for consignment they sell them for what you price them and wholesale they mark them up from the price they paid you.

[Dustpuuppy]

I do have another question. We sell our 8 oz candle for $8.00. Since I will be doing consignment, who sets the price on the candles we bring in?

I think that legally, you have to set your price. Then you have to let them sell at whatever price they want.

If you demand that they sell at a certain price, it's price fixing. If you ever had a dispute, that might work against you in court. It might invalidate the whole contract. I'm not a lawyer, so this is just my understanding.

To simplify things I just put a dollar amount on it and suggested they sell at a certain price.

If you get $8 per unit, retail, you might say that the consignment price is $6 per unit. You can't really tell them what to sell for. If they can get $8.50 instead of $8, then they just make a bit more money.

Instead of actually setting the markdown at 25%, I set the price at 75% of my retail price.

My people always sold at the same price I did, so it didn't matter.

If they sell them for a bit more, you're still getting 75% of your retail price, even if you don't get 75% of THEIR retail price.

I'm not totally sure that price fixing even applies to consignment but my way just avoids the issue all together.

Instead of saying that you get X%, you're saying that you get $X.

For my tastes, this also makes negotiating easier. Arguing over 25% vs 26% gives everybody a headache. $6 vs $5.90 is easier for most people to wrap their head around.

I hope some of that rambling made some kind of sense.:rolleyes2

[Judy, USMC]

I do have another question. We sell our 8 oz candle for $8.00. Since I will be doing consignment, who sets the price on the candles we bring in?

Unlike Dust my contract with the owner says I will set the price... but no dollar value is included. I usually consult with them to get a fair market value price. This allows me to put some candles on sale after the season. For example my $8.50 baybery will go down to $6.00 in January... they still get their percentage but on the lower price. So if they are thinking $9.95 and you are more inclined to $8 ~ a compromise may be $8.95.

With my first consignment I allowed the store owner to set the price; it was too high and they didn't sell.

[Jane42]

Thank you for the replies. It will be interesting to see how these two shops do their consignment. They said they take 25%, but I never even thought about who set the price when I was discussing consigment with them.

[Dustpuuppy]

What Judy said makes sense, as far as special sales go. I didn't sale anything through any consignment that was 'on special' so it never came up.

I was also a bit concerned about the price fixing thing. I'm not certain that it's an issue, as I said. Plus I didn't want to try to control what someone else was doing.

So those were my reasons. Judy had good reason to do otherwise. You may find that you have reason to make a third choice. Whatever that may be.

[Judy, USMC]

With my first consignment I allowed the store owner to set the price; it was too high and they didn't sell.

Let me explain further. After I got into the store she wholesale ordered some from another source. Since she had pricing authority she set mine at $6.95 and was selling the ones she ordered for $5.50. That's one type of "price fixing".

I learned my lesson.

[Jane42]

Since we list them in our brochure as $8.00, my first thought was that would be what she would sell them for. If this was wholesale, I would imagine she could set any price that she wanted - but if it is consignment and she does not have that much of a "vested interest" in them, I thought I would be setting the price, then receiving 75%.

This is the plan I am going in with...we shall see if that was also what the shop owners have in mind....

Thanks again!

[deb426]

My biggest consignment shop has the consignor setting the price and then when it sells, the consignor gets 60% of the selling price. We pre-price and label before we take it to the shop.

[doris]

We do consignment. We allow the vendor to set their price, after all it is their stuff, then we take 1/3 of their selling price. If they think an item should sell for $15, we get $5 and they get $10.

Sometimes they don't care what it sells for, they just know what THEY want. In that case we add 50% to their price to get the selling price. They want $10, we add 50% or $5, it sells for $15. It comes out to the same thing.

I'm sure that there are vast differences between stores. You have to find out what your store does.

[JimJuris]

To me any time that you only have to pay the shop owner 30% or less is a great deal.

You should also find out how soon you will be paid when an item sells. You don't want to be waiting months and months for something that sold several months ago.

Be sure that payment arrangements are in your contract along with who is responsible for breakage and theft.