Consignment Question

[Holly]

I have never really liked doing consignment. It can be a pain in the butt, but for now that is the only way that I can work it since I cannot give a good enough wholesale price.

I have had a few consignment accounts for awhile and they have all been good to work with. I have given them a suggested retail price not to go over (recommendation) but have given them somewhat of an open door to bump them up a little more than my online retail so they can make a little more profit. I noticed lately that two of the accounts (one being a newer account) are bumping them up higher than I am comfortable with since it is my money sitting there. If they bought wholesale then they would have to worry about products not moving fast enough because it is their money sitting there. But, when it is consignment nothing is really at stake for them other than a little space. I found out today that my newest account had bumped my 7 oz. wickless tins to $15.00! I think it was just $15.00 and not $15.00 something. That is way too high for these. She was selling them like hot cakes at $12.00 which I still thought was a little higher than I felt comfortable with. She did say that since she raised the price they have not moved as fast. I wonder why. She mentioned that may be the case...too expensive. Although, it can be due to it being January. She has slowed down. It is a spa. She said that she went into the other store that was near there (but not anymore - moved downtown) and said that they had my tins for $15.00. I did not know this because this particular owner does the inventory and sends me the check, and I am only in there when dropping things off. Normally, she will tell me when she raises the prices.

I guess my question is...do most of you tell your consignement accounts what to charge or what they cannot go over or do you leave it up to them and just give them a suggestion like I have done? Is there a general rule to how consignment works in the way of pricing...the norm...who sets the pricing? I am a little uncomfortable to approach them on it, but at the same time it will not be good for me in the long run. My accounts are all very informal which can be a good thing in a lot of ways but not good when it comes to this sort of thing.

I know what my mind tells me what I should do.....set some rules down on paper for them. I am too chicken that it will dissapoint them and then they would rather find a decent candle with a good wholesale price so they can make a bigger profit range. I doubt they would do that, but I still feel uncomfortable doing it. To my advantage, a lot of small businesses do not what to have to put more money up front especially for accessorie items. They need to remember this when they are wanting to bump mine up so high for more profit....that they don't have to put money up front.

Gee, sorry to ramble. Thanks for any advise.

~Holly

Edited January 13, 2010 by Holly

[SpaceGirl]

Holly... for what it's worth here's my opinion. I'm part owner of a store (we're set up as a cooperative with a group of owners) and we have quite a few consignment vendors. We do not dictate or change any of their prices with approval or coordination. we do talk with them about what we feel is an appropriate pricing mark - but I would never just unilaterally jack up the price like that.

My suggestion is because you've provided a range that you're comfortable with to restate your position as the store can adjust pricing within the given range, otherwise they must either obtain your consent OR purchase the items wholesale and price however they choose. (whew that was a long sentence!)

Good luck!

[Holly]

Thanks so much for your response. It supported my thoughts and that helps. I am surprised being that they are business people that they would not question themselves. The hard part for me now since I did not have any definite rules on this other than my suggestions, is to approach them on it. The one account that the new account had visited to check them out, used to buy wholesale from me even though I could not give a great wholesale discount. She got used to pricing them the way she wanted. She however was struggling in the business and had to go to consignment. She just moved to downtown in hopes of more traffic. I should probably let this other owner know that situation and that is why it was so high even though the last couple of orders was consignment based.

Do you know from experience what most store owners expect to get as profit/commissions for consignment....25%, 30%, etc. I have not done a flat percent but am thinking that I may start doing it that way. It is a lot easier. I have a certain amount that is due to me for each type of product. In the long run I may come out better doing it this way but it would be a lot easier to do a flat percent across board.

Thanks again!

~Holly

Holly... for what it's worth here's my opinion. I'm part owner of a store (we're set up as a cooperative with a group of owners) and we have quite a few consignment vendors. We do not dictate or change any of their prices with approval or coordination. we do talk with them about what we feel is an appropriate pricing mark - but I would never just unilaterally jack up the price like that.

My suggestion is because you've provided a range that you're comfortable with to restate your position as the store can adjust pricing within the given range, otherwise they must either obtain your consent OR purchase the items wholesale and price however they choose. (whew that was a long sentence!)

Good luck!

Edited January 13, 2010 by Holly

[NaturallyTru]

Wow...I've never heard of consignment that wasn't just a percentage. It seems kinda ballsy to me that they did this. Thanks for posting this. I, now, can be aware that others may perceive consignment differently.

I hope you can get this straightened out and keep your accounts.

Trudi

[Holly]

Wow...I've never heard of consignment that wasn't just a percentage. It seems kinda ballsy to me that they did this. Thanks for posting this. I, now, can be aware that others may perceive consignment differently.

I hope you can get this straightened out and keep your accounts.

Trudi

I was surprised they did this as well. Maybe they just feel "too" comfortable with me. Regarding the not doing it percent wise, that is how my first account was doing it for some of their other vendors (how much back for each type of product). It works well for me because some items I would need more back than others. However, they end up making more than me on some items not doing a percent because their prices are bumped up a bit. Not sure if I am going to be able to change it to a percent unless it is based on my retail and then it actually is better for me in the long run to do it the way I have been doing it.

For others that do consignment based on a percent, I wonder if the percent is based on what they sell their products for retail or what the store ends up selling them for. I am wondering if most candle makers who do consignment make sure that the stores are selling them for the same price as they do. I think I read different types of situations on this board.

The next account I get, I am going to make it very clear how it needs to work.

[grama]

They sell at my price and I think the % they get is 25. I put the price on the jars before I take it to them. I had 1 business to do a 10% sell during Christmas and she took it out of her part. Thought that was nice of her. It did help her to sell more though just the 10%.

Of course we are talking more local with mine, the farthest is probably about 25 miles and not really large cities.

Edited January 13, 2010 by grama

[deb426]

I do consignment for one store. I figure out the retail price and price the stuff before I take it in. They get 40% and I get 60% when it sells. They send me a check at the end of each month with an inventory list.

HTH

[sockmonkey]

Can you explain how they currently calculate what you are owed for the candles they sell? Maybe I overlooked it, but I didn't see that mentioned. It seems as though you gave them approval to sell for whatever they wanted to.

Generally, people who sell on consignment set their own prices and recive 60%-90% of the profit. I think 70% is probably the average.

Keep in mind that while you think they aren't out any money, only floor space, that they would see things differently. If they have other products that they sell, your products are competing with theirs--items that they do have money invested in and earn higher profit margins on. They also pay the rent, collect tax, pay fees for credit cards, have staff available to sell your product, and put their reputation on the line with their clients when they sell your product. You're benefitting far more from the arrangement than they do.

Usually, it's the shop owner who would present a list of "rules," not the other way around, but considering the way the relationship was established and your concern about the way things are going maybe it's time for something.

Since it's an informal relationship, why not ask if you can sit down with your contact there and discuss the pricing structure. It's possible that you can learn something from them and the reason for their pricing. Maybe you'll learn that your products are underpriced for a certain market like spas and you really could be selling them wholesale.

[Holly]

Hi Sockymonkey,

Thanks for your input. Each product has a certain dollar amount due back to me...not a set percent for all sales. In regards to giving them approval to sell for whatever they want, I did say that they could bump them up a little to help out with their profit, but it is always discussed with me first. I mentioned the price that I would not feel comfortable going over. I just never thought they woud price these wickless this high! To me it is just a bad decision altogether.

I have never had any trouble until now.....two accounts. The one account used to do wholesale with me. She got used to pricing them way higher than I can and will. She has an expensive boutique, which did not do well in her last location so she recently moved to downtown in an area that will have more tourists, etc....i.e. big Ice Skating even starting Friday. When she went to consignment, I was under the impression that it was temporary until things got better for her. I just let her keep her pricing that she had thinking that if she wanted to up them again, she would talk with me about it since they are now on consignment. Apparently, this is not the case. The other account is new and since she had gone in there, I guess she assumed it was ok to jack hers up as well. You would think though that she would have asked me about it. She may have not considered that the other store was normally wholesale, because I had told her that I do not really do wholesale because I cannot give a good enough discount. The one store was an exception because of who owned it...we know each other and she was willing to buy them right out even if it was not a great deal. She has been very nice to worki with.

Regarding the "store" setting the rules, I understand this can be the case, but with something like this I would assume it has to be the other way around regarding the pricing. Also, I still own those candles, they do not.

Both of the accounts in this one area (one which has moved out of that area) seem to want to price things high. I understand that some areas can but there is a limit. This area is a nice area, but I know that candles priced the way she wants to, will not do well. She would sell more if her prices are better and she does not have any money up front anyway. Stores are going out left and right around here.

I will say that I had a good season last year altogether with store sales (especially the one in the mall and Coeur d' Alene), but these two were not on top. However, the spa just has wickless right now and does not get a lot of traffic.

Thanks for encouraging me to sit down with them. I am going to have to do it even though it makes me uncomfortable. I woke up thinking about it.

~Holly

Can you explain how they currently calculate what you are owed for the candles they sell? Maybe I overlooked it, but I didn't see that mentioned. It seems as though you gave them approval to sell for whatever they wanted to.

Generally, people who sell on consignment set their own prices and recive 60%-90% of the profit. I think 70% is probably the average.

Keep in mind that while you think they aren't out any money, only floor space, that they would see things differently. If they have other products that they sell, your products are competing with theirs--items that they do have money invested in and earn higher profit margins on. They also pay the rent, collect tax, pay fees for credit cards, have staff available to sell your product, and put their reputation on the line with their clients when they sell your product. You're benefitting far more from the arrangement than they do.

Usually, it's the shop owner who would present a list of "rules," not the other way around, but considering the way the relationship was established and your concern about the way things are going maybe it's time for something.

Since it's an informal relationship, why not ask if you can sit down with your contact there and discuss the pricing structure. It's possible that you can learn something from them and the reason for their pricing. Maybe you'll learn that your products are underpriced for a certain market like spas and you really could be selling them wholesale.

Edited January 13, 2010 by Holly

[Holly]

They sell at my price and I think the % they get is 25. I put the price on the jars before I take it to them. I had 1 business to do a 10% sell during Christmas and she took it out of her part. Thought that was nice of her. It did help her to sell more though just the 10%.

Of course we are talking more local with mine, the farthest is probably about 25 miles and not really large cities.

Hi Grama, I have an account that did a 10% sell in Dec. and they did the same thing. I thought that was nice as well. They make as much as I do, if not more, and I am the one making them.

[Holly]

I do consignment for one store. I figure out the retail price and price the stuff before I take it in. They get 40% and I get 60% when it sells. They send me a check at the end of each month with an inventory list.

HTH

Hi, I am going to sit down and run the numbers again and see if a percent could work out to where we are both satisfied. I may take a little bit of a cut on some products but hopefully not much, and it would be easier for each party to do a straight percent.

[Sag_77]

When it comes to any of my past or current consignment accounts it has always been a percentage. In my experience the percentage has ranged from 25-40%, and sales have always come out of the stores end as stated in the contracts. All my contracts have had the sale info right in them, only ever had to mention it to 1 of my store. I would have never thought of the sale stuff myself but it was already in the first 3 contracts so made me think of it when my 4th didn't have it.

[van_yulay]

I do about 9 lease options. I put the prices on the products. I have a sheet, I made in excell with all the products. It has the whoelsale price and the retail. It is 40/60. I was doing 30/70 and the huge retails where telling me the market is 40/60. Yikes.. Well I learned. I got into a lot more stores when I did 40/60 . I dont put on the sheet suggested retail, just retail. Also I price everything before I go. So there is no dicussion about it. So far no worries.

Just go in a explain that you are concerned about the price increase. Tell her if she wants that choice she has to buy it out right. Just bite the bullet. It is hard when they are your money makers.. Just kill them with kindness and you will get er done.

[jenscandles]

I do about 9 lease options. I put the prices on the products. I have a sheet, I made in excell with all the products. It has the whoelsale price and the retail. It is 40/60. I was doing 30/70 and the huge retails where telling me the market is 40/60. Yikes.. Well I learned. I got into a lot more stores when I did 40/60 .

To confirm what I'm reading here, you have your wholesale price discounted 40% off your retail price. Is that correct? Or am I reading this wrong?

[van_yulay]

60 % of the retail is my cut. 40% is theirs

Edited January 14, 2010 by van_yulay

[jenscandles]

60 % of the retail is my cut. 40% is theirs

great, thanks for the clarification!

[grama]

I also do the same as van yulay - I give them what I call an invoice with everything listed & their percent & my percent and also the retail price. It has worked fine. I will stick with the 25% until they say different. Since the towns are rather small compared to some you'll do I only have them in 1 place in each town so there is no competition with one trying to undercut the other.