There are many benefits of selling your items on consignment rather than listing and selling them yourself. Consignment is a great way to send your items off to someone else to do all the work and just receive cash when your items sell!
In fact, many resellers have adopted consignment selling as a part of their business model. If you can source items inexpensively, have someone else sell them, and still profit from your payout, this model can be incredibly lucrative.
There are many places to sell your items on consignment including companies such as ThredUp and The RealReal, as well as private consignment clients and brick-and-mortar consignment shops. You can even tap into The RealReal’s audience by stopping by a RealReal luxury consignment office in many major cities and drop off your items.
Let’s explore how Consignment works, and how you can consign your items.
What is Consignment Selling?
Consignment refers to an agreement in which one party (the consignor “client”) provides items to another party (the consignee “seller”) to sell. In return, the seller receives a portion of the sale price as a commission for their work in selling the item.
Consignment is a great way to make money on your items without all the work entailed in processing, listing, managing, storing, selling, and shipping them yourself. This is especially beneficial if you can source inventory inexpensively, and then have someone else do all the work, and still make a profit after the fee you pay to the consignee seller.
Consignment is an opportunity that broadens your sourcing; you might come into contact with decent and well-priced inventory all the time that you don’t want to sell, but someone else specializes in!
This is also a great avenue for your stale inventory that just won’t sell, as a last effort to recoup any small amount that you can, rather than donating or discarding it.
Interested in the other side of consignment selling? Learn more about consignment from the consignee perspective in the article How to Sell Consignment Items Online.
How to Consign Items
You can consign items by giving them to someone else to sell. This includes finding another reseller to sell them for you or finding a consignment store (thrift store). There are also companies for clothing consignment such as The RealReal, ThredUp or Vestiaire Collective.
Consign Your Items With Another Reseller
Consignment models differ but generally, the reseller takes possession of the client’s items and agrees to sell them, perhaps within a specified period. The client and the reseller agree on how the profit from the sale will be divided and paid out to each party.
Where do I Find Consignment Clients?
It can be difficult to find clients but there is a huge community of online resellers. You can connect with other sellers on Facebook Groups, Instagram, TikTok, and more! You might consider sharing a post that explains that you are seeking someone to sell your items under a consignment model. Consignment can be mutually-beneficial if you find another seller that does not have time to source or access to inventory with a decent resale value.
Just make sure that you choose someone that you have vetted. Make sure they are legitimate and established. Check out their shops and stores to be sure that their listings, sales, and reviews look good and the partnership will be lucrative.
Do I Need a Consignment Contract?
Yes. In business, always have a contract. Even (especially) if a friend is selling your items, it is a good idea to have a contract that outlines all terms. A consignment contract can be very simple, but should include:
Names of the parties
The date and the period of consignment term- How long will you have the items?
A breakdown of fees- Including who pays any selling or shipping fees
An analysis of the frequency and mode of payments
A disclaimer about how the seller retains pricing discretion
A clause about how the items will be returned if unsold
A disclaimer about the risk of fraud in eCommerce, relinquishing the reseller’s responsibility in the event of scam or fraud (i.e. a scammer purchases your item, intentionally damages it due to buyer’s remorse, and successfully opens a case).
An attachment “Schedule” of inventory, itemizing each piece and its value (for insurance purposes in the case of a loss)
Signatures of both parties
Contracts can be awkward, but remember that they protect both parties. My attorney has always told me that “good fences make good neighbors.”
Is Consignment Worth It?
Consignment can be lucrative for both parties, provided that both parties receive adequate payment; meaning:
- The consignor receives enough to yield a profitable return on investment (ROI) in consideration of their cost of goods (COG);
- And, the consignee receives enough to yield an appropriate amount in return for their work in processing, listing, shipping, and the book-keeping entailed with consignment selling.
Basically, this means that the inventory has to be good for consignment to be worth it. The higher the resale value, the more likely that both parties can benefit from the arrangement (especially after the marketplace fees).
My consignee client sold this American Eagle Plaid Shacket for $25 on Poshmark under a 60/40 consignment structure (after Poshmark fees). She made $8, and I made $12 (before my COG).
Here is the breakdown:
Sale Price: $25 minus Poshmark Fee -$5, minus Consignee fee: -$8, minus COG -$2= $10.
So, my ROI was $10, not counting my time, as it took time to send, organize, communicate with the consignor, and do bookkeeping.
Simultaneously, my client was only paid $8 for all of her work in receiving, inventorying, preparing, photographing, listing, cross-listing, and preparing accounting and authorizing payment to me. This item is not a great consignment item.
But, do what works for you (and the seller you work with). Everyone’s ability to source, access to inventory, time, and business model are different. This example might be very attractive to a new reseller, but might not be worth it to a seasoned seller, and that’s okay.
If person-to-person is not your style, you might consider checking out consignment stores. Because they are established with employees, resources, and capability to process large volumes, they may be able to offer a more appealing commission to you.
Consignment Shops and Thrift Stores
There are many commercial consignment stores and brick-and-mortar thrift stores that accept items on consignment. This means that you will bring in your items, they will sell them, and they will pay you a portion of the sale price as a commission.
This can be even easier than trying to find and vet another reseller, especially if you are consigning with a well-known business.
Find local consignment opportunities and private thrift stores by searching for “consignment stores near me” on Google! Make sure to check the reviews.
Also make sure you understand how the process works. You should get answers to all of the questions above, and a written contract (or at least receipt).
- Do your research: have an idea of what your items will sell for so you can determine if it makes more sense to just sell them yourself.
- Be patient; consignment takes time, and the consignor does not live to sell your items instantly. Inquire as to how long the consignor anticipates the item taking to be listed and sold. While you should make sure that they are on top of it, do not be unnecessarily bothersome.
- You might inquire as to if your consignor has a payout option, where you can basically just sell the items: you might make less this way, but you remove the risk of them potentially not selling, and you might be able to leave with instant cash in-hand.
- Try to consign with a person/place that specializes in your type of inventory. While many places accept clothing consignment, specialized businesses exist for furniture consignment, and tools, appliances and electronics!
- Remember that there is extra work entailed in book-keeping and tax preparation when your inventory is being sold by someone else, and you must be sure they provide you with all of the numbers and documentation that you require.
- If you consign with a person/place and have agreed to donate what they can’t sell, see if you can get proof of donation for a tax-write off (if the donation is considered charitable, you might be able to claim it on your taxes).
Consignment vs. Cross-Listing
Consignment is great if you don’t have time to list, love to source, or you’re a niched-seller but come upon inventory that you won’t sell, but you know someone else would!
Of course, you will make less per item than you would if you sold it yourself. Did you know that you can cross-list to multiple marketplaces with just a few clicks using Vendoo?
You might also be interested in the article Consignment vs. Cross-listing….
Have you sold items via consignment? Tell us about it below!