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Free Book: How to Sell on Consignment

How to Sell on Consignment

A Step by Step Guide to Consignment Selling in Your Small Business

How to Sell on ConsignmentThis guide will walk you step by step through all the essential phases of using consignment to sell your products or services.

Sellers seeking new and expanded wholesale and retail markets for goods can use consignment selling to economic advantage in many cases.

This guide provides a discussion of the advantages/disadvantages of consignment selling and general comments about how to use consignment as an effective selling tool for the small business operation.


Table of Contents

1. Introduction
2. Purpose Of Consignment Selling
3. Advantages Of Consignment Selling
4. Disadvantages Of Consignment Selling
5. A Few Words Of Caution
6. The Consignment Relationship
7. Give Special Consideration To...
8. Examples Of Consignment Selling
9. Consignor's Liability

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Sample Content

Sellers seeking new and expanded wholesale and retail markets for goods can use consignment selling to economic advantage in many cases.
This guide provides a discussion of the advantages/disadvantages of consignment selling and general comments about how to use consignment as an effective selling tool for the small business operation.
What happens to a manufacturer who has developed a new consumer product that is thought to be a best seller, but no retailer or wholesaler is willing to invest enough capital to stock a small number of the items in inventory?
What happens to a manufacturer who is told that the seasonal product he or she is trying to sell is such a capital risk that there is probably no chance that it will make the retail shelves during that Christmas season?
How can manufacturers in these cases and similar cases make the products and terms of sale sufficiently attractive to get the product on retail shelves for exposure to the buying market?
Perhaps through the use of consignment selling.
Selling goods on consignment is described as a situation whereby goods are shipped to a dealer who pays you, the consignor, only for the merchandise which sells.

The dealer, referred to as the consignee, has the right to return to you the merchandise which does not sell and without obligation.
As you can see, this may not be an ideal arrangement. The dealer has no money invested and is not obligated to "push" your merchandise.

Purpose Of Consignment Selling
Even with obvious disadvantages, there may be times when you may decide that consignment selling can serve your purpose. It can be used as a marketing tool which creates no obligation on the part of the dealer in the event they do not sell. As a result, such practice can provide an attractive incentive for the dealer, at least to stock your merchandise. The dealer has no risk and you have your merchandise before the buying public.
Examples of goods which very often are sold on consignment include light bulbs, produce, eggs, poultry, magazines, newspapers, Christmas decorations, garden seeds, batteries for flashlights, and potted plants such as those found in supermarkets.

In the case of perishable merchandise (either in quality or in seasonal appeal) dealers are often more inclined to consider placing it in their stock if they have no great threat of financial loss on investment in the event it does not sell.
In the case of a newly designed and manufactured product for which there is no sales record, dealers might be more enthusiastic about promotion if their investment loss is minimized.

Advantages Of Consignment Selling
Now that you've read some general facts about consignment selling, look at the specific advantages to you as a manufacturer.
It allows a seller (manufacturer) to place merchandise in wholesale and retail outlets for additional exposure to the buying market.
It can provide an incentive for the wholesaler and retailer to stock goods in inventory because no capital of theirs is tied up in inventory.
It can encourage wholesalers and retailers to stock seasonal or otherwise newly introduced merchandise which they might not usually buy because of a lack of demand.
It provides the manufacturer with the opportunity to have the merchandise exposed to the buying market, instead of having it stored and isolated in a warehouse while waiting for an order from a buyer.

Disadvantages Of Consignment Selling
In deciding whether or not to use consignment selling, you need to look at the disadvantages.
While your merchandise is being exposed on the shelves of a wholesaler or retailer, you get no money until they sell.
As the manufacturer you must have enough cash on had to wait extended periods for payment of merchandise sold.
Since the goods are out of your physical control, you cannot control the damage and shopper abuse which inventory merchandise is generally subject to.
You cannot always affect shelving decision which wholesalers and retailer make concerning maximum exposure of the merchandise. Because consignees do not have any capital invested in the inventory, they may be inclined to place their outright-owned inventory in the most advantageous display spots in order to realize a fast return on investment. They are aware that they do not lose any investment if the consigned goods do not sell. They do lose if the inventory they own does not sell.

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