Wholesale vs Consignment

I get periodically receive questions regarding wholesale and consignment. For many of people these words are scary and have a finality and seriousness to them. The truth is they are quite simple concepts and, when properly understood, can help makers strike more mutually beneficial contract structures with stores. In their simplest terms;

Consignment: I leave my product with the store to be sold. When my item sells, the store keeps a percentage and sets the rest aside for me at the end of the established period, typically each month. Some stores will only sell on consignment because the lack of risk if the product doesn’t sell.

Pros

  • You can negotiate better rates as your product brings more sales.

  • You will typically make more than wholesale.

Cons

  • You don’t get paid immediately

  • Stores do not have as much incentive to sell your product since they don’t “own it”

  • Theft affects your wallet and not the store’s

Wholesale: The store buys the goods from me at usually half the retail value, and then resells to the customers. It is important that makers are financially able to create and sell their products at a price where a customer will pay double to own it. It is a delicate balance to strike.

Pros

  • You get paid up front for your goods.

  • The store now assumes all risk of theft.

Cons

  • Less earnings than consignment

  • Stores will buy less product than they would typically carry under consignment.

Scott WhippleComment