![]() Start with a strong vendor relationshipĪ solid relationship with your vendors will be a foundational component of successful consignment. So, how exactly can you make consignment inventory work in your store? While every arrangement will vary, strong consignment agreements typically take place when you implement these best practices. Vendors who own the goods face the risk of revenue loss when the items don’t sell. Consignors must carry the cost of producing the goods, without a guaranteed payoff. ![]() They can, for example, produce a limited number of goods, sell them in retail stores, and evaluate product performance based on the sales they’ve generated. A consignment arrangement also helps suppliers test new products. By selling them through retail stores, consignors can tap into the retail market, allowing them to generate revenue without having to establish their own sales channels.Ībility to test unproven products. Consignment inventory gives suppliers the chance to put their products in front of new audiences. And since they technically don’t come with any upfront supply costs, tracking your margins and profits can be trickier. Consigned goods should be tracked separately from non-consignment items. Consignment inventory could also make stock management more difficult. Increased complexity with inventory management. Not to mention, holding goods in your store or warehouse comes with risks, and you will need to pay for any damaged items. (If you, as the retailer, don’t want to handle the shipping costs, be sure to negotiate and specify this in the contract.) ![]() In addition, the consignee is usually in charge of shipping costs, especially if you’re selling consigned inventory via ecommerce. You need to devote floor space to the goods, which means giving up space that can be used to sell other items. While consignment inventory doesn’t have any upfront costs, stocking them in-store comes with certain expenses. You can add variety to your assortments, and when implemented correctly, a consignment inventory arrangement can actually increase your sales and profits. Consigned goods can add breadth and depth to your retail inventory. What’s more, you don’t have to deal with the hassle of unloading surplus stock. Since retailers don’t have to pay for the products until they are sold, they won’t have to worry about tying up or losing their capital on inventory costs. The main draw of consignment inventory for retailers is that the model comes with low financial risk. What are the advantages and disadvantages of consignment inventory?Ĭonsignment inventory has pros and cons for vendors and retailers alike. ![]() The retailer will only pay for the goods that are sold, and the rest will be returned to the designer.ĭone right, a consignment inventory arrangement can provide a win-win situation for both parties. The consignor still owns the products and the consignee will only pay for them once they’ve been sold.įor instance, a retailer may strike up a consignment agreement with a fashion designer and agree to sell the designer’s clothes in-store. What is consignment inventory?Ĭonsignment inventory is a supply chain strategy or business agreement in which the consignor (i.e., wholesaler, supplier, manufacturer) gives the goods to a consignee (i.e., the retailer) to sell. We’ll also share consignment inventory management tips to help you stay on top of the consigned stock. You’ll learn what it is and how it works. In this post, we’ll go over the ins and outs of consignment inventory. This means that the consignee (the retailer) doesn’t need to purchase inventory upfront. Consigned inventory reduces the retailer’s risk because the consignor (i.e., the supplier or vendor) retains ownership of the merchandise until they’re sold. This is where consignment inventory comes into play. However, if customers don’t purchase enough merchandise, the retailer is stuck with unsold products that they either need to markdown or unload. Stocking retail products typically follows the process where the retailer purchases goods from the supplier then sells those products for a profit. As any retailer would tell you, purchasing inventory comes with a certain amount of risk. ![]()
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