Friday, May 7, 2010

The Consignment Selling Experience - Part I

(What is it and what are the pros and cons?)

Within the last few weeks, I’ve been approached by several retailers about selling my work on consignment. I’m sure this resurgence in the consignment system is based strongly on today’s economic conditions. There just isn’t a lot of capital out there to fund small businesses at the moment. Cash flow is limited for just about everybody from Fortune 500 companies right down to the one-woman gift shop. Only those who can creatively manage their shops will survive. They need to be resourceful in maintaining a fully stocked store and in getting those shoppers who actually do have a few bucks in their pockets into their businesses.

When I started to seriously sell my work, way back in the early 70s, there were a huge number of stores that worked predominantly with the consignment system. It was the norm at that time. As time went by, they became harder and harder to find. Then, the craft mini-mall and co-op system took hold for a while. That now seems to be declining. When I left my job in the legal field a few years ago, I searched for a few consignment markets for my work and had trouble finding any in my area. There were a few craft malls within a reasonable distance but nothing very impressive.

Today, small gift-based businesses are suffering and there simply isn't enough cash flow to fully stock without being resourceful - in comes consignment selling! If crafters enter these arrangements in a professional manner, with written contracts that spell out everything, and with caution (check out every shop to the best of your ability), consignment can be very beneficial to both you and the shop. You can get considerably more exposure and sales without a lot of marketing effort on your part. The shop is fully stocked which encourages more sales (hopefully, of your product). The concept of “handmade” is kept alive.

Over the years, I have been on both sides of the consignment contract. I have sold on consignment in a number of stores along the way and I have owned and operated my own shop where I hosted a number of consignors. I’ve experienced the pros and cons from both sides of the issue. There have been good and bad experiences.

Let’s start with the basics:

“Consignment Selling” is when you create the product and then turn it over to someone else to sell in their shop for you. When the product sells, you receive a percentage of that selling price. You retain ownership of the product until it sells but it is not in your possession.

From the Seller’s Point of View:

The Pros of selling on consignment:

You do not need to devote your time and energies to marketing, whether that is sitting at craft shows, listing and promoting items on line, working a party-plan system, whatever. This is ideal for those who have physical limitations and cannot get out and sit through a long day at the craft show or haul their merchandise and displays in and out. If you are not “a people person,” you don’t need to interact with strangers and make small talk simply trying to push a sale. If your time is limited, this gives you time to devote to creating and not sitting and waiting for a sale. You have the opportunity to reach an audience that may never see your work otherwise. Your work is on display at all hours of the shop’s operation without tying you down for that time period. You don’t have the overhead of doing shows such as entrance fees, travel expenses, display costs, etc. In most cases you control the selling price of your product.

The Cons of this system:

You do not have physical control of your merchandise. You are not there to protect it and see that it is being handled gently and displayed in a safe or appropriate manner. You cannot talk up the sale or attempt to “sell up.” You may be subjecting yourself to possible losses of merchandise or damage to your goods. In some cases, crafters have trusted their products to less than reputable folks who have absconded with the goods or have sold the merchandise but not paid you for them. Shops have closed up and simply disappeared without any warning to the crafter and you are left with trying to find the owner and your merchandise.

From the Store Owners View Point:

The Pros:

You can provide a better quality, quantity and wider variety of merchandise to your patrons without the huge initial cash layout. Crafters are not paid until the product has actually sold and the money has come into the till.

The Cons:

You are now responsible for someone else’s merchandise. You have a tremendously increased amount of paperwork, both for inventory purposes and bookkeeping purposes. You cannot always count on what merchandise is coming and when. Often, quality of the workmanship will vary. Some crafters see consignment as a means of dumping whatever doesn’t sell in their other markets (odd colors, weird color combinations, etc.) Dealing with the crafters can be trying at times. All believe they should have the best spot in the shop and special treatment when requested. Some will call or come in almost daily to check on their sales and advise as to what you should be doing to move their merchandise.

You are responsible for display racks, insurance coverage, taxes and other business licenses. You are paying the lease, utilities and promotional expenses. You are often devoting a large amount of space to merchandise that simply isn’t moving but you cannot mark it down or run a special as you have agreed to a specific price with the crafter. Crafters often come in without notice and want to pick up their merchandise for whatever reason. Many like to treat the shop as if it has a revolving door and want to “borrow” their merchandise back to do a craft show and then bring it back to the shop after that show. Checking those products in and out takes time and disrupts the flow of business.

Done wrong - consignment can be a nightmare for all involved. Done right - everybody can benefit and make money from a good consignment arrangement.

So, how do you find the right shop, get the right contract and work it out to have a good experience? That’s what I will address in Part II of the Consignment Selling Experience.

So, take some time to create and I'll be back to tell you how to find the right consignment arrangement that works for you.

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