Consign or Wholesale? Best Choice for Retailers and Makers
Should I consign or wholesale?
I hear this question often from BOTH retailers and makers.
Let’s start with the difference between the two.
Consignment is an arrangement in which an item is placed in the care of another until purchased by a buyer.
A consignment arrangement usually involves an agreement with a retailer and a percentage split on items sold. For example, the retailer may take 30% and the maker 70%. Every retailer is different.
- For the retailer: You will have to manage each of your consignment vendors, their sales, and issue a check or payment – usually done on a monthly basis
- For the maker: You might make a little more on each sale with this model but you are only guaranteed payment if your items sell in the retailer’s store
- Contract or agreement? Usually, Yes and the maker may have to complete a W9 if the retailer sells over $600 of the maker’s goods.
- Shipping or delivery? Consignment is ideal for selling to or buying from other local businesses. Most retailers won’t want to pay for return shipping if your items don’t sell in their shops. In most consignment relationships, it’s the responsibility of the maker to deliver and pick up items from retailers.
Wholesaling is the selling of goods in large quantities to be retailed by others.
A wholesale arrangement usually involves the retailer purchasing goods in larger quantities from a maker at keystone pricing (half of the retail price).
- For the retailer: You are taking on the responsibility of selling the entire quantity you purchase
- For the maker: You are selling your goods at a cheaper price than consignment prices, but you are receiving immediate payment when you sell your goods to a retailer
- Contract or agreement? Usually, No.
- Shipping or delivery? If you can ship your products, then you have a much better chance of selling nationwide or worldwide – you aren’t limited to buying/selling just in your local area.
How do you know what works best for you?
This is a personal decision for both retailers and makers. As a retailer, my sister and I made a decision early on to only buy wholesale. We didn’t want to juggle multiple vendors or spreadsheets of inventory and sales. I also have confidence in my sister’s buying ability, so if we purchase a large number of items from a maker we feel confident that it will sell in our store.
On the other hand, we know many shopkeepers who prefer vendor/consignment arrangements or a combination of both buying wholesale and consigning in their stores. And some who prefer to use consignment as a way to test if the product will sell well in their store – then they move on to a wholesale relationship.
For makers, I’ve also seen them do a mix of both. If wholesale is the route you choose, a wholesale line sheet will be useful for you. Also, check out my free checklist on selling to an independent retailer here.
One may or may not be better than the other. Consider what works best for you. Or maybe try each and then make an educated decision.
P.S. If you’re a maker, just be sure to price your products so that you can be profitable. Be prepared to set up systems and processes that will allow you to buy materials at wholesale or discounted pricing, and set up an efficient making process, so you can price your products well. Pricing might have to be a conversation for another day. Comment if you have questions about pricing!
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I currently am selling wholesale to two stores and am a consignor at one location. I sell handcrafted jewelry made from paper. I make my own paper beads and quilled jewelry. There is a great amount of time in rolling and glazing beads but little product cost to create. Paper jewelry on Etsy is all over the place with pricing. I am pricing competitively with other vendors near me at the consignment location but it’s not selling well. I am also not thrilled with how low my wholesale prices “feel” because of how much time goes into making them. $8 earrings (wholesale) went through a 24 hour glazing/drying process. I don’t get a sense that most paper bead artists are confident in pricing. I’d love any advice you may have. Thank you!
Hi Brittney, thanks for commenting! Hearing what you make and your experience with pricing is helpful. I’ll be writing a blog post on pricing soon. Watch for it!
Always good to get tips on pricing.
I am in the design stage of a line of top of the bed products. My core fabrics will be linen and the products will be made here in the US (at this point by another lady and myself). It is going to be tricky getting the pricing to both cover expenses with some profit and be in a range the market will bear.
Hi Julie, understandable and tricky, for sure. You might find it’s best to stay out of the wholesale market and simply sell direct to consumers OR market your wholesale items to high-end boutiques who can sell at those margins.
In a consignment relationship, what happens if there is theft of products that are consigned? Is this something to be outlined in the consignment agreement?
Yes, this is definitely something the retail store owner should have established in the agreement with the maker. Oftentimes, the retail store owner will have a clause indicating they are not responsible/liable for theft.