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.
Consignment is an arrangement in which an item is placed in the care of another until purchased by a buyer.
- 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.
A wholesale arrangement usually involves the retailer purchasing goods in larger quantities from a maker at keystone pricing (half of the retail price).
Wholesaling is the selling of goods in large quantities to be retailed by others.
- 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.