Is Consignment a Good Idea?

Decided whether Consignment is a Good Idea for your products is a personal decision you need to make as a professional craftsman or artisan.  Personally, I tell folks to avoid it, but is this good advice?

Ironically, while researching the topic further, I received this note from one of my facebook followers:

As a fan and owner of your how to get sales book I have been trying the techniques for a few months now. … I keep getting a lot of “no’s” and I am becoming a little frustrated.

I just met with my local mentors from SCORE at my counties chamber of commerce today to see what they thought might be a wall or area that I may need to look into as to why I am not getting any in the yes category. I appreciated their time, but their advice was to take one piece of the jewelry that I make and give it to a shop for consignment to see how it does….

(Check out her website)

Of course, I commended her for wise decision to NOT follow the advice she was Consignmentgiven and made some other suggestions that would be much more helpful in solving her problem.

There are only a few cases where consignment is a good idea.  I have outlined those in my mini website:  Consignment Dos and Don’ts.

I also want to share what other experts say on the topic:

Art Consignment is Unhealthy for Your Business

You wouldn’t give your wallet to a new friend or stranger . . . would you?

Think about that scenario the next time a retailer asks you to consign your work in their store or gallery. They are asking you to take a huge risk on an arrangement that leaves you out of control, while they take no risk and are in control – plus they have possession of your merchandise.

CONTINUE READING THIS GREAT ARTICLE FROM THE ARTS BUSINESS INSTITUTE

Moving from Consignment to Purchase

By Wendy Rosen

Years ago, most galleries relied on the “consignment” business model… today as artists leverage low production, exclusivity and high demand, things are very different.  As an artist you need to devise art gallery relationships that have mutual risk, and mutual reward.  Converting from consignment to purchase might take time… but it’s a necessary part of your success strategy.  Your artwork needs to be in the best places, aggressively promoted and well represented.  And that doesn’t happen if your dealer has no “skin in the game”.

MAKE SURE TO CHECK OUT WENDY’S VIDEO

Wholesale vs. Consignment

Here is a scenario I hear frequently: a new or emerging designer is excited because a local store has offered them the “opportunity” to sell a few pieces on consignment.  With rare exception, I have a very strong NO consignment policy.  Before I get into the details of why I have that policy (and why I think you should too*), let me first explain the difference between the two.

MEGAN FROM DESIGNING AN MBA CONTINUES HER ARTICLE WITH SOME EXCELLENT REASONS NOT TO CONSIGN

‘Oh My! Handmade Goodness’ has a great article called Why Consignment May Be Bad for Busines.  April MacKinnon, author, talks about both sides of the issue (as she chose to consign her products) and the comments she received from her article are almost as good as the original post!

So back to original question:  Is Consignment a Good Idea?  You be the judge!!

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  1. Was in the jewelry mode for a few years and placed some spendy jewelry in a shop in Tubac Az. on conscrewment @ 60% agreed on sale price, They doubled the agreed price to customers and paid me on the agreed price..I pulled the entire line with my display cases as soon as I discovered it..Hint..have someone check things out for you if you get suckered in to a consignment deal and if you have a bond from them ..go after it…

  2. As both a jewelry artist who has consigned her work in the past, and a boutique owner who has a number of artists’ work for sale on a consignment basis, I actually highly recommend it. There is, of course, a caveat, which is that both the artist and the boutique need to hold each other and themselves to the highest professional standards. It seems to me that when I hear of unhappy results from a consignment agreement, one or both of the parties should have taken heed of red flags before ever entering into an agreement.

    As a boutique, I have a consignment contract which outlines expectations regarding exclusivity & restocking of merchandise (by the artist) as well as reporting, inventory and payment (by me.) I hear constantly from artists that they are pleasantly surprised at how thorough and speedy we are in monthly inventories and pay schedules, so I am sure that this is not the norm.

    As an artist, I do not consign to any shop that doesn’t pass muster as far as their online or storefront presence. And I require some sort of a written agreement (although not necessarily as detailed as ours), along with regular communication regarding sales & customer response. I just pulled several pieces of my jewelry from a shop about an hour from my studio because the sales weren’t performing as expected. Nothing wrong with the shop, just probably not the right demographic. So, we both lived & learned.

    I think consignment is a great way for both parties to “test the water,” and is a nice way for shops to take a chance on a new artist. It can take many months for sales cycles to develop, so I think the minimum trial period should be at least 90 days, and actually prefer 6 months. Then the partnership can convert to a wholesale agreement.

    As an artist, I have one shop who purchases some of my “smaller” pieces wholesale, but also carries more one-of-a-kind pieces on consignment. It’s been a win-win for everyone!

  3. Thanks Kristi for the feedback.

    In all fairness, I ran (and was part owner of) a co-op owned consignment wood ‘gallery’ before I began my sales rep business. I was VERY STRICT with paperwork, products on display and standards for submitted items. As a store, we were professional and paid our vendors in a timely manner. Unfortunately, some of our folks used the store as a storage placed for their ‘less than desirable’ products, but most exhibited their best work. Consignment can work, but so many folks get caught in a bad situation because, like you said, they don’t do their homework. Or, the story I often hear: “They did not want to buy my products, so I offered a few pieces on consignment for the store to try” — bad idea!! The store is not set up to monitor consignment and this is a perfect example of the shop not having any ‘skin’ in the transaction.

    Thanks again for the feedback — I always appreciate a difference of opinion!!

  4. We are a wholesaler of upscale tourist souvenirs. Though I would in general agree that consignment should be avoided, we have occasionally chosen to offer consignment terms to a customer for a few, very specific reasons. Two of the three reasons turned out to be very valid:

    1) During the financial downturn, one of our best customers had cash flow problem and was sold to a new owner. This is a small chain of great stores, and they had been a large customer up to then. Everything about that chain was right for us – locations, store layout, how the new owner displayed our product line, demographic of their consumer customers… To get the chain back onto it’s financial footing, the new owner required all vendors to sell on consignment. We gave it a lot of thought and decided to take the risk. The customer was very prompt in paying for the consigned goods monthly, and after about 9 months turned back into a Net 30 customer. To this day, they are one of our top 3 customers, and growing.

    2) A huge giftshop that had been another very large customer had closed, and after about a year was reopened by new owners. We knew that this store had great potential for us again. The new owner gave us prime real estate in the store, and a huge display and assortment of our products in return for consignment terms. They stayed on consignment terms for about 18 months, and then turned in to Net 30 customer. This store also has turned into one of our top 10 customers.

    3) Our sales rep suggested to give consignment terms to a small store in an area where nobody else stocked our line. The small shop was hard pressed for cash, but wanted our products. We agreed based on our rep’s good relationship with this customer – she essentially vouched for the customer. The result has been good for the customer, who has a well-selling line, but not so good for us, because payments are a bit hit and miss, and the store does not have the potential to ever become a large customer for us.

    My take-away is that consignment is an administrative pain to deal with, that can be worth it if the customer has large potential, but is not worth it, at least for us since we are a well established company with a good customer base.

  5. Your fan in the first scenario had better advice from her SCORE councilor, than what I got. Mine told me I needed to send my designs to an overseas factory to produce, so I can concentrate on marketing. Somehow, he just couldn’t understand the concept of one-of-a-kind work or that some people want to “make stuff” to sell, not merely “sell stuff”.

  6. It would be great if you could enroll them (and if they’d listen), or if the local SCORE would get a few councilors who weren’t SBA or Fortune 1000-type executives. Like, a few who were in Arts, and/or sole proprietor manufacturing before they retired. Or even small retailers. And maybe a few who understood the differences between copyright and trademarking– and the basics of setting up each.

    I do mostly consignment of one sort or another– it works better for me than crafts’ fairs. My main consignment venue (a non-profit, ~95% consignment shop) was how I got my one (current) wholesale account– a buyer from the wholesale account saw what I had on consignment, and asked the shop for my contact information, then emailed me about making similar items, but with a specific theme. Their terms were net 30, and they paid right on time. A previous wholesale account unfortunately went out of business (partnership problems)– that one insisted on wholesale, rather than consignment, and paid on delivery (again, their choice). For both– it was nice knowing the pieces were sold/inventory list could be “closed”, and having the money “up front”, even if it was less than consignment splits (although, that is changing, too). But, the slower sales in a depressed time/area, means re-orders are further apart, and not likely until all/almost all the items are sold. With consignment, pieces can be rotated out more often and/or back-filled without waiting for “everything” to be sold, and thus sales are more frequent, if smaller, and catching the “trends” is easier.

  7. Thanks for your update.

    And yes, Kaytee, in defense of the SCORE people, they do probably have excellent advice for some start up companies and others who need to grow their business. It is unfortunate that they could not refer you to someone who understood your business objectives better!

    Glad to hear you found a consignment system that works for you!

  8. Consignment is vital to the success of my business for several reasons. Before I reference them, let me say that wholesale relationships can have plenty of pitfalls if you are not vigilant and clear in the beginning of your relationships. Wholesaler’s may buy your product and not display it well, or ask for an exclusive and order once a year at the holidays. Or they might be late in paying or not pay. Or they might try to order below minimum or order additional work with an open invoice. Or they might just be a PITA for any number of reasons that tie you up and abuse your good will. If you are not clear about your target market, clear about the type of merchandising you need for your line, clear about your demographics and price points, and just willy-nilly ship to anyone who meets your min. wholesale, you are not doing your long-term business needs much good. There is a great article on ABI’s blog today that lists reasons to say NO to a wholesale order. http://www.artsbusinessinstitute.org/blog/when-to-say-no-to-a-sale/#comment-54132

    Consignment has similar risks as wholesale. The criteria for both is the almost identical for me. The assumption from some of these “don’t do it” proponents is that a store owner is trying to get something for nothing. And I am sure there are examples of that. But we do not need to be victims of ANY abusive buying scenarios. Due diligence is required for ALL business decisions.

    RULES:
    Don’t be the “minority or only one on consignment”. If a store wants to “try your line” give them a money back guarantee. Get payment in full upfront and offer a refund with the return of ALL items unsold with a restocking fee after 30 days or 60 days or whatever YOU feel will work best for your line to show it’s potential. ONLY consign in shops with 100% consignment as their business model. Then use the same criteria as you would for a wholesale buyer’s business.

    Don’t put your work in any shop (ws or consign) that is a funky location with cheap mass produced imported inventory unless that is your products category (which fully deserves to exist, just not my target). If you are creating and targeting a better class of cliental with your widget, don’t put your items into a “dollar store” environment.

    Don’t “buy” a space. (enough said)

    Don’t send them your rejects – a store that will allow poor quality examples from many dozens of consignees is NOT being a good steward of their business. SEND YOUR BEST. And make sure the other work surrounding you is of professional and wow-factor quality, too. Ask for photos of the shop.

    Don’t let them choose what and how much you want in YOUR display. And control that display and it’s restocking with scheduled payments and full reports of all sales in the previous month on a date certain – no different from net30 – you want payments and reports on time. With that report each month, you are able to learn a great deal about your line and the viability of various designs in a properly managed consignment gallery. I test my new designs in the 5 different consignment locations I ship to each month. When I see a solid pattern of sales, I can say with deep conviction, “THIS ITEM SELLS WELL” when adding it to my wholesale line.

    Don’t get into a gallery/shop with MORE than a 60/40 split. Any shop that is giving you more than 60% is probably desperate for consignees or is treating the business like a hobby and treating you the same way. I have one gallery that actually pays me only 45%. It doesn’t matter to me. I get my wholesale (plus 10% for paperwork) and they just have a price that mimics 2.5 mark-ups. PERFECT!

    Make sure you are in a GOOD location. Who is in the mix? Are they the quality of product you want to associate your line with? What kind of advertising does the business do? Is the store well-lit and well maintained? Are the displays tastefully designed? Is there good foot-traffic? Same questions I ask with wholesale inquiries!

    Consignment works!