Have you ever walked into a hella cute gift shop and thought “I could totally see my product here”? Gift shop owners are constantly looking for new talent to line their shelves and attract their customers. Use these tips to better prepare yourself for your first (or next) consignment agreement.
I vividly remember my first consignment contract. I’m so grateful that I got to work with an established business owner that walked me through every step of their process and was invested in my success. But not every consignment relationship is like that. Even with the help I received, there are things I learned along the way that I wish I’d know years ago.
What is Consignment?
In a nutshell, consignment is an arrangement where a business (the consignee) agrees to pay a seller (the consignor) after an item sells. Consignment businesses are typically retail, brick-and-mortar stores that operate in a specific niche, though many more digital consignment shops have opened in recent years. The relationship starts by the business receiving product from the seller, then paying the seller a percentage of the earnings when (or if) the products eventually sell.
Just about any physical product can be sold through consignment. In your handmade business, you can easily sell your enamel pins, jewelry, yarn, beauty products, and vintage finds in a local consignment shop.
How it Works
The goal of a consignment relationship is for all parties to make money from their hard work. Pricing arrangements vary from store to store and should be clearly articulated in each store’s terms. On average, the payment split for consignment is either 60/40 or 50/50, typically in the favor of the consignor. Payment methods are determined by each store, and are often done through bank transfer, a check, or cash.
The Upside to Consignment
It gets your product on the shelves. As an online seller, I was originally attracted to consignment because it was one of the first ways I got my product on physical shelves. Aside from the occasional craft show, customers could only experience my product through photographs and snappy captions. Having my beanies and scarves in a store where they could be tried on and immediately purchased was a godsend for me.
Increase exposure. The opportunity for a quick sale is an obvious perk of working with a consignment shop, but the residual impact of your product might be even better. Shortly after entering into my consignment agreement, I started seeing that shop’s customers visiting my online shop. Custom orders increased and it gave me more ideas on how to expand my product line. I was also pleased to see the well-known shop featuring me in their social media and mentioning me in their blog post features.
Build a relationship with the shop owner. I shouldn’t have to tell you this, but business owners are major influencers in your local community. They are concerned with the financial health of their businesses 24/7. When you win, they win. Building a strong relationship with them can open even more doors for your business by way of collaborations or even being introduced to the next big opportunity. If you plan to do consignment, consider your capacity to nurture that relationship.
The Downside to Consigment
You’re paying for it. Remember all those upsides I mentioned before, the access and exposure we all want? Yea, you’re paying for that in a consignment relationship. At best, you as the seller will receive 60% of the original retail price of your item when it is sold at consignment. As nice as they may be, consignment shop owners are not charities. You’ll need to assess your shop’s ability to part with 40% of your potential earning if you decide to delve into consignment sales.
There are no guarantees. Just like at a normal retail store, there is no guarantee that your product will sell at a consignment shop. Owners will do all they can to make your product pretty, but consider that you are on the shelf next to potentially hundreds of other products and handmade shops. All of your work is done on the front end and you essentially keep your fingers crossed that your product will translate to that shop owner’s customers. Ultimately, you will get your product back if it does not sell.
Preparing your Shop for Consigment
So you’re ready to take the plunge and consider consignment as one of the income streams for your handmade business. So, what’s next? There are three crucial steps you have to take to set your self up for consignment success:
1. Prepare your product.
- Branding – As online sellers, we are encouraged to include branding and marketing elements in our packaging to create a lasting impression with our customers. You’ll want to do the same thing when creating price tags to go on your items before sending them off for consignment. Be sure to include information on how customers can find your online shop and your social media platforms. Don’t forget to include care instructions too!
- Durability – While having customers physically experience your product in a store is a good thing, it can quickly turn into a bad thing if your product isn’t cut out to be handled. If your product goes inside packaging, consider if that packaging can stand up to months of being touched and turned. If your product does not have packaging, consider if you will stop into the shop periodically to refresh your product to it’s perfect, pretty self.
2. Prepare your pricing. Your first through should be “Can I afford to give up 40%-50% of my retail price if I were to sell my product through consignment?”. If the answer is not an immediate yes, then you’re pricing is just not ready. In my post Pricing Basics for Craft Businesses, I walk through a pricing calculator that results in a reasonable retail price. Reaching a reasonable retail price will take into account consignment fees and makes sure you still earn what you’re worth when diversifying your business income. And remember, consignment owners will expect that the price you put on your product in their store matches the price you sell your product for elsewhere.
3. Prepare your pitch.
- Scouting shops – The main question I get from new handmade business owners who are just starting out is where to even find consignment shops in their local area. The best place to start is through tourist guides. Many break down local and unique shopping locations in neighborhoods that may be near you. Also, get on the mailing list for artistic news outlets. Many times they will do articles and features of local shops you are interested in. Lastly, never underestimate word of mouth. Find a local Etsy team or artist meetup and talk to your fellow makers about shops they’re in.
- Get the terms – Once you have a list of consignment shops you want to work with, you have to do some homework. You’ll want to learn more about what consignment looks like at that shop and decide if it’s a good fit for you. Try to find their consignment terms on their website. Terms should include what types of items the shop specializes in, how you should get your items to and from the shop, what happens after your products are dropped off, what the sale split is, and how/when you can expect to get paid.
- Get in touch – Professional businesses will have a clear path for consignment inquiry on their website. That may be a form to complete on the webpage, an email address to send a query to, or a phone number to call. If none of those are available, find their generic email address and try this email template:
It’s not for everyone. If you just can’t reconcile yourself with giving up 40% of a sale, then don’t do it. Just because consignment is an option doesn’t mean it’s a good idea for your business.
Diversify. If you decide consignment is a great income stream for your business, go for it. But don’t let it be the only way you make money. I’m still of the school of thought that you should control your sales. Focus on having a dedicated site for your products and branch out from there.
Be picky. If you take nothing else from this post, be picky about who you decide to work with. Read through the consignment terms carefully and take the time to visit the shop before handing over your product. Most consignment contracts are pretty forgiving if you decide the relationship isn’t working out.
I’d love to know about your experience with consignment in your handmade shop. Drop any wisdom or questions in the comments.