What Is Consignment Sales?
The principle of sales on consignment is based on a business model where the retailer deals with a seller or shipper in order to sell the latter’s merchandise while keeping a portion of the profit made.
Here are the advantages of consignment sales.
One of the advantages of consignment sales for the retailer and the seller is the high visibility offered to the product offered for sale. It offers the seller the opportunity to show his merchandise on the market and on the shelves of a department store instead of storing it in a warehouse in view of no one. Items sold on consignment are often displayed in high traffic areas and this increased visibility can attract potential new customers.
Consignees can sell the products online on sites like eBay, Etsy and Amazon. These advertising windows thus provide greater exposure to the products.
Sellers can therefore benefit from the online visibility offered by consignment sales platforms and the storefront of department stores to promote products to a wider audience.
Another advantage of consignment sales for the retailer and seller is the minimal financial risk. If the products do not sell, the seller can simply collect them without having suffered any financial loss, the same for the retailer. The retailer then takes no risk in displaying the seller’s products, as they do not have to invest money to produce or buy merchandise as well as pay for transport costs.
In addition, the seller does not have a storage cost or a cost of ownership since these are managed by the retailer.
Sellers can rest assured that products being sold on consignment are displayed in high-traffic locations, increasing the chances of a sale.
3. Opportunity to Experiment
Since the financial risks are minimized, it is possible for the retailer to explore different avenues to sell and test products that have not had the chance to prove their value. Consignment sales can therefore serve as a test phase for certain products.
Vary Your Offer
The opportunity to experiment is a big advantage of consignment sales as it gives retailers a chance to test new sales strategies, new products and new sales channels without taking financial risks.
By using consignment sales, retailers can also test new prices and promotions by learning which products are in high demand and when!
Consignment products are often sold at competitive prices, which can increase their sales potential. So that’s another advantage that seems obvious to consignment sales: increased sales!
Acquire New Customers
Consumers are often attracted to products sold at bargain prices, and consignment sales are often performed in high-traffic locations. Acquiring new customers can be done through offering new products and consignment sales allows you to reach more customers.
5. Good Inventory Management
Unlike traditional retail, retailers who sell products on consignment are not required to purchase inventory of products in advance, allowing them to reduce costs associated with stocking and managing inventory.
Solve the Storage Problem
Sales on consignment put the seller in an advantageous position since, as we mentioned earlier, the products are stored by the retailer and not by the seller.
Additionally, storage is more secure since retailers often have secure storage facilities suitable for the products they sell on consignment. This can help protect products from possible damage or theft, giving sellers peace of mind.
Learn how to calculate your consignment inventory in this article!
6. Better Customer Experience
When you provide a good customer experience, your customers are much more likely to want to support your business. The advantage of consignment sales for customers is that the retailer can optimize their inventory turnover and it encourages long-term relationships with customers and their sales associates through regular replenishment.
Improve the Customer Experience
Consignment sales can help provide a better customer experience allowing customers to discover new products and enjoy a wider variety of purchasing options.
Build Relationships With Your Customers
The platforms to sell online offer options that greatly match your customers needs and can increase your customers satisfaction.
Consignment sales can therefore be an effective way for merchants to strengthen their relationship with their customers and provide a more satisfying shopping experience.
An advantage of consignment sales is also reflected in the great flexibility of sellers and retailers who can decide to interrupt consignment at any time. Certainly, there are situations where a contract governs this business relationship, but for the most part this is not the case.
This flexible relationship allows both parties to quickly adapt to market fluctuations and make informed decisions about how to bring their products to market.
Adjust Your Prices
Additionally, sellers are often experts in their field, allowing them to accurately price consignment products. This can help sellers determine the right price for their products and maximize their profit.
Adapt Products to Seasonality
For retailers, consignment sales offer great flexibility in their product offering. Retailers can also quickly adjust their offer of products, according to the seasons by offering seasonal products.
8. Effective Time Management
Sales on consignment allows sellers to focus on their core business, rather than spending time marketing and selling their products. Sellers are responsible for advertising, promoting, selling and shipping products, inventory taking, which allows retailers to free themselves from these tasks.
With this selling principle, retailers don’t have to spend so much time managing returns, as they are not responsible for unsold items.
In conclusion, consignment sales is an effective method to improve product visibility and sales. Advantages of consignment sales for sellers include high visibility, minimized risk, opportunities to experiment, good inventory management, customer experience, flexible offering, and good time management.
Consignment sales can therefore be a win-win solution for sellers and retailers by providing a convenient and efficient way to sell products and deal with logistical issues.