The Business Chat - Selling on consignment

Consignment is the most common method of selling to stores and the topic of today’s post. 

Selling your work on consignment means that you place work in a shop and when they sell something they pay you a percentage. Unlike wholesale where the store buys it outright, with consignment you retain ownership of the work until the customer buys it. It’s like you are renting shelf space. Consignment is often the easiest way to get your products into a store and is a good first step if you're just starting out.

Consignment is beneficial for shop owners and designers alike: it allows shop owners to fill their shops with items at no upfront cost to them and lets them test out the saleability of your goods to their customers. For you, it's beneficial as you retain a higher percentage of the sales price on your items than you would selling via wholesale (or, you should!) while also testing our your saleability in different markets, and getting exposure in retail shops.
A typical consignment agreement is 60/40 in your favour. Consignment is also good for selling one-of-a-kind or very high-end pieces. A big advantage of consignment over retail craft shows is that your work is continually on display somewhere, not just when you're doing shows or parties.

Even in a great store or gallery, there are disadvantages to consigning work. One is the lag time between delivering your product and receiving your money after it sells. Your inventory may be tied up for a long time without bringing you any return. The store or gallery may shut down and the owner may disappear with your work and the money they owe you. The store may not issue payment promptly. Finally, a retailer has less incentive to promote your work since they haven't invested any of their own money in it.
It’s very important to maintain more detailed records than you would in other types of selling. Inventory is money, your money, and it’s sitting on a shelf in someone else’s store under someone else’s control.

When you do agree to place your work in a consignment store (either online or brick-and-mortar), make sure you get a consignment agreement signed! Most stores will have their own agreement: read it, and if you don’t like parts of it, work it out before handing over your work. Be sure that both parties have a signed and dated copy of the consignment agreement.

A consignment agreement must talk about the following:

• Inventory: Generally, the agreement includes an inventory sheet of all the items that you are placing on consignment with the shop- it should list the item quantities, descriptions and retail prices.
• Sales split: When your item sells, the shop owner will retain a certain percentage of the sales price of your item, and you will receive payment for the remainder. The most typical consignment split is 60/40, with the designer/seller/you retaining 60% of the sales price and the shop getting a 40% commission
• Payment schedule: The agreement should explicitly state when you can expect to be paid for work that has sold. Often, payments are made by the shops every month for all sales that occurred the month prior. You should also know how you will get paid (via check? paypal? cash in store?) and you should expect to receive a list of items that have been sold along with your payment
• Duration of consignment: Each consignment agreement should have a trial period. Both you and the gallery needs to make sure that it is a good fit. Once the trial period is over you both have a right to end it. You should also be able to pull your items from the shop and have them returned to you whenever you'd like, as technically, you still own them- remember that. You don't want your items collecting dust on the shelves for too long and if they haven't sold after a period of time, then perhaps it's not the right market for you anyway.
• Shipping costs: For out of town/online consignment, it is usually the designer's responsibility to pay for shipping costs to the shop, and generally the shop's responsibility to pay for shipping costs back to the designer if the work doesn't sell. It's always best to ask the shop their policy upfront and get it in writing.
• Insurance: It is usually the responsibility of the shop to assume the loss for stolen/lost property or items that are damaged by shop/customer error, make sure you clarify this up front!
• If damage occurs due to faulty workmanship on your end (e.g. a clasp falls off one of your necklaces) then responsibility for that loss should be yours.

Here’s one last BIG piece of advice. When you first start your crafty career, and a store asks to carry your work, it is a real ego boost. Many new makers make the mistake of putting their work in every store that asks, thinking that stores = sales. This is not true.
Take a really good look at a store you are considering for consignment. Make sure it’s a good fit for your work, do they carry other work similar to yours? Is it a store your target market would shop at?

Now stop and think about this. If the store owner asked you for a loan, to invest money in the store, would you do it? Do you think you will get a good return on your investment? If the answer is no, then do NOT place your work in the store. Putting your work in a store is the same thing as investing in the store. You paid money to make your work. You are giving your work to the store, this is the same as giving your money to the store.  If you wouldn’t give them cash, then don’t give them work.

Once you have placed your work in a store, keep in touch with the buyer to see how it is selling. You don’t need to stop by daily, but calling every 2 or 3 weeks to check in and see if they need more is always a good idea.

Succeeding in consignment requires excellent record-keeping and careful planning. On the plus side, a good gallery understands that the more they sell the more money you both make. A good gallery is a win-win situation.

The Business Chat - 3 ways of selling

No matter how beautiful your work is, if you don’t sell it, your business will fail. In a crafty business money is sometimes not the main reason we’re in business. We do this because we love it, because we want a creative outlet, because we want to share our talents. Regardless of why you are in business, if you lose money it’s a failure.

The bottom line is you need to sell your work.

There are 3 ways you can sell your work.

1. retail your products directly to the public
2. wholesale to stores/galleries
3. in stores on consignment

There are advantages and disadvantages to each method. Each method isn’t mutually exclusive and most successful makers use a mix of all three.

Retailing to the public.

Let’s start with retailing your products directly to the public.

Pros:

• You receive 100% of the final selling price and you receive this immediately. Cash is good.
• You control the sales environment. You design your own display or store
• You meet the buying public and conduct on the spot market research

Cons:

• Time spent selling is time away from the studio
• You have to deal with the buying public. You are the salesperson
• Craft shows cost money. Opening your own store or studio costs money. Selling online costs money
• You have to start up and maintain your own display or store, or website

 Where to sell to the public:

• from your own studio/shop
• craft shows
• home parties/office parties
• online

Wholesaling to stores
Wholesaling is when a store buys your jewellery outright. They order from your catalogue, you produce the work and they give you money.

Pros:

• you don’t produce the work until you receive an order so you don’t have to invest as much in inventory
• you spend more time in the studio, less time selling
• unlike retail where you make a lot of small sales, in a wholesale model you set a minimum order and make fewer, but more lucrative sales

Cons:

• stores expect a discount from your retail price, usually at least 50%
• you need a catalogue or line sheets
• you must have work that is consistently repeatable, wholesale does not work for one of a kind work
• you still have to sell the work, to the store buyers

Consignment
With consignment, the store doesn’t actually purchase your work. They agree to display it and sell it for you. When it sells, they send you money. This is advantageous to the store as they do not have to spend money on inventory. While most of us would prefer to sell only wholesale, most stores deal on consignment. In the beginning of your crafty career, you will find that you are obliged to deal with stores on consignment.

Pros:

• your work is continually on display somewhere unlike a craft show which is a few days here and there
• unlike wholesale, you set the selling price
• you usually receive a larger percentage of the price than you do with wholesale
• consignment works will with one of a kind work or with large expensive pieces
• more time in the studio, less time selling.

Cons:

• As the store has not invested any money in your work, they may not be as motivated to sell it as you would like
• You must keep meticulous records of what pieces are in what stores
• Your inventory may be tied up for a long time without bringing you any return for it
• Stores aren’t always prompt in paying, it is up to you to be a collection officer

How you choose to sell depends on a number of factors. If you know that you are not a people person and don’t like the general public then craft shows are not a good option. If selling your work for 50% of the price means that you are losing money and you feel that you cannot raise your prices, then wholesale will not work for you. Think about how much time you want to spend in the studio rather than in a selling position, although if you want to sell wholesale or consignment you still have to sell, only this time to a store buyer.

Sometimes it’s a loathing of selling that stops many crafters from moving forward with their busines. Think of it not as selling, but as an exchange between friends. You are gifting them with your work, and they are gifting you with money. And you have made their world a more beautiful place, that’s fair.

The Business Chat - Selling on Consignment

We've spent the last few weeks talking about all the things you need to do behind the scenes to get yourself ready to sell. Now let's talk about selling your fabulous creations. There are 3 ways of selling:

1. Retail - directly to the public
2. Wholesale - a store orders X number of pieces and pays on delivery
3. Consignment - a store displaying your work and paying you when it sells

Consignment is the most common method of selling to stores and the topic of today's post.
Selling your goods on consignment means that you get paid by the shop only upon the sale of your items- essentially, you retain ownership of your items until they sell, the store does not buy them outright. This is often the easiest way to get your products into a store and is a good first step if you're just starting out.

Consignment is beneficial for shop owners and designers alike: it allows shop owners to fill their shops with items at no upfront cost to them and lets them test out the saleability of your goods to their customers. For you, it's beneficial as you retain a higher % of the sales price on your items than you would selling via wholesale (or, you should!) while also testing our your saleability in different markets, and getting exposure in retail shops. A typical consignment agreement is 60/40 in your favour. Consignment is also good for selling one-of-a-kind or very high-end pieces. A big advantage of consignment over retail craft shows is that your work is continually on display somewhere, not just when you're doing shows or parties.

Even in a good store or gallery, there are disadvantages to consigning jewellery. One is the lag time between delivering your jewellery and receiving your money after it sells. Your inventory may be tied up for a long time without bringing you any return. The store or gallery may shut down and the owner may disappear with your jewellery and the money they owe you. The store may not issue payment promptly. Finally, a retailer has less incentive to promote your work since they haven't invested any of their own money in it.

It's very important to maintain more detailed records than you would in other types of selling. Inventory is money, your money, and it's sitting on a shelf in someone else's store under someone else's control.

When you do agree to place your work in a consignment store (either online or brick-and-mortar), make sure you get a consignment agreement signed! Most stores will have their own agreement: read it, and if you don't like parts of it, work it out before handing over your jewellery. Be sure that both parties have a signed and dated copy of the consignment agreement. A consignment agreement must talk about the following:

* Inventory: Generally, the agreement includes an inventory sheet of all the items that you are placing on consignment with the shop- it should list the item quantities, descriptions and retail prices.

* Sales split: When your item sells, the shop owner will retain a certain % of the sales price of your item, and you will receive payment for the remainder. The most typical consignment split is 60/40, with the designer/seller/you retaining 60% of the sales price and the shop getting a 40% commission.

* Payment schedule: The agreement should explicitly state when you can expect to be paid for work that has sold. Often, payments are made by the shops every month for all sales that occurred the month prior. You should also know how you will get paid (via check? paypal? cash in store?) and you should expect to receive a list of items that have been sold along with your payment.

* Duration of consignment: Each consignment agreement should have a trial period. Both the maker and the gallery needs to make sure that they are a good fit. Once the trial period is over you both have a right to end it. You should also be able to pull your items from the shop and have them returned to you whenever you'd like, as technically, you still own them- remember that. You don't want your items collecting dust on the shelves for too long and if they haven't sold after a period of time, then perhaps it's not the right market for you anyway.

* Shipping costs: For out of town/online consignment, it is usually the designer's responsibility to pay for shipping costs to the shop, and generally the shop's responsibility to pay for shipping costs back to the designer if the work doesn't sell. It's always best to ask the shop their policy upfront though.

* Insurance: It is usually the responsibility of the shop to assume the loss for stolen/lost property or items that are damaged by shop/customer error, make sure you clarify this up front!

* If damage occurs due to faulty workmanship on the designer's end (e.g. a clasp falls off one of your necklaces) then responsibility for that loss should be yours.

Here's one last BIG piece of advice. When you first start your jewellery career, and a store asks to carry your work, it is a real ego boost. Many beginner jewellers make the mistake of putting their work in every store that asks, thinking that stores = sales. This is not true. Take a really good look at a store you are considering for consignment. Make sure it's a good fit for your work. Would you invest money in this store? That's what you're doing by placing your work in the store. You are giving them your money in the form of your work. It cost you money (and time, which is also money) to make that jewellery. If you wouldn't give them cash, don't give them your work.