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Last updated date: 22nd Mar 2024
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Consignment is a type of arrangement where the goods are left in the possession of an authorized third party to sell. Generally, the consignor receives a percentage of the revenue from the sale which is at times a very large percentage, and that is in the form of commission.

Consignment is a shop which sells goods on behalf of an owner. The owner who keeps the ownership of his item until it sells, although if it sells. As the owner, one may pay even a small fee to the shop as compensation for selling the owner’s item. 

Define Consignments 

Consignment is actually a set arrangement where the goods are left in the possession of a third party who is authorized to sell the product. The consignor who receives a percentage of the revenue from the sale (sometimes at a very large percentage) is in the form of commission.

Consignment here deals with a variety of products, such as the artwork, clothing and accessories, also with the books. Even the retail stores may be considered as a special form of consignment where the producers rely on the retail stores to sell their products to the consumers, moreover, the second-hand stores and the thrift stores are associated with this arrangement of consignment.

Consignment, however, does not include the retailers such as the Walmart or the supermarkets, who purchases goods outright from the wholesalers and then mark their item up.  

Understanding Consignment

In today’s era, the consignment shops have become trendy, especially those who offer a speciality in their products, like infant wear, pet care, or even the high-end fashion items. Today’s generation is known for their frugal shopping habits, which include buying from the high-end stores and designer boutiques, they are in favour of bargains which are found at the thrift and consignment shops.

Advantages of Consignment

Selling on consignment is a great option for every individual. To a certain extent, online companies like eBay are the consignment shops as for a percentage of the sale, they offer people a marketplace to exhibit and then sell their wares and items. This removes the requirement for an individual to create their own website, attract other customers, and also set up payment processes. Likewise, the items to be marketed and sold through television channels are also forms of consignment.

Sellers lack the time or their desire to advertise their product for sale, or to take time off work to accommodate the prospective buyers' schedules, to conduct the pricing research, and then to endure the tasks associated with the selling an item often find the consignment fees is a smaller pay to put the work in someone else's hands, particularly if they are successful in negotiating to a low fee.

Examples of Consignment

A film artist has five large pieces of artwork to sell but does not have a place to showcase their work for prospective buyers. The artist then decides to employ a theatre to show and sell his works of art. The theatre does not charge the artist a fee for space but will charge a sales commission for any art or work sold, which is incorporated into the price paid.

Another example of the consignment would be Bini visiting her grandmother's house and finding an old case full of clothes. She keeps a few pieces that she likes and decides to sell the rest of them. She takes the clothes to a second-hand store to sell the clothes on consignment. Bini and the store come to an agreement that Bini will receive 60% of the revenues from the items that are sold while the store will receive the remaining 40% of the profit.

FAQs on Consignments

1. What is a Commission?

Ans. The commission is the act of passing responsibility to someone else this is also an order for someone to do something and get paid in return. 

Commission, basically the sales commission, is a payment which is given to the employees that are based on the sales they make. Commission is only one of the many things that you need to consider when hiring the staff. Commission is calculated as the percentage of the value of a sale.

A commission is the fee that a business pays to the salesperson in exchange for his or her own services in either facilitating, supervising, or completing a sale. The commission expense is classified as the part of the cost of goods sold, as it directly relates to the sale of goods or services.

2. What are Retail Stores?

Ans. A retail store is an outlet, a place of business for selling the goods to the customers. 

The most common examples of retailing are traditional brick-and-mortar stores. These include the giants such as the Best Buy, Wal-Mart, and Target. But retailing includes even the smallest kiosks at the local mall. Retailers, not only sales goods, but they also sell services.

3. Who is the Consignee?

Ans. The consignor is the sender of goods and the consignee is the one who receives the goods who can be the buyer or their agent.

A consignor is an individual or a party who brings a good to be sold on behalf of the other party, which is called the consignee. The consignee acts as a middleman here.