Consignment has to do with handing over products or goods to another person but at the same time the legal ownership of that good or product is still with the original owner of that product.
But having known the general meaning of consignment, should a small business still encourage that as an option for as per a platform for growth and higher sales.
Hi everyone my name is Timileyin and in this post I will be talking about what you should know about consignment as it relates to small businesses.
Let’s understand how consignment works
Let’s take an example of someone who is the consignor and he hands over a commodity for sale. When he does that the commodity has to remain in the shop until it’s sold.
Let’s assume that commodity costs $50, when it finally gets sold, the person who sold it will get a 50% share that’s $25 while the original owner of that commodity gets the remaining amount.
Another typical example could also be a house consignment dealer who sold a house at a flat fee- i.e at an amount that is charged or paid that doesn’t change in relation to the amount of job done or the frequency at which it is used.
How can Small Businesses get hold of consignments?
Small businesses can use consignments in situations where the business doesn’t have its own office space.
Most businesses make use of consignments to help their stocks and they also lend their stores and products out for others to help them sell.
When signing consignment contracts be aware that it’s different from a wholesale contract because your products are not being sold to the store. There is an intermediary that helps you generate compensation from sales made.
What are the advantages of consignments for a small business?
From the above write-up, it has been made clear on how consignments work, and also stating expressly that you don’t need to have a physical store to sell your goods, you can put it in the care of someone else until the products are sold out then you take your commission.
1. Consignments helps to take away the cost of rent on a store although you still have to pay a commission to the person holding your goods at that moment. It better than paying for the store’s rent continuously.
As a small business owner, it’s not really feasible for you coupled with the risks attached. The risks of jot having enough customers to buy your products among other things.
2. Once a consignment contract has been signed, you automatically get your brand and product take the fore front where customers and potential customers can see it and patronize it thereby increasing it’s awareness.
3. if you as a small business owner you sell goods on consignment, you definitely will improve your brand because of the variety of products you will possess .
What kind of businesses uses consignment?
Consignments can be applied to virtually any business provided you sell products that can be easily sold in another store.
The kind of businesses that can thrive in this business approach include clothing lines, accessories in homes,work places and so on. The art and craft industry isn’t left out to, they can be fully harnessed due to their skills such as bead/jewelry making, cards and so on.
Due to how small scale these businesses could be, they pose as a really good industry to venture into that business approach.
What negative impact does consignment have on businesses?
As good as consignment looks, there are some disadvantages that are associated with it.
1. You don’t get to keep all the profit.
This tends to be the most painful part of using that business approach and this will add a bit of stress on your growth as a business.
2. Using this business method for sales, you are paid only when your products are already sold out. That means you need to carefully manage your cash inflow and outflow.
3. As much as it’s a good business marketing approach when you don’t have a store of your own, you shouldn’t totally depend on that platform only because you never get paid until your goods have been sold.
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