What is consignment?
Consignment is a business model in which a store sells goods on behalf of another party, called the consignor. The store and the consignor then split the profits from the sale.
How does consignment work?
A consignor brings items to the store; the store accepts what it wants, and then handles pricing, display, and sales. When an item sells, the proceeds are divided according to a pre-agreed consignor split. Unsold items are handled according to the store's expiration terms.
For stores, the appeal is low inventory costs since goods aren't purchased upfront. For consignors, the appeal is access to a storefront and customer base they don't have to build themselves.
The model applies across store types, though the details vary:
A secondhand shop accepts used items from the public, prices them based on condition and market value, and splits proceeds with the original owner.
A vendor mall gives independent sellers a physical retail presence without requiring them to staff it in exchange for booth rent and, frequently, a percentage of sales.
An art gallery places work on behalf of artists and splits the sale price — typically at a higher consignor percentage than secondhand retail, reflecting the artist's investment in the work.
An antique or furniture store accepts pieces from dealers or estates, usually with longer consignment periods to allow time for the right buyer.
The model is the same across all of these. What changes is the intake process, the split, the pricing approach, and the relationship with the consignor.
Consignment best practices
Be good to consignors. Consignors are the supply chain. Clear communication, on-time payouts, and a smooth intake process attract good inventory and keep consignors coming back.
Be selective at intake. Weak inventory clutters the floor and slows your turnover ratio. What "selective" looks like will vary by store type, but every store benefits from having standards.
Use a consignor agreement. Every consignor relationship should be governed by a written consignor agreement that covers the consignor split, the consignment period, pricing authority, and what happens to unsold items.
Have a markdown plan. A consistent discount schedule keeps inventory moving and signals to consignors that you're actively working to sell their goods. This matters more in high-volume secondhand retail than in a gallery, but some version of a markdown or expiration policy applies almost everywhere.
Track everything. Consignment math gets complicated as your consignor base grows. Good consignment software lets you see what's on the floor, what's sold, and what each consignor is owed at any given time.
FAQs
What's the difference between consignment and donation? In consignment, the consignor retains ownership of their item until it sells and receives a share of the proceeds. Donated goods transfer ownership immediately and the donor receives nothing. See thrift store.
Who sets the price on consigned items? Most consignor agreements give the store final authority on pricing, although some leave room for the consignor to request a minimum acceptable price on high-value items.
What happens if a consigned item doesn't sell? This is usually spelled out in a consignment agreement in a store's expiration terms. Common options include returning the item, donating it, or converting to store property.
Is consignment the same as buy outright? No. In a buy outright model, the store purchases inventory from sellers upfront and keeps all proceeds from the sale. In consignment, the store sells on the consignor's behalf and splits the proceeds.