Introduction to Consignment
Consignment is a business arrangement where a seller ships goods to a dealer who pays only for what sells. The dealer can return unsold goods without obligation. Revenue is recognized only when cash is received. In shipping, consignment means giving custody of goods to another agent while retaining legal ownership until sold.
Advantages of Consignment
Consignment benefits sellers lacking stores. Consignment places inventory in retailers’ hands; suppliers own goods until sold, earning retailers commission. Pricing consigned items at 25% – 40% of original price helps them sell. Consignment saves suppliers inventory costs like storage, insurance, and transportation.
Understanding the Consignment Process
The consignor ships goods in contracted quantities to the consignee’s retail location for sale or consumption. Risk stays solely with consignor; consignee focuses on sales without needing capital to cover goods, encouraged by available stock from consignor to spur consumption and sales.
Conclusion
Consignment is an arrangement where a consignee agrees to pay a consignor for merchandise after it sells. Consignment benefits sellers lacking brick-and-mortar stores. Consignment places inventory in retailers’ hands; suppliers own goods until sold, earning retailers commission.