{"id":2630,"date":"2019-10-18T15:18:38","date_gmt":"2019-10-18T15:18:38","guid":{"rendered":"https:\/\/brightpearl20.wpengine.com\/a-retailers-guide-to-selling-on-consignment\/"},"modified":"2025-11-17T15:54:33","modified_gmt":"2025-11-17T15:54:33","slug":"a-retailers-guide-to-selling-on-consignment","status":"publish","type":"post","link":"https:\/\/www.brightpearl.com\/blog\/a-retailers-guide-to-selling-on-consignment","title":{"rendered":"How Consignment Works in Ecommerce"},"content":{"rendered":"<h3><strong>Key Takeaways<\/strong><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Selling on consignment lets vendors keep ownership of their products while retailers sell on their behalf \u2014 a model increasingly relevant in ecommerce.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Businesses may act as consignors (placing stock in other stores) to grow their reach or as consignees (selling another brand\u2019s goods) to expand their product offerings without upfront costs.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Success depends on clear agreements around payment timing, shipping, returns, insurance, and <a href=\"https:\/\/www.brightpearl.com\/inventory-management-system\">inventory<\/a> communication.<\/span><\/li>\n<li aria-level=\"1\">With the right <a href=\"https:\/\/www.brightpearl.com\/inventory-planning\">inventory planning<\/a> system, retailers and vendors can track inventory, sales, ad costs in real time, ensuring accurate reporting and smoother partnerships.<\/li>\n<\/ul>\n<h3>What is a consignment store<\/h3>\n<p><span style=\"font-weight: 400;\">Selling on consignment is when vendors retain ownership of their products and contract with other retailers to store and sell those products. There are loads of articles (\u2018<\/span><span style=\"font-weight: 400;\">Selling products on consignment<\/span><span style=\"font-weight: 400;\">\u2019, <\/span><span style=\"font-weight: 400;\">\u2019Consignment\u2019 by Shopify<\/span><span style=\"font-weight: 400;\">, \u2018<\/span><span style=\"font-weight: 400;\">11 tips when selling through consignment<\/span><span style=\"font-weight: 400;\">\u2019) out there about consignment selling in traditional retail but barely any are focused on the consignment model in ecommerce. We will focus specifically on the benefits and costs of running a consignment model in ecommerce.<\/span><\/p>\n<h2>Managing consignment inventory in ecommerce<\/h2>\n<p><i><span style=\"font-weight: 400;\">Outlining the basics of the model:<\/span><\/i><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Ownership Remains with the Supplier<\/b><span style=\"font-weight: 400;\">: The supplier (consignor) owns the products and retains ownership even after they are placed in the e-tailer&#8217;s (consignee&#8217;s) care.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Inventory is Stored and Displayed<\/b><span style=\"font-weight: 400;\">: The e-tailer takes responsibility for displaying, marketing, and selling the consigned products on their ecommerce platform, just like their own inventory.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Payment Upon Sale<\/b><span style=\"font-weight: 400;\">: The e-tailer only pays the supplier after an item has been successfully sold and the transaction is complete.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Commission or Fee<\/b><span style=\"font-weight: 400;\">: In exchange for their services, the e-tailer earns a pre-arranged commission or flat-rate fee from the sale price.\u00a0<\/span><\/li>\n<\/ul>\n<p><b>Unsold Items Returned<\/b><span style=\"font-weight: 400;\">: Any unsold items are returned to the supplier at the end of the agreed-upon consignment period.<\/span><\/p>\n<p><span style=\"font-weight: 400;\"><!--more--><\/span><\/p>\n<h3>Why adapt the consignment model to ecommerce<\/h3>\n<p><span style=\"font-weight: 400;\">Any business can sell as a consignor or consignee but there are a few common reasons to adopt as both a consignor or a consignee.<\/span><\/p>\n<h3>Benefits for the consignor<\/h3>\n<p><span style=\"font-weight: 400;\">When to think about becoming a consignor (putting your inventory in another business):<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Your own retail customers have a strong web presence or sales team, and you don\u2019t<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Your product is unknown or expensive &#8211; it can be difficult to convince retailers to tie up their precious cash and space into a product they don\u2019t know or haven\u2019t sold before. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">You have a system in place to effectively support you by tracking your inventory and sales at your retailers. This is imperative to maintain an accurate balance sheet and income statement since you have assets spread across many locations.<\/span><\/li>\n<\/ul>\n<h3>Benefits for the consignee<\/h3>\n<p><span style=\"font-weight: 400;\">Strictly a retailer? Here are some questions to ask yourself when considering becoming a consignee instead (putting another business\u2019 inventory in your store):<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">You want to try a new product but can\u2019t risk tying up cash into something that might not sell<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Cashflow is a concern &#8211; consignment aligns payment to vendors with when you make a sale, rather than months in advance.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Your vendor has a reliable and consistent <a href=\"https:\/\/www.brightpearl.com\/supply-chain\">supply chain<\/a> and will ensure you\u2019re <a href=\"https:\/\/www.brightpearl.com\/warehouse-management-system\">warehouse<\/a> shelves are never empty.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Brightpearl makes it easy to manage consignments. <a href=\"https:\/\/www.brightpearl.com\/bookdemo\">View a demonstration<\/a> to find out how it works.<\/span><\/p>\n<p><a href=\"https:\/\/www.brightpearl.com\/bookdemo\/\"><img decoding=\"async\" class=\"alignnone size-full wp-image-4564\" src=\"https:\/\/www.brightpearl.com\/wp-content\/uploads\/2020\/03\/bp-cta1.png\" alt=\"\" width=\"793\" height=\"274\" srcset=\"https:\/\/www.brightpearl.com\/wp-content\/uploads\/2020\/03\/bp-cta1.png 793w, https:\/\/www.brightpearl.com\/wp-content\/uploads\/2020\/03\/bp-cta1-300x104.png 300w, https:\/\/www.brightpearl.com\/wp-content\/uploads\/2020\/03\/bp-cta1-768x265.png 768w\" sizes=\"(max-width: 793px) 100vw, 793px\" \/><\/a><\/p>\n<h3>Consignment model best practices<\/h3>\n<p><span style=\"font-weight: 400;\">This isn\u2019t something to rush into and there are a few agreements that need to be made before a consignment model can be adopted:<\/span><\/p>\n<p><a href=\"https:\/\/www.brightpearl.com\/payments\"><strong>Payment<\/strong><\/a><span style=\"font-weight: 400;\">: Even though all consignment agreements are based on payment to vendor after the sale of a product there are a few different ways retailers can settle their debt.<\/span><\/p>\n<ol>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Time of sale &#8211; every time a consignment item is sold, a payment is made for that item to the consignor<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">End of a period &#8211; at the end of a week\/month\/year payments are made for all consignment items sold<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Order to order &#8211; the consignee pays for all items on a previous consignment order once they place a new order<\/span><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">Furthermore, some important <\/span><strong>replenishment<\/strong><span style=\"font-weight: 400;\"> questions to consider are:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Who pays for freight\/shipping of consignment items?<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">What happens if items are damaged or defective?<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">How will inventory levels be communicated? By hand? Email? Integration?<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Who is responsible for the insurance of products?<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Do customers return items to the retailer, or the vendor?<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Selling on consignment can be lucrative for all involved but relations can quickly become strained because of poor data around inventory levels.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Brightpearl allows vendors and retailers to:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Provide live inventory levels<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Accurately track the assets, revenue and costs associated with consignment<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">With Brightpearl, consignors can:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Maintain an accurate inventory asset value even with inventory spread across many locations<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Stay on top of their inventory levels across all of their consignments by drawing up a new inventory location to represent each one, including minimum stock levels and reporting for each<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Import orders through spreadsheets or via the API for when things really take off, and use Sales Analysis reports to understand the best performing products and locations<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Track outstanding consignee debt to ensure you\u2019re paid for what was sold<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">&#8230;and consignees can manage processes just as easily by:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Reordering and receiving stock via purchase orders while correctly accounting for the initial zero cost value of items<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Generate sales analysis reports to understand product performance by vendor<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Include external branding for any stationary or templates to handle any bespoke returns policies<\/span><\/li>\n<\/ul>\n<h2>Drawbacks of the consignment model<\/h2>\n<p>These points are already covered, but not as a dedicated section:<\/p>\n<ul>\n<li>Operational Complexity: You need robust systems for tracking assets spread across multiple locations \u2014 without this, relationships strain quickly.<\/li>\n<li>Data Issues: Poor tracking of inventory and sales can create disputes and mistrust.<\/li>\n<li>Risk Allocation Questions: Who pays for shipping, handles damages, insures goods, or processes returns? These potential \u201chidden costs\u201d are left to negotiations.<\/li>\n<li>Dependency Risks: For retailers, reliance on vendors\u2019 supply chain reliability; for vendors, dependency on retailers\u2019 sales performance.<\/li>\n<\/ul>\n<p>And add these points:<\/p>\n<ul>\n<li>Increased liability exposure.<br \/>\nMargin erosion compared to wholesale.<br \/>\nLegal\/contractual risks in ecommerce (cross-border, digital returns, etc.).<\/li>\n<\/ul>\n<h2>How Brightpearl facilitates the consignment model<\/h2>\n<p><span style=\"font-weight: 400;\">Need advice on how to get set up? <a href=\"https:\/\/www.brightpearl.com\/contact-us\">Request a callback<\/a> and one of our retail specialists will get in touch.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Key Takeaways Selling on consignment lets vendors keep ownership of their products while retailers sell on their behalf \u2014 a model increasingly relevant in ecommerce. Businesses may act as consignors (placing stock in other stores) to grow their reach or as consignees (selling another brand\u2019s goods) to expand their product offerings without upfront costs. Success [&hellip;]<\/p>\n","protected":false},"author":10,"featured_media":3452,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[111],"tags":[],"class_list":["post-2630","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ecommerce-best-practices"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.6.1 (Yoast SEO v27.6) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>How Consignment Works in Ecommerce | Brightpearl<\/title>\n<meta name=\"description\" content=\"Learn how to sell consignment inventory in an ecommerce environment. 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