The Cons of Using Consignment
The biggest disadvantage of selling your products through consignment is that you don’t get to keep all the profit. Consignees can take as much as 60% in compensation for selling your products, costs which need to be factored in when determining how much it costs you to make or purchase the items in the first place.
With consignment, you won’t receive any money until the items sell. This could potentially prove problematic for cash flow requirements, and you, therefore, need to manage cash flow carefully to avoid running into such issues.
If your goods become lost or stolen while in a store, it could cost you out of pocket. It is, therefore, important that you ensure your consignment agreement notes who is responsible for lost or stolen goods.
Of course, consignment wouldn’t work for service-led small businesses. Nor would it work well for any products not generally sold in retail stores or not able to stand out well from other retail products in a store setting.
It is important to remember that consignment only works well if and when your products sell, so relying solely on consignment contracts may not be sufficient for the successful running of your business.
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