Consignment selling can be a welcome strategy for handmade business owners. Learn what craft artists can typically expect when selling on consignment, so you can negotiate a sales agreement that's fair to everyone.
Craft consignment can add to your overall business income and be a good complement to other sales strategies. It can provide you with additional sales opportunities, introduce your work to new customers, and open your business up to increased growth opportunities.
However, selling on consignment can also be complicated. If it's going to be a positive experience, you need to develop a solid professional relationship with the retailer and communicate terms and responsibilities clearly.
Craft consignment selling can benefit your business by:
Some handmade business owners are happy to sell crafts on consignment, but others are resolutely against it.
My own experience with handmade jewelry consignment selling, many years ago, was completely positive. I had a great working relationship with the shop owner, and it was a good starting point for my new business.
On the other hand, other craft artists can tell you stories of bad experiences with craft consignment selling. Products may sit in a back corner of the shop with little chance of being seen by customers, items can be lost or damaged without compensation to you, or surprise fees or terms may crop up that you did not expect.
Those who are against the idea of consignment selling for craft artists will typically encourage business owners to pursue wholesale accounts instead.
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If you do want to try selling on consignment, it's essential to know what is reasonable for you to expect from the retailer and what is reasonable for the retailer to expect from you.
You need to communicate clearly, and in writing, with a consignment sales agreement (you can find a sample form here (among other helpful business resources) to ensure the best chance of building a positive experience that is a win-win for you and the retail shop owner.
When sourcing inventory for their stores, retailers look for items that meet and exceed their customer's expectations in terms of quality, style, function and price. They want items that provide good potential for profit, and they also want to work with suppliers (that's you!) who are professional, reliable and respect their time.
In addition to demonstrating your items would be a good fit for their store, it's also important to show the retailer you are someone they would be happy to work with.
Most craft professionals will probably want to look at more upscale consignment opportunities. Lower end consignment is not typically a good fit for handmade items because you'll struggle to charge a price that earns you a reasonable profit in that type of setting.
Visit the store as a customer before contacting the store owner or manager. The information you gather on your visit will help you to get a sense of types of items already available in the store, their price points and whether your items would fit well with existing items in the shop.
One way to find good upscale consignment selling partners is to ask for referrals from others who sell items on consignment. Network with individuals you know - perhaps people you've met at craft show or in your local arts or crafts council - to find a retailer you can trust and with whom you can build a mutually beneficial relationship.
Networking can also help you get your items into a retailer's store. Approaching a retailer by mentioning a mutual friend or acquaintance who referred you to their store can be much easier than cold calling.
Once you determine a store is a good fit for your products, call or visit the store to ask for a meeting time to present your products to the retailer. If you go in person to request a meeting time, be prepared to make a great impression.
The shop owner will be making judgments that will impact her decision from the initial meeting. Remember, she's not just assessing whether your products would sell well in her shop; she's also assessing whether you are a person she would want to work with.
There's a chance the retailer might ask to see your items right away. That's why you should come prepared with samples if that's practical, or product photos if it's not practical. Don't expect the store owner to have time to look at your products right away, but do go prepared in case the owner does want to talk with you immediately.
You take on a degree of risk when you decide to consign your crafts, so you won't want to partner with just anyone.
It's important to consider and address a few issues before you commit to this business strategy.
1. The store owner is the one safeguarding and promoting your work.
You will need to feel reasonably comfortable that the retailer will take care of your items and pay you in a timely manner or return the items to you in saleable condition when appropriate.
2. There are pros and cons to entering a consignment agreement with newer, less established stores.
A new store owner who needs to be very careful about overhead may be more open to trying an unproven line and accepting items on a consignment basis. However, a new store owner may not have the experience necessary to successfully promote your products or manage the consignment relationship.
If you're working with the owner of a newer store, consider consigning a few items initially while you establish a relationship, and provide more inventory if and when you see they are a good fit for your business.
3. You'll have inventory tied up at the store(s), and you won't be able to retail those items yourself at other venues.
You'll need to ensure your products are being promoted effectively by the retailer, so it's worthwhile having them in the shop and not in you craft booth at shows.
Remember, the retailer has not purchased your items outright. The only risk he or she has taken on is providing some space in the store for your items, so retailers may be less inclined to promote your products as opposed to items they've purchased on a wholesale basis for their store.
4. You'll need to ensure everyone is clear about the terms of the wholesale arrangement.
Consignment arrangements are more complex than wholesale, and there's plenty of room for misunderstanding if you don't communicate terms clearly. Be sure to discuss and put in writing all of the pertinent details.
If the retailer doesn't have a standard agreement, you can find a sample consignment agreement form here. It will provide a solid starting place, and you can adjust any elements of the form to suit your own specific circumstance and agreement.
The shop will usually take anywhere from 30 to 50 percent of the sale price of craft consignment items, with 40 percent being typical.
When you sell your crafts to retailers on a wholesale basis, they usually pay 50 percent of the retail price. There may be exceptions, but in a consignment arrangement, in my opinion, a retailer should usually receive less than 50 percent of the retail price of items sold because they have not taken on the risk of buying your product as they would in a wholesale relationship.
In my own craft consignment selling, I negotiated a 60-40 split of the sale price (60 percent for me and 40 percent for the retailer), which seemed fair and reasonable to everyone involved.
You'll need to ensure you price your crafts appropriately so you can still make a profit after the retailer takes his or her percentage.
Request a copy if one is available and be sure to review and understand the terms before signing the agreement.
If the retailer isn't accustomed to selling consignment items, be sure to put everything in writing including the retailer's percentage, selling prices and the terms you have agreed upon regarding sales and promotions.
Managing paperwork related to craft consignment selling can take up a surprising amount of time, so setting up an efficient system from the outset will be extremely helpful and allow you to use your time more efficiently.
The retailer should track inventory and sales, but it serves your best interests to keep track yourself as well, just in case there's a discrepancy.
To save time and keep expectations clear, determine a schedule for reporting sales, payment and restocking ahead of time. These details can be outline in your consignment agreement.
Be open to a bit of flexibility if, for example, the retailer has sold more of your items than initially expected and wants to restock early (this is a good problem to have!).
If you need to ship your products to an out of town retailer, be sure to package items securely, discuss ahead of time who will be responsible for shipping fees (a detail that also belongs in your consignment agreement), and seriously consider purchasing shipping insurance.
Knowing where your items will be displayed in a store will give you good insight into how committed the shop owner is to promoting your products.
Will they be in a well-travelled, well-lit area of the store or hidden in a dark corner? Placement and visual merchandising can have a huge impact on sales, and experienced retail shop owners know that. If your products are featured in a high-traffic spot, that's an excellent sign the shop owner is committed to promoting them.
Also, knowing how much space you have in the shop will be one factor to consider when deciding how many items to provide for the shop owner.
While it's a little extra work, setting up the display yourself for a local retailer can be worthwhile because you'll be able to ensure your products are displayed to their best advantage.
A painter might participate in a meet the artist night hosted and promoted by the retailer who carries his or her work.
Someone who makes unique baby products may provide a seminar for new moms that provides valuable information on some aspect of parenting which can be related back to the product.
Someone who makes soaps and cosmetics may host a spa evening at the retailer's store.
Creative partnering events like these can provide good promotional opportunities for you and the retailer and can boost sales and build goodwill and loyalty all around.
Building a positive, productive relationship with a retailer you can trust is at the core of successful consignment selling.
Remember, you are not approaching retailers begging them to sell your products. You are providing unique items that meet their customers' needs and will help the retailer to make a profit.
With a little bit of research, organization and good communication, consignment selling between the right craft artist and the right retailer can be a profitable win-win situation for you and your partner retailers.