Skip to Content

How Do Consignment Shops Get Their Inventory?

Consignment shops get their inventory from individuals, families, organizations, and businesses who want to sell and make money off their old or used products and wares.

For example, a hotel that wants to upgrade can offer its furniture, bedding, kitchen utensils, electronics, and home appliances to a consignment shop to help it sell the goods.

So also, a family that is relocating can enter into an agreement with a consignment shop to help them sell their furniture, bedding, kitchen utensils, electronics, home appliances, etc.

Don’t forget that some stores and boutiques that want to clear out their stores can also work with consignment stores to help them sell their goods.

It is important to note that consignment shops typically take a 40% commission, which is considered a 60/40 split. A 40/60 or 50/50 split is also appropriate, depending on the products you are selling and the type of consignment shop you’re selling through.

Please note that it is one thing to know how to get inventory for your consignment shop, but another kettle of fish to know how the consignment business model works.

A consignment shop is a shop that sells second-hand items on behalf of the original owner who receives a percentage of the selling price; hence they must make sure they explore ways of getting used products and wares on a regular basis to stock up their shop.

In case you are planning to open a consignment shop and you are wondering where you will be getting your inventory, you need not worry anymore because you are reading the right article.

In this article, we will explore how you can get inventory on a steady basis to stock up your consignment shop and also give you a proper perspective on how the consignment business model works.

How Consignment Business Works

  1. Draft the Consignment Agreement

Before you start a consignment business, you must make sure you have your consignment agreement in place. The consignment shop owner evaluates the items to determine if they meet the shop’s standards and will likely sell well in their market. They consider factors such as the item’s condition, quality, demand, and marketability.

Once the shop owner is satisfied, then he or she will enter into a consignment agreement with the consignor. Note that it is mandatory for the shop owner to outline the terms and conditions of the arrangement.

The consignment agreement is expected to include at least details such as the length of the consignment period, the commission the shop will take upon sale, and the pricing strategy.

  1. Fixing of Price for the Goods

Please note that usually, the consignment shop owner works with the consignor to fix prices for all the items they bring to the consignment shop.

The price for consignment goods is usually based on market value, item condition, and the shop’s pricing strategy. The consignor may have input into the pricing decision.

  1. Display of Items

Once the items are accepted and the prices are agreed upon, then they are cleaned, photographed (if necessary), and displayed in the consignment shop. Interestingly, the way the goods are displayed will go a long way to determine how fast they can sell.

  1. Sale of Goods

When a customer purchases an item from the consignment shop, the shop records the sale and collects payment. The shop retains a commission (usually a percentage of the sale price) as agreed upon in the consignment agreement, and the rest is paid to the consignor.

  1. Handling Unsold Items

The fact that not all goods that are brought to consignment shops are sold means that there is always an agreement on what happens to unsold goods.

Usually, after the agreed-upon consignment period expires, unsold items may be returned to the consignor, donated, or sometimes subject to a discount sale.

  1. Making Payments to Consignors

Lastly, whenever the goods are sold, the is an agreement on how the payment can be made to the consignors. Generally, consignors typically receive payments periodically, such as monthly or quarterly, for items that have been sold. The payment may be in the form of a check or direct deposit, depending on the consignment shop’s policies.

In conclusion,

It is important to state that the consignment shop business model is a business model that provides a win-win scenario for both consignors and shop owners.

Consignors can sell items they no longer need or want without the hassle of managing a sale themselves, while shop owners can continually refresh their inventory and offer a wide variety of items to their customers without spending a dime or purchasing inventory upfront.