What is consignment?

It's a way to make your products accessible, outside of your online store or website. Your creations are sent to a store and sold on your behalf. Your target customers therefore have access to your products without paying shipping costs in addition to being able to touch them and see them in real life. Nothing sells better than having the product in your hands!

You should know, however, that what you send will only be paid for when the store has sold your product . You will therefore have to pay for the materials needed to make your products before selling them, but don't forget that consignment will open many doors for you!

Of course, there are several points to check before getting started! And although it seems very simple, it can quickly turn sour if you don't take the time to think about everything.

Rest assured, I will guide you through every step!

1. How does it work?

First, you need to research stores that interest you and that offer products of the same type as yours. For example, a store specializing in children's products or zero waste.

Make a list of your favorite stores and keep this list in order to contact them eventually. Also take the time to see if similar products to yours are already there. For example, a store that already has candles may not want to have more. It is not impossible but not very common.

Prepare an information document to “ sell your salad ” including:

1. your story ;
   
   
2. your business description;
   
   
3. photos of your products;
   
   
4. a price list;
   
   
5. the different ways to contact you;
   
   
6. your approximate production times.
   
   

Why this document? Because all the shops that have a storefront receive tons of requests and you have to stand out to have more chances!

Then comes the time to contact the merchants who interest you, either by phone, email or even better, in person!

Think of a few sentences to introduce yourself to the owners. Why did you choose their store, who are you, what do you do, etc. You can send them your information document right away if you send them an email and if it is by phone, ask for an email address to send it to them.

If you don't hear from them after that, you can contact them again about 1 week later. You don't want to call them back too soon and seem a bit pushy, or too late and lose the momentum .

Now when you talk to a store you will also have to discuss MARGIN.

2. What is margin?

This is an amount X that the store will keep to sell your products. This margin is used to " thank " them for offering you this visibility, but mainly to pay their administrative and sales costs such as advertising, sales consultants, etc., to give just these as examples.

The margin to be offered (or the one that will be asked of you by the store) is very variable and depends on several factors. A high-end store located in the heart of Montreal could easily ask for 45% or 50% margin versus a small store located in the region could ask for 25% or 30%.

Ok, but concretely?

Let's say you create candles at a retail cost of $25 and the margin is 40%. That means $15 goes to you (60%) and $10 goes to the store (40%).

It will be very important that your product prices are calculated correctly if you don't want to lose all your profit. So the question to ask yourself is: is the $15 you are getting enough to cover your material costs, your administrative costs and your salary?

You can read an article about calculating product costs right here or learn how to calculate the price of your products with this training!

When the margin percentage is established, I strongly advise you to put together a file with all the information of the store (name, address, telephone number, email and margin) this will be your reference when the time comes to invoice the store rather than digging through your 83 emails!

3. Monitoring and invoicing

You also need to validate with the store from the start how they will track sales. You have AMPLE right to demand a document or a simple email to know in detail what has been sold in the last month.

You don't want to end up with an Interac transfer of an amount X that doesn't match any of your products and have to look for the match (real life story here) . This is still accounting and it has to be done well!

Usually, each store reports the products sold at the end of each month. This will be the time when you can send the invoice to the merchant. Don't forget to add the discount for the margin!

Let's say 40 candles at $25 = $1000 - 40% margin = $600 to bill.

Some important points:

• You should know that, most of the time, shipping costs are the responsibility of the craftsman (you!);
  
  
• If the store is not too far away, you can very well go and deliver the order yourself! So it is important not to put shipping costs on your invoice. Unless, of course, your agreement stipulates otherwise.
  
  
• I also advise you to add to your point of sale file, the inventory that you send to the store . This allows you to make statistics on the best sellers from one store to another in addition to relaunching them when you see that their inventory is low: are they interested in more products? Do you have new products to present to them?
  
  
• Once a quarter, you can also ask them to confirm the inventory they have on hand. You can then compare with your notes and see if your tracking is good or if an item has not been paid for.
  
  
• These notes and revisions also allow you to validate whether these points of sale are the right ones for you and thus review certain points with them or in your strategy such as: were there any sales? Did they talk about you on their social networks? etc.

4. The contract

Any good understanding between a trader and a craftsman must be put on paper! VERY IMPORTANT!

This is what protects both parties in case of changes or glitches along the way. Because, yes, it happens! Some shops have their own contract already written, ready to be filled out while others will require you to provide your own contract.

Like any good contract, it must include basic information:

1. the name of the consignee (the store);
   
   
2. the name of the consignee (you);
   
   
3. everyone's contact details;
   
   
4. the date and place of signing the contract.

Next comes the (very important!) list of small details to consider:

1. The established margin
   ;
2. Respect for the product, the brand, the name and the branding (You don't want a store to remove your labels, a real-life experience here!);
   
   
3. Mention that you remain the owner of your products until they are sold. For example, if the store has to close, they must return your products to you;
   
   
4. Indicate that you have a non-competition rule, that is, the merchant does not have the right to produce the same product as you and then remove your creations from his store. You secure your place! ;
   
   
5. The shipping method and who pays the shipping costs;
   
   
6. What happens if your products are stolen or damaged;
   
   
7. Do you offer the possibility of exchanging items (out of season or less good seller products);
   
   
8. The duration of the contract;
   
   
9. How to receive the sales report, how you send the invoice and how you will be paid;
   
   
10. The signature of the consignee and the consignee.

Although the agreement may be drafted by a lawyer, any document that includes the signature of both parties is considered a contract.

5. Consignment: the good and the bad !

The advantages

• Good visibility;
  
  
• Allows you to make yourself known;
  
  
• Offers multiple ways for customers to purchase;
  
  
• Your products can travel very far from your home.

The disadvantages

• Requires investment to cover expenses;
  
  
• No choice always on the location of the product in the store;
  
  
• Requires organization and close monitoring of each point of sale.

6. Point of sale “on purchase”

There is also the option for the store to buy your products directly in order to sell them. This involves the same steps.
(Research, discussion, agreement, contract, invoicing)

The big difference is that once the store pays for the products, you have to design and ship them, just like you would for a customer, but without the complex management side.

It can also be very advantageous to offer a better margin to the shops that buy. It's a win-win for everyone! The entire invoice is paid before starting and the profit for the shop is higher.

It also happens that merchants start with consignment and after having “ tested ” your products with their customers, decide to buy the next orders. To this option, we say yes!

7. In summary

• Research businesses;
  
  
• Produce the information document;
  
  
• Contact businesses and follow up with them;
  
  
• Build the tracking document;
  
  
• Write a contract;
  
  
• Take orders;
  
  
• Produce and send the items;
  
  
• Note the inventory sent;
  
  
• Register your new point of sale on your website and announce it on social networks;
  
  
• Bill the merchant each month;
  
  
• Follow up after 3 months;
  
  
• Evaluate each point of sale and its viability.

Do you have any questions? Do some things seem unclear to you?

Don't hesitate to let me know in the comments!
It will be a pleasure to discuss this further with you!

• •

2022-06-20 Written by Justine Doré-Champagne

2022-06-26 Last update by Stéphanie Therrien

• •