During your store visit, the buyer may ask you if you are willing to consign your work. Some stores ONLY take goods on consignment, some don't do consignment at all, and others do a mix.
How should you answer?
As always, it depends. There are good things and bad things about consignment, so let's explore those a little.
First: What IS consignment?
You send/leave your product at a store. You and/or the store create an inventory list--naming/labeling each item (or a group of identical items), quantity (if multiples) and price (you either tell the buyer what price you need to get, and a retail price is determined from that, or you determine a retail price and work from that.)
Usually, if you ship product to the store, you the artist pay the shipping. If the product is returned to you, usually the store pays the return shipping.
Consignment rates vary. Some stores will pay you 70% of the retail price, keeping 30%. More standard is a 60/40 split--you the artist get 60%, the store gets 40%. Since standard wholesale is 50/50, the extra 10% supposedly helps you recoup shipping costs to the store, and having to wait for your money.
More and more, however, consignment is tilting toward 50/50, like wholesale, and in some art galleries, even a 40/60 is becoming common. More on this later.
As the work is sold, the store issues you a check usually in the month AFTER the product is sold.
Keep in mind these are not "rules", just what is--or has been--typical.
What are the advantages to consigning?
· YOU establish the retail price.
· Your commission on sales—the portion of the retail price you receive--is usually higher than the wholesale portion. (That extra 10% we talked about earlier.)
· You still own the product until it’s sold.
· Because you still own the product, you can remove it anytime from the store—when you are low on inventory for a show, if sales are slow, if you become unhappy with the store, etc.
· This is a low-risk, low-threshold for the store--they don't have to actually lay out money to do the experiment of carrying it--so it may close the “sale”. A good bargaining chip!
· You can use consignment as an incentive and/or reward for regular wholesale accounts (“Buy my production lines and I will be willing to consign a one-of-a-kind piece.”
· Excellent for introducing unusual, high-end and/or one-of-a-kind work. Again, no big outlay of cash for the store to test market these riskier products.
· Many reputable stores & venues ONLY do consignment. Many non-profits, special fund-raising events, seconds sales, seasonal stores, etc. don't have much start-up cash or budget for inventory, so they HAVE to do consignment--only paying out money as goods are sold.
What are the disadvantages of consigning?
· You are not paid for work until it is sold.
· You may not be paid for up to 2 months. (You leave an item in the beginning of January. The item sells the last day of of February. If commissions are paid the last day of the FOLLOWING month, they won't cut a check until the last day of MARCH. And it may be several days before your check reaches you--in early April.)
· You may end up with thousands of dollars of inventory out in dozens of stores, and no money coming in.
· It’s low energy. The store has no money tied up in inventory, so there may not be as much incentive to move it (especially if it’s a non-profit or a co-op, with no “owner”.)
· If it’s a co-op situation, the owners may not be as interested in selling YOUR product over theirs.
· Damaged/lost/stolen goods can be problematic.
· You must include shipping costs in YOUR costs.
· Stores don’t like it when artists remove all their work for a show.
· Consignment takes lots of accurate record-keeping and paperwork.
· Consigment takes a lot of trust for BOTH parties.
· If store closes or owner vanishes with your product, you are left high and dry, especially if you are consigning with a store a distance away from you.
· Consignment-only situations may indicate a store owner with not much retail savvy or a constricted cash flow because...
· A 40% bottom line for operating a retail store is TOUGH!! Many stores now find they have to mark up wholesale goods at MORE than twice the wholesale price.
If you decide consignment is for you, protect yourself. Check with your state laws on consignment to see what protection is afforded you.
Use a contract (but read them carefully.) If there are any clauses that you don't understand, ask what they mean. The store should be able to explain them to you in a way that makes sense. If it doesn't make sense, or seems out of line, ask to take a copy of the contract home with you before you sign or leave work. You don't HAVE to close the transaction that day if you are uncomfortable or unsure.
Check your homeowners/small business insurance policy to see what protection is offered.
Keep accurate records on inventory, returns, payment. Check in often—in person is best!—and make sure your inventory is out and displayed properly.
Some stores ask for exclusivity--that is, that they have defined an area or a set of stores that compete with them, and they will ask you NOT to sell to those stores, or other stores in that area. There are good and bad reasons to give exclusivity, and that is a whole nother column. For now, understand it's not in their OR your best interest to have your work in a lot of stores in a small area. We'll talk more about strategies for handling this complex issue.
As in any relationship, there will be bumps and dips in the road. If the store is proactive about working them out, that's a good relationship. But if you feel there's too much going on that doesn't feel right, walk away. There's always another store down the road.
Coming soon! "What is Wholesale?"
