In our last posting, we talked about wholesaleing your handmade jewelry through boutiques. Although this is the ideal situation, if a boutique doesn’t want to pay for your jewelry outright, there is the option of displaying your items on consignment. A boutique may feel more comfortable with this arrangement since there is little risk to them and they only have to pay for the item if it sells.
How does this arrangement work?
You would establish a price for your handmade jewelry, possibly with some input from the boutique owner since she knows what price points sell in her store. When the item sells, the boutique owner keeps an agreed upon percentage of the sales price and gives the remainder to you. The percentage varies depending up on the retailer and the consignor, but is usually between 60/40 and 75/25 in favor of the seller. I wouldn’t accept a percentage less than 60% since you’re tying up handmade jewelry inventory that could be sold elsewhere without a large enough return.
Advantages to Selling on Consignment
1. It may be a way for you to get your foot in the door of a boutique that wouldn’t normally purchase from a new vendor.
2. You keep a slightly higher percentage of the profits than if you sold wholesale. This is can be significant if you’re able to secure a 75/25 split.
Disadvantages to Selling on Consignment
1. Your inventory is tied up so you’re unable to sell it elsewhere. This can result in cash flow problems.
2. Increased paperwork for both you and the boutique owner. It can be difficult keeping track of what’s sold and what hasn’t if you’re in several stores.
3. Because the boutique owner hasn’t taken title to the merchandise, she may not treat it with care and respect handmade jewelry deserves. This can result in damage to your pieces.
4. The boutique owner may not display your items as prominently as items that she’s purchased outright.
5. The boutique could go out of business suddenly without returning your merchandise. You would likely not be paid and still be out the merchandise. Not a good situation. 🙁
Judging from the list, it would certainly seem as if the disadvantages of selling on consignment outweigh the advantages. This may be true but if you’re trying to establish a relationship with a new, high traffic boutique, it can in your best interest to pursue a consignment relationship if all else fails. Here’s how to avoid some of the problems:
1. Research a boutique thoroughly before commiting to consignment arrangement. You want to know how many years they’ve been in business. Since most businesses fail within the first two years, a boutique that has been in business at least that long may be worth taking a chance on.
2. Find out if the boutique has done consignment before. If so, ask for a copy of the consignment contract before you commit your items to their store. Make sure you understand all of the details and “fine print”.
3. Keep accurate records and counts of all items you consign with the boutique. As each item sells, remove it from your consignment list
4. If you’re consigning locally, keep a close eye on your merchandise. Check back every two weeks to make sure your items are well displayed and are not being damaged or pilfered. It’s also a good idea to replace slower selling items with fresh ones to spark new interest in your jewelry.
5. Try to avoid a consignment arrangement in out-of-town boutiques unless you’re able to make a trip every two weeks to monitor the situation.
6. Try to negotiate as high a percentage of the sales price as you can to make it worth your while. Aim for 70/30 if at all possibile.
7. Once you’ve proven that your handmade jewelry will sell, encourage the boutique owner to purchase your items via wholesale. You may want to establish upfront that you only sell on consignment on a temporary basis for new retailers. Most boutique owners will be glad to purchase wholesale after they see that your handmade jewelry is a quick mover.
I know of several handmade jewelry designers who are quite happy with the consignment mode of doing business and use it exclusively. So, it is an arrangement that can work and be profitable. My feeling is that you should wholesale to boutique stores if at all possible in order to increase your cash flow and reduce the time required for record keeping. If a consignment arrangement is the only way you can get into a high traffic store, by all means, give it a try. You may find that the rewards greatly outweigh the disadvantages.