In business, making money is necessary. And making money right out of the sate can be challenging. Building brand awareness for direct to consumer sales and finding boutiques that will take a chance on you by purchasing wholesale are not easy accomplishments as an emerging designer. So with that in mind, it can be very tempting to accept new accounts being selling on consignment.
But is selling on consignment a bad idea for emerging fashion designers?
First let’s make clear how consignment works: Your pieces are taken on and displayed in a store without any payment being made up front. Once a piece sells, the store pays you an agreed upon percentage of the selling price.
It’s a risk for sure. Because it means that you need to pay for the cost to produce the products before you receive any money. I realize that this is the same risk as when you sell direct to consumer on your website. However, the added risk is that you are tying up product with a retailer, and if they don’t get sold, the pieces are returned to you.
But just because selling on consignment is a risk, it doesn’t mean that it’s not a risk worth taking. Let’s break it down.
Pros of Selling on Consignment
- Brand Awareness– when you’re just starting out, it’s tough to get people to know who you are. By getting placement in a neighborhood boutique, you will start to build awareness of your brand and products.
- Relationship Building- getting your foot in the door with a popular boutique or department store presents a lot of value. If you can prove that your goods will move, they should be willing to buy wholesale the next time around.
- Larger Profit Margins– when products sell, you can sometimes receive 60% of the sale price, which is more than traditional wholesale. This percentage is based on the negotiations that you have with the boutiques prior to handing them product.
In my own past experience I found selling on consignment when I was just starting out to be successful. I chose a handful of stores and approached their buyers. Those that were interested all wanted to start on consignment. Since I was new to the whole process I went for it and selected two high-traffic boutiques in my then residence of Philly. I never gave them more than five pieces at a time, and sales happened very quickly. Within two months both shops were placing wholesale orders. (disclaimer: this was 15 years ago)
Another successful example I heard about was with the jewelry line Dannijo. When the sister team was just starting out they were desperate to get into Barneys. So they worked on consignment at first. Before too long, the department store was buying wholesale.
That’s not to say it always works like this. I’ve also heard horror stories of boutiques closing without returning goods, refusing to pay, or denying having had any pieces in their inventory. Scary stuff.
Cons of Consignment
- Risk– there are no guarantees. You’re producing something and putting it out there without receiving payment up front. It’s a costly way of doing business.
- The wait– the unknown is difficult to deal with. If things don’t sell, you’ve lost time and money.
- Setting a standard- if a boutique knows that you’re willing to work on consignment, they may never want to front the risk by purchasing wholesale. When you feel the time is right, propose a wholesale relationship and sick to your guns.
If you decide to go for it, make sure to:
- Be picky about the stores you work with on consignment. What can they offer? Are they high traffic and able to really help you grow brand awareness? Who else do they sell? Make sure you’re O with the brands yours will hang with.
- Start with stores that are close enough for you to drive to, in case something goes wrong, you want to be able to walk into the store and get answers, rather than hoping the pick up the phone or answer your emails.
- Keep excellent records on your end.
- Have a consignment agreement drawn up and signed.
- Include a time frame with a final date they are allowed to return unsold items.
- Have someone sign for the items when they’re delivered to the store.
- Find out who is responsible for damaged or stolen goods and get this in the contract.
- Remember that if things are going well, try to transition into wholesale as soon as possible.
Sneed
Can we start a list of brick and mortar emerging designer consignment shops in USA? Just so we are all aware. Spread the word. Maybe it can be a different article.
All the consignment shops I see on Google are reselling of luxury items like Chanel, Gucci, Prada. I feel like the list would help us to contact people and alert us who to stay away from.
I only know of one in NY.
ALLAN & SUZI,
it sells emerging designers and highend established designers. They pair emerging designer items in the window. It’s nice to be paired with Viktor & Rolf along with Moschino.
SunbirdTown
Sneed,
Thats a great idea. I have not been able to find one yet. but then I’m looking into US market from Canada so online resources are my only tools. If you know of any please let me know. Thanks
Nuala
I’ve sold on consignment before and I think it’s a great option. One of the boutiques I started with were crap and decided never to order from me even though my goods sold out quickly – they just didn’t want to pay – but other boutiques turned consignment deals into wholesale orders all while increasing my profile!
http://www.fionnuala.com.au
Cassandra
Hi Nicole
I know this conversation was a well ago but what did you mean the boutique when wholesale did you mean they took your designs and got them wholesale sorry wasn’t sure what you meant.
Nicole Giordano
Hi Cassandra!
I’m sorry, I’m a little confused by your question. Are you asking the difference between wholesale and consignment? If so, wholesale means that a store buys your pieces for less that the selling price (at least 50%) and then sells them at retail prices in their store. Consignment means that you lend your pieces to the store without any payment in hopes that they can make sales and then you get around 60% of the selling price.
If that’s not what you were asking, just let me know what you were hoping to learn!
unclone
For online tie-ups, the designers should mostly look at the drop-ship option.
unclone
Hi Nicole,
That was a great article.
Most start-up businesses are attracted to sell on consignment for factors mentioned above. What most people are unaware of is that the store staff is advised and trained to push sales for products that have been bought by the store. Products on consignment, therefore, are terribly neglected (badly exhibited in the store, not recommended to prospective buyer etc).
Here are two methods by which designers could reduce risks for themselves:
1. Propose to the store owner to hold a week-long promotional event for your label, just so you know how’s the market responding to your designs. Offer them your designs on consignment only for this week. If you do well, ask them to purchase, now that you’ve tested the waters
2. Work on a part consignment- part purchase basis if the store is really interested in your work. This is how it works – the store buys your first batch of designs. Whatever is left unsold after x (decide mutually) amount of time is replaced with new stock of equal worth.
Nicole Giordano
Thanks so much for this helpful insight!
Evon Cassier
Your suggestions for those who choose to consign are an absolute must. I’ve heard horror stories about not being paid for sold items and not being compensated for stolen or damaged items. Consigning takes a lot of time and energy to manage not to mention the fact that it ties up inventory which a lot of new designers don’t have a lot of. I believe social media marketing and online venues for selling offer many of the same benefits of consigning without the risk of lost inventory.
Nicole Giordano
Thank you for these great points, Evon!
Jonathan Chin
Hi Nicole,
Great article on a topic all of us emerging design companies struggle with. Would you say that the same rules you laid out apply to Bridal Gown Fashion?
For us we have less risk on inventory but the sample pieces themselves do end up costing more.
How did you approach the boutiques about taking your inventory on consignment? Face to face meetings? Did you send them a buyer kit and line sheet package?
Nicole Giordano
Hi Jonathan,
I don’t have experience with the bridal business but if developing samples is very costly, I don’t imagine it’s a great idea to lend them out. Do bridal boutiques usually purchase samples to show brides?
It was 10 years ago when I was a designer, but I scheduled a face to face meeting and made sure that I had all the necessary collateral (line sheet, buyer info) on hand.
Lance Lippman
Thank you so much for this article! I like the fact that you listed clear pros and cons because I will look to show this to my designers. I have been in the process of launching a new online boutique with a consignment style sales model called Minsstyle.com. The concept is to build brand awareness along with sales for today’s brightest up-and-coming independent designers and we showcase them and sell their products on the site. However, we do not purchase anything. When an item sells they ship out the product and we give the designer a 60% cut. We feel that by using a consignment style model but in an online setting, the cons are even more reduced due to the fact that they don’t have to part with the products while trying to sell it in the store (like they would with a brick and mortar store). We really feel like the consignment model, especially in the online setting, is the best way to go for new independent designers to grow.
Nicole Giordano
Thanks for you comment, Lance. 🙂
Ken Issac
Great article. I think there is a big risk in consignment deals. Granted it may be “easier” to go this way, however, for designers without financial backing this is going to be a struggle to have the resources to continue making more garments. Its difficult as is with brands that have financial backing via investors so I can only imagine difficulties when you are doing it on your own. The root of going consignment or not is found in the deals being made by those who sell the items. Are they getting paid upfront or will they have ot wait months before they see a check. You have to be tough in this jungle.
Nicole Giordano
Thanks for your feedback Ken. You make some great points!
Divya
Great article Nicole! I have had overseas boutiques ask me to send them clothes on consignment although it is a fantastic opportunity I am afraid to go ahead with it. What would you recommend in this instance?
Nicole Giordano
Hi Divya,
To be blunt, no. When I did did consignment many years ago, I chose two boutiques that were in my city so that I could check them out, check up on them, and be there in no time if I was having any issues. If you decide to do consignment, I would stick to boutiques within driving distance only.
Do you have low minimums? Maybe allow them to buy just a piece or two to get your foot in the door. If they like your work, that’s a low risk on their part.
Hope that helps!