Consignment is a unique business model that bridges the gap between owners of goods and those who can sell them, offering opportunities for both individuals and businesses to earn revenue with minimal upfront risk. Whether you’re a consignor (the owner of items) or a consignee (the seller or shop), understanding the core terms and processes of consignment is essential for smooth transactions and successful outcomes. Here’s a comprehensive glossary based on current industry practices and real-world consignment agreements.
Consignment
A business arrangement where a consignor (owner) entrusts goods to a consignee (store or platform) to sell on their behalf. The consignor retains ownership until the item sells, after which they receive a percentage of the sale price as agreed.
Consignor
The individual or business that owns the items and places them with a consignee for sale. The consignor maintains legal ownership until the goods are sold.
Consignee
The store, platform, or person responsible for selling the consigned goods. The consignee earns a commission or fee for successful sales.
Term
The duration of the consignment contract, typically set for a defined period (such as 90 days). If items are not sold within this period, the consignor may reclaim them, extend the contract, or agree to further discounts or fees.
Pricing
Consignment pricing is usually determined collaboratively, based on comparable items’ current and historical sale prices, condition, and brand. Prices may be subject to change due to negotiation or third-party selling fees.
Discount Schedule
Many consignment agreements include scheduled discounts to help move inventory. For example, items may be discounted by 10% after 30 days, 25% after 60 days, and 50% after 90 days if unsold.
Authenticity
Consignors must guarantee the authenticity of their items. Authentication may involve an in-person evaluation or certificates, and non-authentic items can be rejected, destroyed, or returned for a fee.
Ownership
The consignor retains legal ownership of items until they are sold. If the contract ends or items remain unsold, ownership and possession revert to the consignor.
Payment
Consignors are paid after their items sell, typically via cheque or electronic transfer. Payment schedules vary but often occur monthly, and it is usually the consignor’s responsibility to follow up for payouts.
Commission
The percentage or flat fee the consignee earns from each sale. Commission rates can vary by item value, category, or brand, and may be tiered (e.g., 50% for items under $1,000, 60% for $1,000–$3,500, etc.).
Storage Fee
Fees are charged for storing items after the contract period ends or if items are not picked up within a specified timeframe. Storage fees are typically charged weekly until the item is collected.
Return Fee
For non-local consignors, a fee may be charged to return unsold items by mail or courier after the contract ends.
Buyout
A set price at which the consignee may purchase the item outright from the consignor, negating future commissions or fees.
Minimum Flat Fee
Some consignment shops set a minimum payout or fee for items, ensuring consignors receive at least a certain amount for higher-end goods.
Net Selling Price
The final price the item sells for, after any discounts, fees, or commissions are deducted.
Curated Selection
Consignment shops often curate inventory, accepting only items that meet their standards for brand, style, condition, and seasonality.
Prohibited Items
Items that a consignment shop will not accept, such as damaged goods, non-authentic pieces, or out-of-season products.
Legal Title
Consignors must affirm they have legal title and the right to sell the items placed on consignment.
Meeting of the Minds
A clause confirming that both parties have read, understood, and agreed to all contract terms. Changes require written consent from both the consignor and consignee.
Consignment Tiers
Some shops offer tiered commission rates or payout percentages based on item type, brand, or value—for example, higher percentages for luxury brands or exceptional pieces.
Bottom Line
Consignment offers a flexible and mutually beneficial business model that empowers both consignors and consignees to maximize value with minimal risk. By familiarizing yourself with the essential terms and best practices outlined in this glossary, you can navigate consignment agreements with confidence—whether you’re looking to declutter, launch a side hustle, or grow your retail business.
