Wholesale Vs. Consignment

When you make the transition from personally selling homemade jewelry to having it sold in stores, you need to consider what kind of contract to arrange. There are two main ways that stores will carry your accessories: wholesale, and consignment. In this article, we’ll describe the difference between the two and why you should stay away from consignment deals.

Wholesale

Wholesale is when the store buys your jewelry up front, marks up the price and then resells it. Depending on how well your accessories sell in the store, they will reorder and possibly in increased quantities. The store is concerned with 2 things: sell through and profit margin. Sell through is how fast they sell the items they get, and the profit margin is the difference between the price at which they buy from you and the price at which they sell it to their customers. Stores are generally looking for an initial sell through of 80% and a minimum of a 100% markup. So if you sell 10 pieces at $10 they need to be able to sell at least 8 of them at $20 in the season for them to consider your jewelry worthwhile.

Consignment

Consignment method means stores allow you put your pieces in their shop, but they don’t pay for them up front. They merely provide the real estate for you to showcase your work. If it sells, the store keeps a percentage and gives you the remainder. The percentage is usually around 50/50. The contract may or may not specify the length of time they will carry your accessories, and might also specify payment/accounting frequency.  How long the store will keep your items on display, how frequently you get paid, and how long it takes to get your money after the sale, are all negotiable. Consignment is, in a sense, the opposite of wholesale, because you’re the one personally incurring all of the risks, and may not see a return on your investment for some time. You’re guaranteeing that the item will sell.

The Benefits of Wholesale

Wholesale is preferable to consignment because the store is committed to your product, you receive a predictable cash flow, and reduced accounting overhead. If stores buy your items it means they believe in your jewelry. It also means that whether or not they sell it is up to them. They’ve made the investment and in order to get a return, they have to sell your jewelry. This is an incentive for them to take care of your items, to display them properly and to push them to the customer. You’ve already made the sale; your investment has been returned regardless. The accounting is simple; you get paid when they receive the items, it’s one step. This kind of relationship is mutually beneficial, and you will have a relatively stable source of income from a customer who values what you do.

The Disadvantages of Consignment

1. Stores have very little motivation to sell your jewelry
If a store carries your designs on consignment, but also has a selection they’ve bought wholesale, they’ll focus on selling the merchandise they’ve already paid for before they sell yours. This may mean they’ll suggest other pieces to customers over yours or present your designs in less prominent displays. The store truly has no real incentive to push the fruits of your labour, apart from their commission.

2. It is a hassle for you to maintain
Consignment is a waiting game, and leaves you wondering when your investment will be returned, if ever. In the meantime, you have to regularly check each store to see how they’re doing. You’ll also need to keep track of what pieces, and how many of them, are at which stores. You’re trusting the store owner to display your product properly, to sell it effectively, and to let you know when it’s sold. There is little incentive for them to do this because if it is not done you’re the one that suffers, not the store owner.

3. It is almost impossible to switch from consignment to wholesale
Consignment may be an easier way to get your jewelry into stores, but don’t expect to be able to change to a wholesale arrangement later on. This is equivalent to hiring someone for $20 an hour but hoping to pay them $15 after they realize the job isn’t that difficult. Even if the accessories are selling well, the store will be reluctant to suddenly pay up front for something that was previously free.

Conclusion – Resist the Temptation of Consignment

It may seem that consignment is a good way to get your work into stores or to test pieces you’re not sure about, ultimately it’s inadvisable. Wholesale is by far the preferred way of selling to stores. If a store tells you they don’t want to buy your pieces but will sell them on consignment, resist the temptation to think that this is better than nothing at all. You’re accepting a deal that may or may not have any return and leaves you waiting to recoup the component costs that have already come out of your pocket.

If there is any benefit to consignment, it’s that the store may be more willing to carry pieces that are eccentric, unique, and risquè, but in any event you should not rely on ‘high art’ jewelry to drive your business. Instead, concentrate on producing jewelry that stores can sell fast, and try to develop wholesale business relationships right from the very beginning. Your best bet is to research what the stores are looking for and how to achieve it creatively before trying to market your jewelry. As with any business endeavour, you want to remove as much of the guesswork from the equation as possible. If you still find that absolutely no one wants to buy your work, it is probably time to evaluate the designs you’re trying to sell. Getting honest feedback from stores that decline to buy your jewelry will be more valuable in the long run than settling for consignment.

Watch Amoracast’s video and learn how to make the Pearly Plumes Necklace featured in this article.

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