Consignment Selling – A Last Resort
Posted by learntobead on February 22, 2010
Over At The Consignment Shop
“She’s CHEATING ME!” the woman from Rhode Island screamed into the phone. She could hardly catch her breath, the anger overtaking her ability to explain why she was calling.
“I read your article about Pricing and Selling on-line, and I’m not getting my $70.00 for my piece.”
She didn’t have to say anymore. I knew right off the bat she was talking about CONSIGNMENT. I recognize the anger. The frustration. The feeling that someone put something over on you, and you’re powerless to correct the situation. You don’t know what to do. You know the sweat, time and cost you put into all the pieces you let some stranger have, and now what do you do?
“I put 10 of my pieces of jewelry in her shop in Northern Rhode Island – not a big shop, no sales, except, this one piece sold, not in a major place,” she continued, taking breath after breath, to get it all out, in some way that made sense, and some way that kept her from losing it.
“What do I Do?” “She sold my piece for $70.00, and didn’t give me my money?” “Should she have given me my money right away?” “Should I take my jewelry out of her shop?” “Should I never do consignment again?” She peppered me with questions, not waiting for an answer.
She indicated that the store owner told her that she paid her artists 30 days after a sale. Her customers had 30 days to return something. If the store owner paid before that time, she would be out the money. Store owners can set whatever policies they want, and in this case, I told the woman it was reasonable to wait 30 days, given the policy.
Of course, it had already been 7 weeks.
“Should she call her?” Her husband told her not to call yet. He didn’t want her to make waves, or ruin this opportunity to sell her jewelry.
“Call her,” I said. If the store owner said 30 days, then 30 days it should be.
Consignment may be a necessary evil, especially when you are getting started in the jewelry making business. But consignment is not the best situation to be in. Most stores that accept consignment do not understand the consignment business. As a result, when the time comes to pay the artists, there’s no cash flow.
In Consignment, the store is at greater risk than the artist. The store has to make space available for the pieces, and forgo the opportunity to get something else in that retail-real-estate that might do better. The store has to display the pieces, and keep them clean and presentable. The store has to train its sales staff so that they have sufficient information and motivation to make the sale. And, of course, there’s the tracking and accounting that goes with every consignment piece on sale.
Your best clue to whether a particular consignment situation is a good or better one, is the percentage split between the store or gallery owner and the artist. Given the level of risk each party assumes, the optimum distribution is 60/40 with the store or gallery getting the larger amount. But if the split is 40/60 or 50/50, this would be a acceptable sign as well.
However, when the split is 70/30 or 30/70 or outside this 60 and 40 range, yellow flags should go up. This shows that the store or gallery owner is not aware of the level of risk in their business. You probably won’t get paid on time, and not get paid without a lot of time spent yelling on the phone. Your pieces won’t be maintained. They won’t be displayed in a prominent place. No one will be trained or motivated to sell your pieces.
Just because you confront a potentially bad consignment situation doesn’t necessarily mean that you should walk away. There are a few prominent boutiques in Nashville that offer a 70/30 split between the store and the artist. They rarely pay their artists when the pieces sell. It takes a lot of screaming, “Bloody Murder!” before you get paid. But these are very prominent shops. Letting other stores and galleries know that you have pieces in these shops will open many doors for you. You might view the delayed payments and the effort to get your money as “marketing expenses.”
Other reasons you might settle for a bad situation:
– You’re just getting started, and saying your pieces are in a shop anywhere has some marketing cache that goes with this
– You can direct customers to this shop. At least you have a place to send people. You might not have a central base from which to work. Your main business might be doing craft shows, and here you can direct people to your jewelry between shows.
– This might be the only game in town.
But otherwise, if consignment doesn’t have some added value for you, you want to minimize your consignment exposure.
When you negotiate consignment terms with a shop, try to:
1) Get a feel for the amount of consignment they do (and how long they have been doing this), the range of artists, the range of types of merchandise on consignment, and the types of customers they have
2) Get a 60/40, 50/50 or 40/60 split
3) Work with store or gallery owner on final retail pricing of your pieces.
4) Get a written contract
5) Get in writing if possible, but an oral agreement would suffice, to convert the situation to “wholesale terms”, if you pieces sell well. (Be sure to define what “selling well” might mean.)
6) Determine a specific date when to take your pieces out, or trade them out for new pieces. Usually it’s good to trade them out every 3-6 months.
7) Determine exactly how and when you will get paid, after any one piece sells. A 30-day waiting period is reasonable.