Consignment is a legal term that refers to a transaction between two parties when goods are given to a merchant to sell at an agreed-upon price. The merchant agrees to pay the consignor (the seller) a commission either once the item is sold or after a certain period of time, whichever comes first. Consignment contracts often specify the manner in which the goods are to be held, displayed, and then sold.
What Can Be Done Through Consignment?
Through consignment agreements, businesses can create an alternative sales channel for their goods. This can be especially helpful for businesses lacking the resources to open up their own retail store or make direct sales to customers.
By using consignment, businesses can also offload their inventories to those who can make use of them quickly and for a better price. This way, businesses can recover their investments and enable others to make a profit of their goods.
When Should You Use Consignment?
Consignment is ideal for businesses that are trying to sell goods such as clothing, home goods, antiques, art, and collectibles. Consignment agreements provide an excellent platform for these types of goods, while also allowing businesses to establish relationships with certain vendors. For example, a consignment agreement would enable antique shops to carry goods from multiple sources without actually buying them outright.
Consignment agreements have become an important agreement used by various businesses. Knowing the rules and regulations of consignment agreements can help businesses use this opportunity to their advantage.