You have a product you know is quality....friends help you and buy a few...you have a few online sales...and then what? The business side of your brain knows you need volume sales in order to make a profit, and the realist side of you wonders how in the world you're going to make that happen....when, lo and behold, a retail opportunity presents itself to you.
To the "outside" world, it's retail. To the business owner, it's....gulp....consignment.
Many products actually make their way to market via the consignment path. There's nothing wrong with that. However, just as with any business practice and venture, there are best practices. While I certainly am not in a position to give you best practices with regard to consignment selling, I can certainly share a few lessons I've learned over the past year my products have been in consignment stores:
1.) Visit the store. Does it bring in the type of customer who would buy your product? Does your price
point fit with the other products? Visiting the store is my first decision
making factor. Before you commit to a consignment arrangement, take some time to visit the store, to see the other products being sold, and to watch the customer base. Is the owner in it for the long haul? Will your product "fit" with others being sold? Do the customers coming through the door fit your existing customer base? Don't be afraid to say no at this point - for the good (on this point) the burden is on you.
2.) Understand the pricing model. Not every consignment contract is alike. I've been in five stores, all with a variety of contracts from straight booth rent, to straight commission. In one store, it's my responsibility to pay sales tax; in another it was an expectation to contribute to the marketing budget. Each contract arrangement is unique to the store but should still provide an overall profit. Which leads to price....
3.) Your prices don't have to be the same in every store, but they should be in the same range. Since every store will have it's unique contract arrangement, you made need to adjust your prices accordingly in order to retain the profit margin. In my case of candles, I don't have the volume of a large national chain in which my sales would justify a $14.95 price point for the same product in Kohl's, Walmart, or Target. However, if a customer is shopping my product from store to store, the range of $16.50 to $18.00 for the same item feels reasonable.
4.) Don't expect the venue to do the selling for you. Some consignment ventures are established on strong business models, but not all. Not all consignment ventures have a strong marketing budget. While I don't pay to advertise my products in a retail environment, I do use social and electronic media to promote what's new in each store or to support their social media marketing efforts. Because they did not buy your product to resell, you are the one taking the risk and should bear a portion of the burden for the sale.
That's a lot for one post! I'll follow up on the rest of the lessons I've learned from consignment selling in a later post. I welcome you to post your feedback and experiences below.