The Consignment Trap

Inevitably, many struggling designers find putting their merchandise into consignment stores is the easiest solution. I agree that it is easier to get your merchandise into a store on consignment than it is to get a store owner to pick up a new line. Many designers feel that 40-50% of something is better than 0% of nothing.

Years ago when I was selling off-price merchandise (discount designer merchandise), I met a woman I’ll call “C”. C was in the business of working on a business model that relied upon consignment stores because she felt they were an untapped market. She joined all the associations, attended the trade shows and she had even sold or consigned to a few. Now, she wasn’t a designer so her experience won’t be identical to yours but it is similar and does shed some light onto the issue of consigning to stores.

The most important lesson she learned was that most women start consignment stores precisely because they don’t have to invest in inventory which means they’re insulated from any financial risk if the item does not sell. This is a big deal because they only owe money on what does sell. This is crucial because one of the things she found out was that many -not all, I don’t want to offend anybody with a blanket statement- consignment store owners are not good at selling and merchandising products because they don’t need to be. Products that don’t sell don’t represent any financial risk to them.

When you sell to a retail store, how they sell or merchandise your items is not a huge concern to you (although it should be important to you, more about that later) because it is not your financial risk because you got paid when they received their goods (or you should have). Regular retailers develop skill in merchandising and selling because they have to if they want to be profitable. They learn how to move merchandise and how to buy with a keen eye and know what their customers want because their money is on the line. Since consignment stores are not forced into an aggressive merchandising mentality, many just put items on a rack and hope the items sell. It’s not that they don’t sell and merchandise at all, it’s that their business model doesn’t depend on them being proactive about it.

Don’t get me wrong, you will find outstanding consignment stores with incredible sales and merchandising but those are the cream of the crop and not very common. You can find better consignment stores by scouring newspapers, magazines and other articles for featured consignment stores. Every area has them. The more you get into it, the more you will find that one store will lead to another.

However that brings up the issue of whether you should sell to consignment stores at all. I know quite a few industry consultants who would say that you should not because you are essentially financing the inventory of the store and only getting your wholesale price in compensation. The difference is pivotal; you are only getting wholesale for your merchandise because the store has no investment or financial risk and you should get a better margin if you are financing someone’s inventory and assuming all of the risks! I’m sure you agree that it’s better to be paid a wholesale price up front rather than running the risk of the item not selling at all -or worse- your products become shopworn or damaged which means you are stuck with returned goods that you can’t sell elsewhere even if you wanted to.

The reason a lot of designers get into consignment is because they have a hard time getting into stores and they feel that “getting it out there” is better than nothing at all. You can probably do well with consignment if you have very low costs with respect to your perceived value. For example, if you can make something for $10-$15 that can retail for $100, your split will be $40-$60 because most consignment stores will give you 40-60% of what they sell it for -including mark-downs- but most of you don’t have such low costs.

Another thing to keep in mind is that most consignment stores have a markdown cycle and you get your split based on the markdown price. Their policy may be to list goods at full price for 6 weeks, 3 weeks at 20% off, 3 weeks at 30% off and after 12 weeks, it’s off the racks or on clearance. If you are only getting wholesale price selling at full retail and you have to take a hit on that because of a markdown, you are losing money. Is this why you are in business?

Some designers use consignment as a springboard -a sort of testing ground- until they can get off the ground. You need to decide at the outset if you really want to invest in a business model that would not be a long term solution and whether it would be better to put your efforts into doing things aligned with your long term goals. I know it is tempting to start off easy but you should know that this can drive a vicious cycle that were you to sell to a few consignment stores, regular retail buyers will refuse to take your merchandise unless you consign it to them too. Their thinking will be that you gave it to somebody else, why not them?

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  1. Carol says:

    Consignment store owners tend to sell something and then pay a few debts, their own overhead items first. A good plan is friendly regular visits by whoever is representing your line.

    “Hi, this is ___, I’m going to be in your area a week from Tuesday and will stop by to replace anything that’s shopworn, and show you a couple new items. I’ll pick up my check for what’s been sold.”

    They owe you for whatever’s on your inventory list that isn’t in stock. So they have to write you another check? No problem. You stand there pleasantly breathing down their neck until the ink is dry.

    Years ago (I am not Miracle’s C) I had items consigned in a number of outlets. Visiting at a festival with other artists/craftspeople, I found that many of them weren’t getting paid by outlets I was getting prompt checks from (even when I hadn’t been in).

    NOT recommended is getting friends in the area to be police for you, as that ensures a negative spin on interactions with everyone involved, and denies you the chance to develop a good relationship with the business.

    As soon as a market for your goods is demonstrated, you phase out the consignment shops. After you fill paid wholesale orders, they get what’s left. If they’re dismayed to lose you, they can start writing front-end checks.

  2. Madona Cole-Lacy says:

    I am a Artist/Designer who does one-of-a-kind wearable art fashions and accessories. I am in the process of exploring ways of SELLING my products without having to GIVE them away to consignment store owners. It appears as though even gallery owners who sell highend pieces are looking for the lion’s share of your labor. What do you think of trade shows? Has anyone come up with innovative ways of marketing and selling your goods?

    There is also the challenge of getting good sewers to work for you when Mass production is not an option. Any thoughts on this?

  3. Christy Fisher says:

    I have done a number of trade shows that are “D/E friendly”..some shows, such as “the Buyers Market of American Crafts, and the American Crafts Council are perfect for smaller, unique lines. The BMAC shows are wholesale only..and the ACC shows have a day of wholesale and usually 2 days of retail. There are also other markets such as the Roy Helm’s shows (the Contemporary Crafts Market in Santa Monica- also one in San Francisco)..
    I have also done temp areas in the Atlanta merchandise Mart, and the Dallas Gift Show. Other shows that are wonderful are Atelier Designer ( and Nouveau Collective, as well as Fashion Coterie.
    Cruise the various websites and see what other exhibitors have to offer, and see if you “fit in”.

    I rarely do consignment..unless I already have a longstanding relationship with the boutique/gallery and I want them to try one of my more outrageous pieces and not have them take a risk on it.

  4. Jeff Martin says:

    There is also another variant of consignment that I have found works well, which is to sell to a regular local retail boutique through consignment. This allows me some flexibility so far as the apparel I send to be sold there, which I use to experiment with new styles and designs. Then I can get feedback from the employees and customers on what they think. If we were to only sell outright, we would not have the ability to test different new designs in the actual marketplace.

    Even as we make new deals selling outright to other boutiques across the nation, I plan on keeping my relationship with our local boutique consignment to enjoy such an informal stage to test out new stuff in the actual marketplace.

  5. Designer08 says:

    I send some things to a consignment store out in LA. Big mistake. Never again. I never got monthly reports, communication was horrible and now, after a year of arguing with the owner, I’m waiting on getting my things back. I’m sure not all consignment boutiques are like this, but I will never do this again.

  6. Tahja says:

    I have had one good experience with a consignment store which I am still stocking and one bad one which I am still trying to get my money out of. He seems to have mastered the art of avoiding bill payments. This has left me with a very bad feeling, and I do feel taken advantage of.

    I guess it is about finding agreeable stores to work with.

  7. Lynnette says:

    I have been a consignment store owner. Most difficult was obtaining those designer pieces. I would have loved to sell those types of items and it would have increased the individuality of my inventory. Unfortunately, what most customers think is that their junk is gold. I had to turn away more than I could accept. So indeed, getting those designer garments would have been wonderful.

    I have thought about production. I would love to team with someone to do just that.

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