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?