What Is Consignment?
In consignment, an arrangement is made between owners and third parties (consignees), where consignees agree to sell the owners’ goods for a commission. Most typically, these commissions are a flat fee or a percentage of the sale.
Consignment is a trust-based commercial arrangement from which both consignors and consignees can benefit.
How Does Consignment Work?
An item is placed in the care of a consignee until it’s purchased by a buyer. Until the item is sold, the owner is still responsible for anything that may happen to the item while it is in the care of the consignee.
Consignment Example
Suppose Frank consigns his antique typewriter to Bob who is willing to sell it in his shop for 15% of whatever it sells for. Frank (the consignor) and Bob (the consignee) haven’t exchanged any money. Since there was no transaction, Frank is still the owner of the typewriter.
A customer ends up purchasing the typewriter at Bob’s store. Bob then gives 85% of the proceeds to Frank and pockets the other 15%, as agreed on.
Why Is Consignment Important?
Consignment shops are the most common example of this type of exchange. With the advent of the internet and e-commerce sites such as eBay and ThredUp, consignment has become much more common – and is an excellent way for people to earn extra money.