Consignment sales contract sample?

[meanwhile]

Student plans to sell craft items on consignment basis. Does anyone have a sample contract he can see? If no copy, can anyone explain what is usual arrangement? Does the shop keep 30%? 40%?

Also, student plans to sell craft items made and belonging to others. This would also be on consignment basis. Same question: Does anyone have a sample "contract" or agreement he can use to go by?

Do Artist - Crafters usually just use the "hand shake" method when leaving items with a shop? It seems best to have some sort of written agreement? Anyone with copies to share it would be a huge help.

Thank you.

[joebill]

I'll be quite honest with you, and my 25+ years of experience in the Southwest might not apply to your situation, but in my time, place and experience, consignments are a waste of time, materials, attitude and ambition.

If the student has crafts and the only way he can sell them is on consignment, chances are the shops have no faith in the product. It's certain that they will not work very hard at selling his products because they have no skin in the game. Also, selling on consignment is a sure sign of desperation or lack of faith in one's own product. Far better to go to shops who actually buy things and talk to them about his product. If they are not interested at any price, time to go back to the drawing board, but if they are, and are willing to pay on the spot, it tells him he is onto something.

As to selling the work of others on consignment, better to trade his work for theirs. That way everybody has a greater assortment for sale and nobody has to pay out cash.

As to contracts, face it, if you are selling on consignment, you are, generally speaking, at the bottom of the barrel and will take whatever they offer you at the end of the month. Percentages vary, but the larger the artisan's percentage, usually, the smaller chance the shop is actually going to sell anything. The only "consignment only" shop I know of that actually moves a lot of stuff charges 60% of each sale. The ones that charge 30% or so rarely actually sell anything that's on consignment. They just use it to dress up the store. Also, they only pay on what they sell. If something gets shoplifted and does not go through the register, you don't get a penny, and you have to take their word for it.

Certainly, many would disagree about my feelings against consignment, but my many years of living by my products and my wits (dim though they may be) have always shown me that I need to get out there and sell my stuff to stores, and THEN they will be motivated to sell it to customers.

Whatever the artisan decides, I wish him or her the best of good fortune in this endeavor. America will always need and honor artisans, but I strongly believe that the best road to success is to take the stuff to the dealers, screw up one's courage, lay it on the counter, quote a price and hold out the hand for a check. The only folks I know who are happy with consignment are those who can afford to put out $30,000 in product without collecting a cent and wait for the profits. If those same people had the courage to insist on getting paid, they'd double their income and cut their investment by 80%.......Joe

[DryHeat]

I have a somewhat different assessment of consignment deals. I started out in the mid-1970s "beating the bushes" for customers for a variety of jewelry and decorative sorts of items I was mostly wholesaling. Some I was truly crafting myself, some I was reselling. I *knew* that stores like locally-owned gift galleries, decorative accessory sellers, craft stores, even jewelry stores, particularly ones in nicer malls or botique shopping areas, would sell what I had IF I could get the shelf space and set fair prices on the retail tags. My approach was very often to offer to leave a display on consignment, explaining that I'd prefer it be thought of as experimental for both the shopkeeper and for myself to see how sales went and what prices the retail market would bear.

A very wide variety of outcomes developed as I literally drove around the eastern US with inventory for maybe my first ten years. Some more specialized places immediately bought what they wanted, handed me a check, and never would consider consignment. Some bought a few things and took a few more expensive items to carry on consignment. Some looked at a sparse area of their shelf space and told me to put everything I wanted to leave as a full consignment display "over there." I did quite a few consignment deals like that and of those some: 1) sold almost nothing and I and they were happy for me to take everything remaining away when I next made it through their area, 2) sold some things very well, mailed me a check, and asked me to ship them more but stay on consignment, 3) sold a general good variety and told me when I swung by again they'd prefer to buy outright, set prices at their own judgement, but take extra variety on my recommendation as long as I'd take a few unsold odds and ends back as a credit for ongoing fresh sales, 4) sold some things very well and switched to mailing me orders at my cash wholesale pricing on a "net 30" payment basis (check expected to be sent in a month or so), 5) sold some stuff but never communicated and would write a check only when I managed to physically walk back in the door and add up what was missing out of the display, and 6) went out of business (or in a couple of cases literally packed up and left town), leaving me to find an empty storefront whenever I got back by, with a landlord in a couple of cases returning a few sad leftovers to me when I could show the inventory listings.

There were a few very nice stores (one in the Galleria mall in Houston, for example) that had a lot of consignment accounts and in the best cases, if sales were going well, mailed me checks monthly, in the Xmas season sometimes for thousands of dollars, pleading for me to get more inventory to them ASAP. Just having a few of those quickly made up for the losses from deadbeats and wasted time for places that simply didn't seem to have the "right" customers. I *had* to have material that I had a high overall profit margin on to make that work, to cover for the losses and time inefficiencies of storekeepers having my money collected but being slow to give me my share of it. I *had* to be able to walk into very nice stores in top malls and retail areas, have an accurate "feel" for their customers' tastes and business volume, and then be able to communicate accurately and sincerely how I could deal with them and what I expected in return.

For consignment terms, I'd simply write the details in clear print on a triplicate invoice form that was pre-printed with my business name, address, etc. The obviously high-overhead locations, say a three-shop chain in a city's largest malls with very nice merchandise and customers visibly buying while I was present, I would accept a 50/50% consignment split, especially if it seemed likely that would quickly lead to normal cash sales if it worked at all. I seem to recall one or two that suggested I mark prices upwards a bit since they wanted 55% for themselves. Sort of normal strip center craft or antique stores seemed to consider even 75% for me as standard. My more frequent terms were in the 1/3 / /2/3 to 40/60 % split range. Part of it to get clear immediately is that when the accounting is done, "if it's missing, it was *sold*, period." A couple of places tried to claim their register clerks would list, or set price tags aside, for everything sold and that if the number or tag wasn't on the store's records, tough for me, it had been shoplifted and was my problem. Don't ever accept that line, but it'd be fair to make the point very clear and suggest anything of yours that's smallish with a high price tag be kept safely in a display case rather than an open shelf. Whatever the percents and agreed terms were... like check to be sent in two months after inventory... should be written on the invoice, all items listed as consigned, percent split clearly stated. Then both parties sign the dated invoice.

Another FUBAR to watch for and try to avoid in advance is that some store owners think it's their right to change the price tags YOU set on each item to higher ones so their cut becomes larger. Doing that can, of course, KILL the sales if you know your values and had it right to begin with. A couple times that happened when the agreed terms were, say, 40/60%, I renegotiated to that 50/50 split with no price changing allowed and did ok with the place afterwards, other times I took everything away and gave up on that store unless they'd buy outright.

Compared to the overhead costs of advertising, attending specialized trade shows, and hiring a professional sales rep (all of which I also did at times), I'm overall satisfied that mixing consignment agreements into my sales work was a winner. YMMV, though, especially with travel and shipping costs over the last 20 years... this was in the span 1975-1990 or so that I was doing that stuff.

[joebill]

Certainly can't argue with success, and I have frends in the business who would agree with you.

My model has me selling at prices that pretty much assure that I can pick a dealer in nearly any town without having to consign, and preclude tolerating any losses from consignments gone bad or checks never sent.

Since I can sell my full production and get paid on delivery, and have no desire to hire help or grow, it seems a moot point.

Just curious if you'd agree that a new guy in the business shouldn't model his whole business on consignment? I think that if he has not yet learned to ask for a check, he'd make an "easy lunch" for those who never expect to pay him.

Strangely, I find an easier acceptance in shops nowadays, with a lot of artisans hanging it up or not taking to the road any more. OR, maybe it's because I'm obviously old as dirt and more respected...............Joe

[DryHeat]

Just curious if you'd agree that a new guy in the business shouldn't model his whole business on consignment?

Certainly I see no need for anyone to decide in advance to do consignment with no outright sales. If you find you can sell as much inventory as it is sensible for you to do for a set immediate price, the only reason for consignments would be if you can get 20% or 30% more for each of those sales without waiting too very long, and can judge that there's not much risk... meaning that the buyer has been in business at the same location for quite a while, looks stable, and does zero of promising things without living up to them. I happened to enjoy expanding my line of items, trying to get better deals from suppliers myself at larger volumes, and making more total profit right up to the point of it becoming stressful, which did eventually happen. At that point, consignments became something I had no further interest in unless I was shipping resupplies to long-standing regular-check customers.

[meanwhile]

Thank you. Sorry for delay. Storms knocked out internet for a while. We found a sample contract. Thank you for the input.