Introduction to Consignment Selling
What is consignment selling, how do I become a consignment seller, how much should I charge, and how do I promote my business?
Tags: Selling, Consignment Selling, Trading Assistants
Contents
What is consignment selling?
"Consignment selling" means selling items on eBay
for other people. There are a number of ways that this can be done, but
the most common is for the seller to collect items for sale from their
clients, deal with the whole listing and selling process, then pay the
proceeds of the sale over to the client, less an agreed fee for the seller's
services. If the item does not sell it is either returned to the client
or donated to charity. One great advantage of consignment selling is that
you do not have to buy items up front - there is no risk of losing money
on items that do not sell.
Other approaches to consignment selling include:
- Offering it
as a free service for friends, family or charities
- Leaving the item
with the owner and providing a listing service only
- Operating a retail
store or "drop-off" location where customers leave items at
the store, rather than the seller collecting
Why don't people sell their items themselves?
If you have sold a few items on eBay you will know that there
is a lot involved in the selling process. For many sellers the process
seems easy because they enjoy doing it, but if you stand back and add
up all the time involved in a typical sale, you could find that
each item takes an hour or more to sell, and sometimes two to three
hours.
An hour or more to sell an item may seem unrealistically long,
but consider every part of the selling process step-by-step. You could
spend 5 minutes to half an hour on each of the following tasks
- researching prices
- taking photographs
- cropping, resizing and editing photographs
- writing a description
- listing the item
- answering questions
- corresponding with the buyer (e.g. to obtain payment)
- paying in checks
- monitoring your bank account for checks to clear
- packing the item
- shipping the item
- updating spreadsheets or accounting software
- posting feedback (and dealing with negative feedback)
- invoicing and paying the consignor
Looking at the process in detail, an hour's work to sell an item starts
looking rather quick.
Most households could easily find ten or more items that are
no longer of any use to them, and would raise a few hundred dollars
in total if sold on eBay. However, many people are either too busy, do
not enjoy working on computers, or simply cannot be bothered to sell
their own property - these are the potential customers for consignment
sellers. Other common clients are businesses with slow-moving stock,
particularly those with limited space to display their stock, such
as car and antique dealers.
How do I become a consignment seller?
There are no requirements to become a consignment seller -
you simply start doing it. Many consignment sellers start by selling
items for friends and family and their business grows by word-of-mouth
- this is an ideal way to begin because you gradually learn how to deal
with clients and an increasing volume of sales. There are a number of
issues to consider with consignment selling that are not an issue when
you sell your own items, such as:
- Having an agreement in place between you and your clients. A contract
should detail the fees that apply, what happens if items do not sell,
what happens if the high bidder does not pay for the item or their
payment is reclaimed from you, and when and how you will pass the
sale proceeds on to the client.
- Communicating with clients and managing their expectations. You
need to explain to customers that auctions are unlikely to succeed
if the starting price is high, and there is a risk of having
to sell at a low price.
- Providing great customer service to your clients as well as your
buyers. You will want your clients to come back to you again and
again, so it will help your business if you list their items quickly,
provide links to auctions running on their behalf, and pay their
balance over quickly, using a method of their choice.
Consignment selling presents a whole new set of challenges over
and above normal selling, partly because you have clients to deal with
as well as buyers, and partly because your sales volume will be higher.
Software to aid auction
management, listing,
and accounting
becomes more important than ever.
How much should I charge clients?
There are wide variations in how much consignment sellers charge,
and whether listing and other fees are included in the price. A typical
range is 20% to 40% of the final selling price, including fees, and a
minimum predicted sale value is often stipulated (it can take just as
much work to sell a low-value item as a high-value item). A flat rate
is easy for clients to understand, but means you must be sure you can
cover listing, final value, and payment fees. Charging a lower rate with
fees on top presents less risk for you, but may lead to client confusion
and dissatisfaction.
How do I promote my consignment selling
business?
There are numerous ways to grow your business. Since consignment
sellers normally have local clients, advertising in local newspapers
and shops is likely to be appropriate, as well as distributing fliers
door-to-door. eBay's "Trading Assistants" program provides
a directory of consignment sellers, searchable by area, specialist categories
and feedback - to qualify for listing you need a feedback rating of
50 or more, 97%+ of which is positive, and sold at least four items
in the last 30 days. Online advertising and offering a physical store
or drop-off point can also play a part.
Where can I learn more?
