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?
- What is consignment selling?
- Why don't people sell their items themselves?
- How do I become a consignment seller?
- How much should I charge clients?
- How do I promote my consignment selling business?
- Where can I learn more?
"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
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.
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.
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.
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.
Article Added: 11 November 2003
Last Updated: 12 October 2007