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Renting Space vs. Wholesale vs. Consignment
It was a tough decision deciding what is best; Renting Space vs. Wholesale vs. Consignment.
I have just started a consignment relationship with a local boutique that I am very excited about.
As if to prove my instincts right, my first item sold early the day after I brought my things in, before I could even begin this article.
I’ve decided that retailing my own items online is not going to be the best way for my business to make money.
I’ll probably always do it as a supplement, but I’ve been exploring other options for some time now.
Here are my thoughts on the subject of consigning, wholesaling, or paying a booth fee to a brick and mortar shop:
Booth Fee:
By Booth Fee I mean paying to place my items in a storefront
In my first attempt to get my items into a brick and mortar shop, I rented booth space for 6 months.
I paid a pretty reasonable fee–$40 per month—the shop was in a good location for traffic, and was a well-established business.
However, I didn’t make one sale, so this was a pretty big hit to the ole’ wallet.
I definitely did a few things wrong: I didn’t chose the shop because I loved it and thought it was a good fit.
I chose it because I realized businesses of about my size sold there, and I was timid.
Being in a shop was a big deal to me, and I thought it would be good fortune indeed to find someone willing to have me.
I’m bolder and more businesslike now.
If a shop owner isn’t interested, it’s just business.
It doesn’t mean I can’t go somewhere else. It’s important to weigh the beneifits of Renting Space vs. Wholesale vs. Consignment.
Perhaps I would go this route again, but only if I felt very sure my items were right for the shop.
Wholesale:
Wholesale is selling items in bulk at a discount to retailers who will resell them in their own shops.
I’ve been dreaming of wholesale for awhile now, and I’ve begun to attract some interest.
In fact, I believe I will land an ideal customer within the next few days.
I started thinking this way because small retail sales were getting me nowhere.
They were inefficient.
I had a few repeat customers, but not many because I don’t sell things that you need to keep buying.
Once you have a nursing cover, you don’t need another one.
You don’t really need more.
In fact, the whole point of some of my products—nursing pads and coffee cozies—is that you can reuse them.
I figured wholesale accounts would be a good way to build a more solid customer base as well as make more sizeable sales.
I’m still excited about it; we’ll see what happens.
How does a Consignment Sale Work?
Consignment is splitting the proceeds of a sale with the shop owner at a preset percentage.
For example; you have something to sell and a shop owner agrees to sell it for a fixed rate of 40% of the value of the price.
If the item sells for $100 then the shop owner keeps $40 and the owner of the item sold receives $60.
How Many Parties are there in Consignment?
There are two parties in a consignment sale.
Each party can have more than one person.
For example a husband and wife could own a car together and decide to sell it using a car dealer.
Why I decided to Sell Products by Paying a Booth Fee
One reason I started selling at the store where I paid a booth fee is that it was not consignment.
Many stores that sell handmade items do sell on a consignment basis, and at the time I found this unappealing.
I think “consignment” had a connotation to me of cheap thrift store goods that made very little cash for the consignor.
I’d sold some of my old baby things this way.
Consequently, my net payout seemed meager compared to what I could get by selling it myself.
It’s confusing to me now, but at the time, I preferred a booth fee because I knew up front how much it was going to cost me, rather it being based on sales.
In retrospect, I am sure my items weren’t priced properly.
Also, the shop’s 30% cut is not as painful, now that products are priced to allow for wholesale pricing.
I learned that Consignment was a better choice
Consignment now seems like the best of both worlds for me.
It was a valuable exercise investigating Renting Space vs. Wholesale vs. Consignment.
My perception is there is very little risk to me or the shop owner.
If I don’t sell, I don’t have to pay.
What’s not to love about that arrangement?
Most noteworthy the shop I am consigning at is nearby which is very convenient
Because the store shares an aesthetic with me and my brand, and is a better fit.
Do you rent space, sell [or buy] wholesale or on consignment?
So what insight do you have to share?
Related reading selling your products; Tools of the Trade for Selling on eBay, Clothing Brands that Sell Well on eBay, How to Run a Sale in Your eBay Store and How to Drive a Surge of Cash with Blogging Assignments.
Oh, and another thing: with consignment, both the shop owner and I have a continuing incentive to promote sales of my items.
Great article! I’ve always been interested in selling wholesale but it is a goal I’ve set for my business in the future (for when I take on a second seamstress)
I will be selling some products on consignment in a boutique in my town. It’s great because I know the owner and she is helping me price my items properly so that I make a good cut. We are also promoting each other through social media. One thing that is fun about making items for the boutique is that I’m making a small line exclusive to the boutique, using fabrics that will match her other collections. It’s something to think about because that way the items in your online store don’t necessarily compete with the items you have in a boutique.
Thanks for your comment. I agree that having a specific line just for selling in the boutique is a great idea. I also love the idea of supporting each other through social media. Us small business owners need to stick together!
So glad you enjoyed it. :] The exclusive line sounds like a lot of fun; good luck!
In the past I have rented space (monthly fee) in a shop and for the last year have had items in a local shop using a consignment set up… because some of my items are small/less expensive the consignment works better right now because there are some months I sell lots and there are some months where the rental fee would far outweigh the income. I also prefer the local shop for the companionship, we have to work a few hours a month in the shop and I’ve gotten to know the owner, and we mutually support each other on social media too…. sadly, this shop will be closing in a month because her storefront overhead is too high and she will take her money making ventures (art classes and parties) mobile…. this is sad for many of the local crafters in her shop who will now have to move back to being solely online. Time for me to yet again think on how much of a priority I want to make my little business in my life or if I need to let it cool off a bit to focus on my family.
My issue with space rental was a misunderstanding of how sales tax would be handled. ie, I got a check for amount sold but she had not collected sales tax and I had to pay it out of pocket (so actually sold product for 6.75% off!). Now owner says if consignment she pays tax collected, if space rental, it is my responsibility. State help line was unclear, saying it is up to us to decide who pays. I really do not care either way, as long as I can get the tax amount and pay my sales and use tax quarterly. But it has to be COLLECTED for me to get it…..Get it ahead, in writing, next time!! This was an excellent article, Thanks.
That is very interesting Janet. I am in Ontario Canada and depending on the item there is no tax – used, baby items etc. I would ask if the category of item you make is generally taxed. From your email I would guess you make soap and here it is considered a non-taxed item.
Yes, I make soap and other cosmetics. Here in the US, just about everything is taxes…..I have to charge 4.75% State taxes and whatever the county I sell in requires (here 2%). I have decided to remove from the shop rather than the other option to go 60/40 with her. I will look for other venues and opportunities. Just finished a great Irish Ale soap with hops in sit. Taking it to some micro breweries in the area!
I love craft beer. I think the ale soap is a great idea. Good luck 🙂
How do you find stores that offer space to rent for second hand clothing? I have done countless searches and haven’t found anything. I’m in Northern Illinois. Does anyone have any ideas?
I suggest you visit local Flea Markets in your State and talk to people that are selling similar items to investigate a collaboration.
A place offered to sell my products and would both charge a $50 monthly rental and take 30%. After reading this and seeing comments, this arrangement doesn’t seem common. Does anyone have insight?