Consignment

[elmtree]

I was recently approached to sell my products in a new shop about 45 minutes away from me. I met this woman at a craft fair last year. She recently sent me a message on etsy asking if I would sell all of my products in her new shop. Apparently there is quite a bit of space for me. She said she has been thinking about my products since we met. The shop will be opening may 1st and she would like all products and displays set up by April 12. She sent me a contract for a 60/40 split. Me getting the 60. Is this a normal percentage? I'm not experienced with this as I have my products at a friends shop but she doesn't charge me. What should I be looking for in a contract and what is fair? Thanks!! This will be in a relatively upper middle class college town.

 

[Lindy]

She is wanting an awful lot of money. IF you are willing to sell consignment (I personally am not) they the absolute maximum she should be taking is 30%. Have someone who understand legalize read over the contract to make sure your interests are covered.

 

[ilovesoap2]

The 40% sounds high to me too but I have no experience in the area.
I checked with Google and found this article that I like.

http://artsandcrafts.about.com/od/consignmentsales/a/sellingonconsignment.htm

http://www.handmadeology.com/consignment-dos-donts-and-must-knows-for-creative-business-owners/

There are probably some specifically for soap.
Good luck with your decision.

 

[AnnaMarie]

I haven't sold soap on consignment, but I will chime in. I'm not sure how you'll make anything at those rates. Is she aware of these costs of soap making? I am guessing not, or she probably wouldn't have proposed those terms (which I think are normal enough for regular consignment items, but not soap). Hopefully, some soapers who are selling soaps in shops will chime in about their arrangements with the owners. But at 60/40%...poof! goes the profit...

 

[Hermanam]

This is perfect timing, and I too have recently been approached about doing consignment at a local shop. We haven't talked numbers yet, so I am very curious about what others are doing. I thought I read somewhere that most consignments are either 40/60 or 50/50 splits, which means I would have to raise my price a LOT to see much of a profit. Eager to hear from others on this one...

 

[new12soap]

I do not sell on consignment, but I would certainly have a lot of questions. Who pays the sales tax? Who is responsible for damage or loss (theft)?

Shops that have products on consignment in them have very little vested interest in selling, they have no stake in the product at all since they didn't have to lay out any cash for inventory. I would personally much rather wholesale and let them start with a small order to gauge sales.

JMO

 

[Dennis]

Sounds as if she threw out a high number and if you accepted it, oh well! Time to negotiate if you really want to sell on consignment. I have sold stained glass on consignment before and never, ever agreed to more than 20% and stopped after a while because it was not worth it to me considering my time and cost of materials.

 

[Lindy]

50/50 only happens when you are selling straight wholesale not consignment. I used to sell wood carvings on consignment and it was 70:30 but I ended up with so much damage to the pieces that I was responsible for. Never again.

 

[Hermanam]

I really struggle with pricing. If I were to sell my soap for straight wholesale at 50%, it seems like I would barely be making a profit. I sell most of my bars for $6, so $3 barely seems worth it.

Then again, I have friends always telling me I should raise my prices because they see a lot of other handmade soaps being sold in local shops for $8-10 a bar. I love making beautiful soap, but I am not so good with the business end of things.

 

[The Efficacious Gentleman]

I really struggle with pricing. If I were to sell my soap for straight wholesale at 50%, it seems like I would barely be making a profit. I sell most of my bars for $6, so $3 barely seems worth it.

Then again, I have friends always telling me I should raise my prices because they see a lot of other handmade soaps being sold in local shops for $8-10 a bar. I love making beautiful soap, but I am not so good with the business end of things.

Not wanting to hijack, but take your costs, including time - full costs, mind you - and times it by two. That is your wholesale cost. Times the wholesale by two to get retail.

Rather than doing consignment, maybe just sell her at wholesale? Then you get your money and none of the hassle that comes with consignment. If she is confident that the people she will attract in to her shop are the sorts of people that will buy your soap, then she will not be taking a big risk in doing it wholesale rather than consignment.................

 

[shunt2011]

I happen to have 1 consignment account and it is 60/40. It's worked out well as they are responsible for the sales tax and accept any damage or theft responsibilities. They are an artisan market with only Michigan Made handcrafted products. My prices in the shop are higher than I sell at markets and I do quite well there. Since being in the shop I have gained many regular customers. I also had them put in the contract that I can sell anywhere even in the same vicinity. They recently started charging other vendors 50-150 per month and they have to work 2 days per month in the store. I am however excluded. I'm certainly not going to get rich but it's getting my products out there. I checked other places around locally and they wanted a monthly fee 50-100 per space plus they wanted 15% and the spaces were fairly small. You just have to figure out what works for you.

 

[DeeAnna]

I have done consignment on two occasions. One was far, far away when my business was new. The arrangement was with with people I didn't know well. Product regularly got "lost" or damaged and I was expected to eat that loss. The store owner didn't pay promptly for the things that did sell. There was no reasonable way for me to keep an eye on my stuff. I will never do that again.

The second instance is a local art gallery. I've been happy with this arrangement. The management is conscientious about paying monthly, they do a superb job of inventorying everything, and they take responsibility for anything that is lost or damaged. Their terms are 60:40 for artists who don't volunteer in the gallery at least 20 hours a season or 75:25 for those who do. I can pop in any time and check on my stuff. The advantage to me is that the gallery gives me an outlet to sell unusual products or prototype designs that I could not otherwise sell easily.

Consignment is okay if you need the business, but I agree with the others in that wholesale is far better. If you agree to a 60:40 split, essentially you're giving the shop owner the luxury of selling your products without any financial investment, and you eat the risk of retaining ownership of your product for an additional 10% compensation over wholesale. If the shop takes responsibility to care for consigned goods as if she personally owns them, this can work fine. But it often happens that the shop owner views consignment as a cheap way to be in business with minimal risk and acts accordingly.

 

[elmtree]

My husband, the writer in the family, wrote out a really nice letter saying that due to my low markup and high quality I don't have much leeway In Terms of a profit margin and would she consider a 70/30 split. She also accepts no responsibility for any damage, theft, etc so I don't think 60/40 is very fair. I really want this opportunity so I'm willing to work with her. This is a great area and I think the perfect market for my stuff. It will be the second place I have my products and I'm currently looking into a third locally though the market isn't quite as good. Thanks for all of your advice and info!!

 

[elmtree]

So I'm starting to feel kinda bummed. I haven't heard back from her after I sent my offer of 70/30. I sent the letter Wednesday I think. Should I say anything else to her? Ugh. My hubby says that if she doesn't even respond to my very nice and polite letter that maybe she's not someone we want to be in business with anyways. I agree but still feeling a bit bummed.

 

[DeeAnna]

As I tell my employee Connie, it's fruitless to worry over what a potential customer will or won't do. If she orders, she orders. If she doesn't, she doesn't. Agonizing over the matter is not going to change the outcome one bit. It will only exhaust your energy and dim the joy in your day.

"...Should I say anything else to her?..."

No. The ball is in her court -- it's her choice to play it back to you or not, as she wishes. It's only been two business days since your letter was mailed. Quite frankly, that's rather quick to be wanting to push this matter further.

You've done your best ... and now it's time to do your best to let it go.

 

[elmtree]

As I tell my employee Connie, it's fruitless to worry over what a potential customer will or won't do. If she orders, she orders. If she doesn't, she doesn't. Agonizing over the matter is not going to change the outcome one bit. It will only exhaust your energy and dim the joy in your day.

"...Should I say anything else to her?..."

No. The ball is in her court -- it's her choice to play it back to you or not, as she wishes. It's only been two business days since your letter was mailed. Quite frankly, that's rather quick to be wanting to push this matter further.

You've done your best ... and now it's time to do your best to let it go.

Thanks DeeAnna. She did get back to me letting me know they are considering my offer. She was very sweet about it. I was just nervous, it being my first negotiation and all.

 

[DeeAnna]

I'm glad to hear she replied to you -- that's good! I completely understand the frustration of waiting, wondering, and not hearing anything back.

 

[The Efficacious Gentleman]

Stick to it! You most likely don't need it that badly that you should take it even if it means barely making money on it. If it's the perfect market, you will then be working a lot to keep stock there but still not getting much back from it. If it's not going to profitable, you'll going to end up doing a lot for not very much and THAT is bad business.

You must be willing to walk away, as if you have set your heart on being there then it makes negotiating rather hard for you.

 

[soapballs]

Local here I know of the "main" place to sell our handmade crafts and she goes on a scale depending on how much money you gross in sales per month...she got I want to say 20% percent and you at the same time had to also pay her rent for your spot in the store so your looking at another about $30 a month. The rent was determined by the size of the space and well the spaces where already broken up so if all they had as the large area you had to rent that entire spot.
She had it set up someway as If you sold over a cetain dollar amount which from memory I think if your sales matches whatever your monthly rental cost was then the percentage she gets changes. There was a whole formula she had but it seems to be far and work out if you sold a lot...which in turn she then made money too of course...but it was only in your favor if you sold a lot...and well the amount of foot traffic it got was okay but being a small city it was not likely to make it flip to your favor as far as retail rent and your cut. Also you need to consider if items are stolen. A lot of places (or at least local to me) will not cover the stolen items...so that is additional money lost and well you really have no control over the security of the location. So I would look into that and what they have in place to prevent shoplifting and if that area is a high area for that or ability to do so. From what I have experienced local that is normal as long as you do not have to also pay a rental fee for your space...it seems to average out about the same as here. Does the place also except checks and who pays the fees if they do not clear you or the owner? These are all thing to look into. Local here the NSF would come out of my profits the store owner owes me....although she did accept credit cards too but there as another whole bracket fee level for that and well to be honest the whole system she had overwhelmed me so I never ended up selling my candles there...I figured in the end I would not come out being at that time all I sold was tarts and my space was very easy to pocket them and walk away so I passed.

 

[elmtree]

Stick to it! You most likely don't need it that badly that you should take it even if it means barely making money on it. If it's the perfect market, you will then be working a lot to keep stock there but still not getting much back from it. If it's not going to profitable, you'll going to end up doing a lot for not very much and THAT is bad business.

You must be willing to walk away, as if you have set your heart on being there then it makes negotiating rather hard for you.

Logically of course I know all of this lol I won't take it if it means slave labor but a girl can dream!