what it is and what are the advantages for those who do it – WAU
Consigned sales are a great solution for producers who want to expand their businesses and make them even more accessible. In addition, it is a solution for sellers who do not produce and want to increase their sales.
Consigned sales are a type of transaction that is convenient for everyone involved in the process. After all, from this strategy, it is possible to benefit the three parties involved: the supplier, the seller and the final consumer.
Consigned sale, also known as commercial consignment, is the perfect opportunity for the entrepreneur to make his products more accessible to a greater number of people.
In addition, for the seller, the risks of paying for a product with little output are almost nil and, for the end consumer, there is the convenience of having a product with easy access at his disposal.
So, to better understand what the consigned sale is and what are the advantages of this type of negotiation, read on!
What is the consigned sale?
THE consignment works like an estimated contract, in which the producer makes a contract with the seller, committing himself to leave his products so that they are accessible to the final consumer. If they are not sold, they can be returned.
Both parties define a value for the products, so that all costs are covered and there is also a profit margin and a commission, for both the seller and the producer.
This type of sale is very important for all entrepreneurs, at any stage of their commercial life. After all, that way, no need to worry about managing stores with high maintenance costs and taxes to sell your products. Just find partner sellers to help with these features that are already available.
Consigned sales are the main source of income for large retailers, as they do not produce, they only pass on products from other brands. Thus, it is up to the seller to develop the marketing plan for the sale of the products, in addition to announcing them to customers.
A competitive advantage for salespeople is freedom to have a larger stock with a small investment and with almost zero risk of loss. This is due to the fact that the merchant is not responsible for paying for the value of products that have not been sold.
The supplier, on the other hand, needs to be attentive in keeping its inventory always up to date so as not to run the risk of closing large sales without being able to fulfill orders.
How can consigned sales help your business?
Nowadays, taxes are paid on everything: raw material, the employees who produce, the stores that sell, the receiving system, among others.
Consigned sales allows to share these costs, the payment of taxes and even the efforts employed. In addition, it is possible to shorten the process until the product arrives at the final consumer.
When a supplier partners with a seller, it avoids the effort to find customers, either in a physical store or in an e-commerce.
For the seller, abstaining from the costs and labor of making his own products is very advantageous. That way, you only have to worry about how to reach your personas for each type of product sold in your establishment.
A good reason to resort to consigned sales is to increase the number of sales without having production costs and product liability, as well as being a good way to increase profit and reach a wider audience.
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Why sell payroll?
Selling payroll loans reduces the risk margin for the supplier and the seller. This type of sale also favors the financial market and thus, the opportunities for economic growth are much greater. This because generates employability and the more people working, the more the economic capital grows.
The more stores the entrepreneur finds to present his product, the greater the sales opportunities.
What are the advantages of consigned sales?
The main advantage is to increase revenue for both parties.
In the case of the supplier:
- there is no need to have physical stores or e-commerce to display your products – without the costs of having a showcase to present your products, your sales reach and your profit margin can be much greater than what is possible;
- it is not necessary to set up sales or marketing strategies to make the product known – having a salesperson who already has all the necessary structure to sell to him is much more practical and agile so that the inventory is not stopped;
- it is not necessary to have sales tools – of all the obstacles that this type of sale offers, perhaps this is the most costly to be solved, due to the various payment channels that are available;
- there is no need to bear extra costs related to the exchange of defective or out-of-date goods;
- it has the possibility of having its products on several shopping fronts and a greater number of accesses – the greater the exposure and the ease of purchase, the greater the number of sales and the more profit will be attracted to both parties.
For the seller:
- there is no need to worry about the development, production, stock, transport and training process involved with the product, as this is the responsibility of the manufacturer;
- there is no need to worry about storage space – if necessary, just settle what was sold and place a new order;
- there is no need to spend on maintenance and validation care, as these factors are the responsibility of the supplier;
- is not affected if the product is not sold.
Among the advantages for the final consumer, we can mention:
- product easily available;
- reasonable prices;
- purchase guarantee.
What are the disadvantages of this “exchange”?
The disadvantages are few compared to the benefits that result from a well-negotiated contract.
For the supplier:
- if the product has elements such as expiration date and latent consumption, this can be worrying, because within a certain period it can be returned or exchanged for another product;
For the seller:
- it depends on other products to generate sales – as it does not have its own manufacture, it may have to look for manufacturers in order to represent them;
- not having your own products to undertake – the greater the variety of products, the more options you have to sell, but if you have few options, your profit will also be less.
For the final consumer:
- if there are few sellers, the value of the product may increase depending on demand.
Is the consigned sale the best way out for my business?
In many cases, the consigned sale brings a lightness to the supplier, as it does not need investments beyond what is already related to production.
It’s up to the producer assess whether your product is ideal for a particular type of salesperson. The important thing is to analyze whether the salespeople who will be on the front line follow the same line as you.
If so, it may be interesting to prepare training about the product so that there is no misuse and, with that, subsequent complaints.
It is also worth thinking about how the final consumer will receive such a product. After all, the goal of this whole process is to make you a customer of your brand and your product.
Thinking about who can buy your product will help you understand and choose the middlemen who will better preserve the quality of the goods until their destination.
A relevant advantage for the person who will keep the consignment product is that he can sell for the amount you find interesting for your own business, but it will only pass on to the manufacturer the value that was combined by the product.
What care should be taken when choosing a supplier?
Knowing the products that will be under your sales domain is very important, since whoever carries the title of credibility and trust will be the one who will be on the front line, that is, who will be willing to sell such products.
Try the products before selling them and ask for as much information as possible, taking into account that, when selling to the end customer, he may have doubts about the use of the product.
Investigate whether the products do what they say and in which other stores the same products are being sold.
Check if these products are profitable, if they will offer a profit margin that is favorable for your business and if your commission pays the expenses related to the whole process.
What precautions are not necessary when choosing your salesperson?
Knowing about your seller’s reputation is very important before going out on consignment deals. Make sure the seller’s style provides the environment for your product to be sold while preserving the highest possible quality of your product.
Checking the company’s reputation and the relationship that the seller maintains with his customers is also a key point when making a consignment agreement.
Besides that, make sure the seller has real sales experience. Otherwise, the contract may be a shot in the foot if the seller cannot deliver the expected return.
Finally, be sure to ask for recommendations. They will be important when making the right decision for your payroll transaction.
And, to learn more about other types of sales, you can start with our post that explains how to sell on the internet and increase your sales.