Selling on consignment
You can sell your products yourself. But you can also offer them via other parties. For example, in a book shop, gallery, or online shop. Do those products remain your property? Then you sell those products ‘on consignment’ to the seller. When the products are sold, you get the selling price from the seller, minus an amount that has been agreed beforehand. Often, this is a set percentage of the sales price. It is a mediation fee for the seller.
What is in a consignment arrangement?
In a consignment arrangement you record all agreements. For example:
- the percentage the seller gets from the sales price (brokerage rate)
- the sales price of your product
- how long the products stay with the seller (term of consignment)
For the exact contents of an consignment arrangement you can ask for legal advice.
Consignment selling: who takes financial risk?
Sometimes the seller cannot sell all the products. This is often the case with magazines. If that happens when there is a consignment arrangement, you as the owner or supplier take the financial risk. Because the seller only pays you what a product sells for, minus the brokerage costs.
Liability when selling on consignment
With a consignment arrangement you are liable as the owner of the products if a product has a defect. For example, a car that has a malfunctioning part. This is because the buyer of the product signs a purchase contract with you. The seller is only a mediator. So the garage selling the car for you is not liable. The garage is obligated to make clear to the customer from whom they are buying the product.