How to Determine the Value of Consignment Inventory
I only ever teach or recommend marketing, social media, pricing, production and branding tips that I’ve personally used successfully in my own 7-figure handmade businesses. The customer isn’t paying you any more money when you fix an item for free and you may be taking a loss if they return a product you can’t resell. But that little extra money you get from each order, on top of covering your costs and making a profit, helps cover those hours or losses (on returns) that only pop up once and a while. You may even use your markup to absorb some or all of shipping costs into your prices so you can lower shipping fees or even offer free shipping, without cutting into your profits.
What Is A Fair Consignment Percentage?
If you’re unsure about an item, it’s worth holding out for something that you think is more likely to put your space to profitable use. The best way to simplify your acceptance policy is to establish standards for the items consignors bring you. Initially, consignment pricing will feel like a ton of work (and it is!), and you’ll think it takes forever.
Unlock a Profitable Handmade Business
Consignment pricing involves understanding the value of items, where consignors submit items for sale at their desired price. Effective pricing strategies ensure items sell quickly while providing good returns for both the shop and consignors. By being aware of these costs, you can make more informed decisions about your pricing strategy and make adjustments when needed to ensure you’re maximizing your profits. If you sell online using something like ThriveCart(my favorite!), you can say goodbye to a bunch of pesky “mini” fees and monthly costs (looking at you, Shopify) for good!
Do you want to sell this item immediately?
Start by getting an idea of the item’s original retail price. Type the brand in within quotation marks (for instance, “Gap”), then add the type of item outside of petty cash: what it is how it’s used and accounted for examples the quotation marks (for instance, ‘shirt’ or ‘dress’). For most cases, you’ll pull up results for both new items as well as used items from eBay and others.
How to Easily Determine Consignment Pricing with 5 Questions
This is what is running through my mind when I look at the price tags of some items. Some items at consignment events are priced way higher than they should be in order to sell. Furthermore, the condition and quality of the items play a significant role in determining the consignment price. Items in excellent condition or high quality may command a higher price compared to items that show signs of wear or damage.
One common mistake is to assume that everyone in your niche is your competition, but that’s not always the case. For example, if you’re selling luxurious goods, your competitors are other luxurious brands, not dollar stores. This can also help you offer discounts without losing money and give your business some extra cushion for unexpected expenses. Offering free shipping is a common way to attract buyers, but keep in mind that the cost of shipping still needs to be factored into the overall price of your items. So, make sure you’re charging enough to cover those costs.
However, if you don’t plan to sell your product wholesale, you should still mark your prices up so you can run sales once and a while or offer promo codes to your VIP customers. For example, let’s say I’ve decided on a Base Price of $18.12 for my earrings (5% profit margin). I plan to sell through retailers so I need to be able to offer a 50% discount and must mark up my price by 100%. The traditional pricing formula starts off right, by calculating the production costs for a product. Calculating the consignment price can be a crucial aspect of any consignment business. It is essential to determine the right price that benefits both the consignor and the consignee.
If you’re a volume-based business (i.e. you sell lots of units), you may aim at the low end of the profit margin scale. Your profit margins per product may be low (e.g. 5%) but if you can sell 100 units per month, your profits overall will be high. The reason I add profit at this point is because you want to ensure you’re profiting when selling wholesale. For every hour you spend making products, you need to time market and sell them.
If a chair is too big to fit on your floor or in your storage, then you don’t have room for it. The more niche your inventory is, however, the more susceptible your store is to the shifting winds of trend. You’ll need to put in more work to stay up-to-date on whether your niches are growing or declining so you can adapt your acceptance policy accordingly. It’s important for both parties to review the consignment agreement carefully to understand how fees and splits are applied to the sale proceeds. Please go to the Instagram Feed settings page to create a feed. Do market research to determine what’s possible, but don’t compare yourself to others.
- Consignment shops that fail to adjust their prices based on changing market trends risk falling behind the competition and missing out on potential profits.
- You determine your business’s profit margins by dividing your profits by revenue, then multiplying by 100 to get the percent.
- Type the brand in within quotation marks (for instance, “Gap”), then add the type of item outside of the quotation marks (for instance, ‘shirt’ or ‘dress’).
You can even try selling on multiple platforms and see which one gives you the best results (split testing for the win!). Selling top-notch materials without spending extra time on the item is a win-win for both you and customers who appreciate quality. One tool that I love using for market research is Everbee chrome extention. It not only shows you the range of prices for similar products, but it also tells you if those products are actually selling. This can give you a good idea of what’s in demand in your niche. It’s easy to forget to charge for all the time it takes you, such as admin tasks like publishing listings, packaging, and taking pictures.
On the other hand, if we pay really little for something, we might think it’s not as good. The style is something you’ve been getting a lot of, so subtract another 10% ($1) from the base price. But this one looks a little worn, so subtract 10% ($1) from your base price . This is a guest post by fellow consignment store owner & ConsignCloud founder Austin Storm. He owns The Storm Cellar, an independent consignment store in Moscow, Idaho. His ineffable entrepreneurial spirit makes him like a magic hat–you never know what’s going to come out of him next.