In the dynamic world of business and commerce, surplus stock is one of the biggest issues most companies face, and efficiently managing it is an important activity for business success. Whether it’s unsold seasonal items, excess inventory, discontinued products, or leftovers due to changing customer demands, these surplus stocks tie up your capital, reduce cash flow, increase storage costs, and eliminate your chances to take advantage of prevailing market opportunities.
If you want to ensure business growth and success, getting rid of such surplus stock is crucial. Consignment emerges as the best option to turn surplus stock into cash flow without personally getting into selling activities. It is a business model where a vendor company agrees to stock and sell your goods to the end-users at a reasonable price. In this blog, we will shed light on what consignment is, its benefits, and how to do it efficiently.
What is Consignment Inventory, and How does it work?
It is a business model in which a company/vendor/retailer or an agent agrees to sell the supplier’s (company) stock at a reasonable price in return for some commission. In this supply chain model, two parties are involved – the consignee who stores and sells the goods and the consignor who is the owner of the goods. The ownership of the goods remains with the parent company or the supplier until the products are sold to the end user.
The retailers do not buy the stock, instead, they take the stock to their accommodation and sell it to the customers using rigorous marketing strategies, discounts and offers, etc. They display the product in their physical store, online store, social media, e-commerce website, and other online marketplaces. The retailer earns a commission on sales and the seller increases the cash flow of the company due to sales of surplus stock.
How to Find Consignment Partners?
It’s important to find and select a reliable and reputable consignment partner who can take complete responsibility for consigning your surplus stock, from picking it up from your warehouse to completing the final sale. However, to consign surplus inventory, examining the company’s track record, terms and conditions, customer reviews, and commission is crucial to ensure selecting the best consignment partner. Finding consignment partners involves:
- Retailers: Research and approach reputable retailers or online marketplaces that sell surplus stock of various types. You can visit their website, fill out forms, send personalized emails, or make direct calls to discuss the consignment partnership.
- Consignment Shops: Visit local consignment shops in your area that specialize in your product category. Discuss consignment terms and conditions, negotiate the price, and finalize the best deal.
- Online Platforms: You can leverage social media platforms like Facebook, Instagram, etc, and online platforms like eBay to reach out to retailers and customers by listing your stock directly for consignment.
Benefits of Selling Stock Using Consignment
If you are wondering why you should sell stock on consignment rather than using direct sales, B2B sales, online marketplaces wholesale platforms, and so on, there are several reasons to do it. Check out some of the significant Benefits of selling stock on consignment:
Easy Expansion to New Market
Consignment inventory gives you a unique opportunity to reach a new audience and market by selling products through retail stores and online marketplaces. This allows you to generate revenue without paying rent, purchasing a physical retail store, or hiring employees.
Lower Inventory or Carrying Costs
Carrying/inventory cost is the expense or rent you pay for storing the products in a warehouse. In consignment, the retailer takes goods from your warehouse, freeing up the space and saving you from paying the carrying/inventory costs. This increases cash flow in the company as that cost can be utilized for other purposes.
Allow you to understand Product trends
You can keep a record of sales by the retailer and use the data to understand the potential demand for the surplus stock. This helps you choose the right products for your business that have huge market demand and sales potential.
Expanded Sales Channels
Consignment sales provide you a chance to explore different sales channels by using different options like partnering with consignment stores, retailers, online consignment platforms, online marketplaces, etc. This simply means increased reach and exposure of your products, making them available to a wider market and increasing sales.
Reduces Risk
Consignment is the most desirable option, especially for slow-moving or seasonal products, as it minimizes the seller’s risk. You retain the ownership of goods until they are sold, and the retailer takes the whole responsibility of selling your goods, which means you are not financially responsible for surplus stock and related costs.
Brand Awareness
Consignment methods also increase brand exposure by presenting your products to a wider market that might not be aware of your brand and its products. When they see your products in consignment stores or platforms, they get to know about your brand, increasing brand recognition, building customer loyalty and ultimately boosting sales.
How to successfully implement Consignment Inventory Management?
Consigning surplus inventory is not difficult if you use the right approach and follow the correct steps. Here are some important steps to consider:
- Identify and separate the products suitable for consignment
- Research and choose a reliable and reputable consignee retailer or marketplace
- Contact and communicate pricing, terms, conditions, commission, liability for unsold products, etc.
- Develop and implement a robust inventory management system
- Optimize Product Placement and Merchandising to maximize visibility and sales
- Train your staff on tracking inventory levels, and sales figures, and generate reports accordingly
- Conduct timely performance evaluations by collecting feedback from the retailer
- Continuously monitor sales performance and analyze sales data to find areas of improvement.
Conclusion
In conclusion, consignment is the best option for selling surplus stock and increasing cash flow into the company. The biggest advantage of this approach is that you can present your product to a wider market without personally getting involved in sales and marketing efforts. Besides that, you retain the ownership of the product while avoiding large inventory costs because the retailer is responsible for stocking and selling your goods. Along with increasing cash flow, this also increases brand awareness and opens a new market for your company.
