Wednesday 3 February 2021

Consignment Terminology .


You need to communicate clearly, and in writing, with a consignment sales agreement to ensure the best chance of building a positive experience that works for you and the shop owner.  This means that you need to know the terminology used and required in consignment agreements.

Meet the taxation requirements
Make sure you have complied with the legal requirements in your jurisdiction for selling.  In the United States, for example, you need a tax identification number.  In the United Kingdom, you do not need anything other than your personal tax number, unless you are selling so much that you are employing other people.

Written contract
You need more than a verbal agreement.  Ask for their consignment agreement and take it away to consider the terms.  It is not pushy to do this; the shop owner would do the same. If the gallery/shop does not have a standard contract, you need to develop one and negotiate it with the owner.  The important elements are the commission rate, payment terms and frequency, insurance, breakages & theft, inventory arrangements.

Commission rate
A direct sale to the shop is normally marked up 100% of your price plus taxes to give the retail price.  So, the commission taken should be less that than that.  If the shop wants 50% commission, counter with direct sale at that level of commission.  It would be exceptional circumstances only that 50% commission would be acceptable to you.  30% - 40% is more usual.  The agreed rate should be written in the contract.

Payment terms
How frequently will you be paid for the work sold?  This needs to be included in the agreement.  Associated with this is inventory.

Inventory
You need to provide an item and price list for the gallery and one for yourself.  It should state the name of the parties at the head. It is essential to list the date delivered, the number and description of the items. Each line of work needs to have the item price to the gallery and the total price for each line. This list gives the sums you expect to receive upon their sale.  It is possible you will want to include, by agreement,  their commission and the retail price, although the gallery may change the retail price at any time.  If they want to reduce the price, that will come from their commission.  The price on the consignment form is not to be reduced, even though they ask for it. If they want to increase the price, they will keep the additional sums – in which case, of course, you should be thinking about increasing your price to them.

Exclusivity
What about choosing between galleries with different commission levels when you would like to be in both?  How do you choose?




Generally, shops and galleries expect to have an exclusive arrangement for their area.  This means that you can’t have your items in different outlets in a defined area.  What is that area?  If you are comfortable with the area restrictions, you then can approach the decision about commission levels.

Suppose you have different shops offering to take your work, but at different commission levels.  What do you do?

First, you do not reduce your price to the higher commission place.  You set a fair price for your work in the items.  That is a price at which you can make a profit.  That is what you deserve.  So, you place the items in either place at your single, set price. That may make your product more expensive in one shop than another.  That is not your problem. That is the owner’s decision.  You can see everywhere that there are different prices for the same product.  Usually, there is a perceived difference in quality, service, prestige, etc., between the places.

Reporting
The reciprocal of this is the listing by the shop of items sold and resulting sums due.  The frequency of this reporting needs to be in the agreement. 

Loss, theft, breakage
The fact that the work on consignment remains your property until sold needs to be in the written contract.  This may affect who insures your work in case of breakage or theft.  The division of responsibility needs to be written in the agreement.

Management of stock
The shop should have a system to keep track of sales and stock. Ask about it.

Stocking
Agree restocking arrangements to be responsive to sales. An agreement on removing items due to lack of sales, or your requirement to have the item in your possession is needed.

Promotion
You hope and expect the retailer to promote your works, but you must also promote the retailer in your social media and your direct selling venues.  Participating in events related to your work is one of the ways to assist in promotion too.  Some element of this needs to be included in the contract.



Selection of a gallery or shop in which to place your work is a complex interaction of commission levels; the value you place on your time in preparing for and attending craft fairs or putting your work online; the perceived prestige of the shop/gallery; the potential relationship between you and the outlet; and the relationship of the consignment, wholesale and retail prices.

Other posts on consignment:

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