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What Is Consignment? Everything You Need to Know as a Seller in 2025
What Is Consignment? Everything You Need to Know as a Seller in 2025
6min read·Krista Plociennik·Sep 19, 2025
Consignment shops can seem confusing to both buyers and sellers without background knowledge of the term. Many people confuse consignment with pawn shops or thrift stores, but in today’s retail world, the consignment model has become a key business arrangement for both small businesses and large companies looking to reduce financial risk. So, what is consignment?
This guide will dive into the definition of consignment, how the consignment process works, and what a consignment agreement includes. By the end of this article, you’ll be able to determine whether consigning your items is the right way to turn your merchandise into profits.
Table of Contents
- What is consignment?
- How does consignment work?
- Examples of consignment
- Is consignment worth it?
- Tips for consignment selling
- Final thoughts: Consignment for small businesses
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What Is Consignment? Everything You Need to Know as a Seller in 2025
What is consignment?
Those of you wondering “what is consignment?” aren’t alone. In simple terms, consignment is an arrangement where products are given to a consignee (third party) to sell on behalf of the consignor (owner). The goods are placed in a consignment store or with a retailer to be sold. The ownership of the goods remains with the consignor until an item is sold.
Once a sale has been completed, the consignee earns a commission and the consignor keeps the rest of the portion of the sales price. This allows the store owner to sell merchandise without buying large amounts of inventory.
This type of consignment is different from normal retail because ownership doesn’t transfer until a sale is complete. Consignors therefore carry less cash flow risk compared to suppliers working in wholesale arrangements.
How does consignment work?
Consignment shops are usually physical stores, but online consignment shops are starting to transform the traditional business model. Retailers and small business owners are utilizing online platforms like TheRealReal to manage consignment stock. This also allows them to reach substantially more potential buyers in real time.
Typically though, a consignment arrangement will follow a clear path:
- Consignors will choose products that are in good condition, in categories such as seasonal products, fashion, or furniture.
- The owner then needs to find a consignee which can be found at an auction house, a local consignment shop, or an online platform.
- Create a consignment agreement that specifies time limit, commission rates, how profit margins are shared, and what will happen to unsold inventory.
- The consignee will then market the goods in their store or digital places where buyers are most likely to shop for the item.
- When a product eventually sells, the consignor will receive a portion of the sale and the consignee will get their commission.
Depending on the agreement that’s been put in place, unsold items can be returned to the original owner, donated, or marked down in price to try to push a sale.
Examples of consignment
Art galleries
A good example to show “what is consignment?” are art galleries. In this situation, the consignors (artists) will give their artwork to the consignees (galleries). The galleries are then in charge of displaying the artwork, dealing with any marketing, and managing sales. The galleries will then take a commission from each sale, and the artist will still retain ownership until the point that the sale is complete.
Furniture consignment
While consignment stores are popular for items like clothing and accessories, larger items such as tables or couches are usually handled by specialized stores. In this situation, the consignee acts like a third party supplier, and like art galleries they deal with displays but also deliveries. Consignment items are usually priced 25-40% higher than their purchasing cost.
Fashion consignment
Fashion consignment is very popular, especially when it comes to higher priced items and designer brands. For example, a person who brings a designer jacket to a consignment store might see it priced at USD 2,000. With the shop taking off 40% from the total sales price, the seller will only earn USD 1,200 once the commission rate is taken off.
Sellers need to focus on items that provide strong profit margins in order to see a good return. Commission fees are negotiable with the consignee, but before agreeing to anything the seller should ensure that they’re not losing out.
Is consignment worth it?
Consignment works best if you’re selling unique products that have a strong resale demand. It’s also a good option if you prefer a third-party to handle sales and marketing, and if you want a safe way to test the retail world without investing a large amount of cash.
Some key benefits and drawbacks of consignment include:
- Lower financial risk for retailers.
- Business arrangement where both parties take a share of the profits.
- Reduced cash flow problems for consignors.
- Inventory that remains unsold can take up space.
- Higher commission rates will reduce total profits.
There are also some times when consignment should be avoided as a seller. Consignment isn’t a good idea if you need immediate cash, you have low-value items, or if the consignee is demanding too much commission.
Tips for consignment selling
When done right, consignment can be a great option for sellers as well as store owners, providing great prices for buyers. It’s always best practice to have a mutual agreement in writing to ensure there’s no issues when a sale occurs. Sellers should compare rates across different retail stores and consignment shops to find the best location for their goods. And finally, before agreeing to anything, make sure to look up opinions of other consignors to see if your chosen store is trustworthy.
There are also some red flags to look out for. This includes shop owners who delay payments, shop owners not wanting a written agreement, and high commission fees that will wipe out your profit margins.
Final thoughts: Consignment for small businesses
So, what is consignment? Essentially, it’s a business arrangement where the ownership of the products remains with the consignor until a sale has been completed. The consignee will earn a commission for selling the items, acting as a third-party in the sales process. For small business owners, consignment offers a lower financial risk and greater potential for strong profit margins. Using the right business model for consignment is a powerful tool for turning your goods into cash.
Consignment isn’t solely about physical stores though, with ecommerce platforms such as eBay offering consignment services. Sellers wanting to find the most profitable platforms for consignment can use AI-driven research tools like Accio.com to help them out. Accio is an invaluable tool that can consolidate fee comparisons, market data, and demand trends across various platforms. This will help sellers to optimize their strategy and save time.