How does consignment work for makers selling in shops

How consignment works, step by step

Consignment is a way to get your products onto a shop's shelves without the shop buying them first. You deliver the goods, the shop displays and sells them, and when an item sells the shop keeps its commission and pays you the rest. Items that do not sell come back to you.

The key point is ownership. In a wholesale order the shop pays you up front and owns the stock. In consignment you still own the goods while they sit in the shop, so the shop takes little risk and you carry most of it: you are not paid until something sells, and you depend on the shop to track stock, handle the items with care and pay on time.

The Uniform Commercial Code, the set of commercial laws the states have adopted, describes a consignment as a deal in which a person delivers goods to a merchant for the purpose of sale. Its Article 9 consignment rules apply only to some deliveries, for example where each delivery is worth $1,000 or more and the goods are not consumer goods immediately before delivery. Smaller handmade consignments are still consignments in everyday use, and your written agreement does most of the work of protecting you.

1. You and the shop agree on terms: the split, the retail price, how long items stay and how often you are paid.
2. You deliver the goods with an inventory sheet listing each item and its price, and both sides sign it.
3. The shop displays and sells the items at the agreed price.
4. The shop reports sales and pays your share on the agreed schedule.
5. At the end of the term you collect unsold items, swap in new stock or renew the agreement.

Consignment split: how much do consignment shops take

The consignment split is the share of each sale that goes to you and the share the shop keeps. No law sets a typical consignment split; each shop sets its own, and many will negotiate. The consignment percentage is usually written as two numbers, your share first, or as the shop's commission alone.

When you compare offers, look past the headline percentage. Ask what the shop's commission is charged on, whether card fees come out of your share, whether there is a monthly shelf or booth fee on top, and whether the shop can mark items down without asking you.

Example: you price a mug at $40 and agree a 60/40 split, with 60 percent to you. When the mug sells, the shop keeps $16 and pays you $24. If the agreement also deducts card processing from your share, your payout is a little lower. Compare that with wholesale, where a shop might pay you a set wholesale price up front and set its own retail price.

How to price items for consignment

Price consignment items at the full retail price you would charge a shopper directly, then check that your share of that price still covers your costs and pays you for your time. If your share does not cover materials, packaging and labour, the item is underpriced for consignment, even if it sells.

Example: a candle costs you $9 in materials and packaging and sells for $30. On a 60/40 split you receive $18, which leaves $9 for your time. On a 50/50 split you receive $15. Run the same sum for each product before you agree a split, and keep prices in line with your own store and markets so shoppers do not find the same item cheaper elsewhere.

Agree in writing whether the shop may discount your items, by how much, and whether a discount comes out of the shop's commission, your share, or both.

What a consignment agreement covers

A consignment agreement is the written contract between you, the consignor, and the shop, the consignee. Ask for one before you hand over any goods. If the shop does not have one, write your own and have both sides sign it. These are the clauses that matter most.

• The split: each side's percentage, what it is charged on, and any shelf, booth or setup fees.
• Pricing: the retail price of each item, who can change it, and the rules for discounts and sales.
• Payment: how often the shop pays, how it reports sales, and how it pays you.
• Inventory: a signed list of every item delivered, with its price, updated each time you restock.
• Unsold stock: how long items stay, when you must collect them, and what happens to items you do not collect.
• Ownership: a statement that you own the goods until they are sold and paid for.
• Loss, theft and damage: who pays if an item is stolen, broken or damaged in the shop, and at what value.
• Ending the agreement: how much notice each side gives and how you get your goods and money back.
• State law: for art, a note that the agreement follows your state's artist-consignment law, where one exists.

Loss and damage is the clause makers most often skip. Without it, a stolen or broken item can become an argument about who pays. Set the value as your share of the retail price, or the full retail price, and write it down.

Who owns unsold stock, and what happens if the shop closes

Under a consignment agreement you own unsold stock until it sells. You can collect it at the end of the term or under the notice terms in your agreement. Keep your signed inventory sheets, because they are your record of what is yours.

The risk comes if the shop runs into debt or closes. For consignments that fall under Article 9, the code says that while the goods are in the shop, the consignee is deemed to have rights and title to the goods identical to those the consignor had, when it comes to the shop's creditors and buyers. That means the shop's creditors can reach goods you still think of as yours, so if you consign high-value stock, ask a lawyer how to protect your interest under your state's version of Article 9.

Deliveries that fall outside Article 9, such as small batches below its value threshold, are governed by other state law, and the result varies by state. For a few small items most makers file nothing, so the practical protection is to restock in small batches, collect unsold stock on time, keep your signed inventory sheets and stay on top of payments. This is general information, not legal advice.

Art consignment agreements and state artist-consignment laws

Some states have laws that protect artists who consign their own work to galleries, dealers and shops. Each law defines the work it covers, so check whether yours counts. Rules vary by state, and the two below are examples.

California is one example. Under the California Civil Code, when an artist delivers their own fine art to a dealer in the state for sale or exhibition, the delivery shall constitute a consignment, unless the artist is paid in full on delivery. The table shows what the law then requires.

New York goes further for makers. Its Arts and Cultural Affairs Law covers a work of fine art, craft or a print of such artist's or craftsperson's own creation, so it can apply to craft made by the maker, and not only to fine art. Under it the work is trust property in the hands of the consignee for the benefit of the consignor, and it cannot be subject or subordinate to any claims, liens or security interest of any kind or nature whatsoever of the consignee's creditors. Waiver of any provision of this section is absolutely void, apart from a narrow written exception for sale proceeds.

If you are an artist or maker writing a consignment agreement, find your state's statute on the legislature's website and make sure your agreement does not contradict it. This page is general information, not legal advice.

How to sell on consignment

These steps take you from finding a shop to getting paid.

1. Find shops that fit your products

   Look for shops whose customers already buy items like yours at your price. Visit, look at how consigned goods are displayed and ask other makers how reliably the shop pays.

2. Ask for the terms in writing

   Ask for the split, the payment schedule, the term and the loss and damage policy before you commit. Read the agreement in full.

3. Work out your prices

   Check that your share of the retail price covers your costs on every product. Give each item a SKU so sales reports match your stock list.

4. Deliver with an inventory sheet

   List every item, its SKU and its price. Both you and the shop sign and keep a copy.

5. Track sales and payments

   Compare each sales report with your inventory sheet, and follow up on any payment that is late.

6. Review after the first term

   Collect what did not sell, restock what did, and decide whether the shop is worth keeping.

Where Nation fits

Questions about how consignment works