Hi, welcome to this Whiteboard Wednesday. I’m James Shores, future Chief Marketing Officer here at Fishbowl. Let’s talk about consignment, a pretty basic principle. It’s essentially you, as a supplier, have your goods in another store, another small outlet, but they haven’t purchased it yet. So most of the risk is on you, but there’s a lot of good things that you can do with this, as long as you know how to track and manage them appropriately.
So let’s take a look real fast at you as a supplier. So let’s (just as an example, it’s going to be different for everyone), but let’s say you kind of have three typical products that you have. So you have your basic products. It’s kind of what you got started with that everyone goes to you for, and then maybe you have a new product line that you’re wanting to test out or break out into other markets. And maybe you also have your high-end expensive lines – very specific, it’s perhaps even custom-made.
Now one of the benefits of consignment is, let’s say you’re trying to get into a large chain. We have a couple customers that use this same principle, consignment, so that they can help get their product into the larger chain, which helps get them into the market, get their name out there. But then also there’s a little more risk on their side, and so they have to be able to track these things, but by getting that basic product into this large chain, they’re getting their name known and they’re also expanding their potential market.
But then there’s also the other side of, you might have just the individual ma-and-pa kind of stores, places where it’s just local to you and some of them might be specific in their own clientele. So you might have a shop where, again, it’s just your basic product that you have there on consignment, or it could be a little bit fancier store, or has a new market that you’re trying to branch out with your own new product line and they want to carry that, or there might even be a fancier place in town that sells higher-end wares, higher-end goods that you can try and sell your more expensive offerings, again, all in consignment.
So here’s where the math really comes into play because you need to know how much and where all these products are. Especially if you’re spread across a few different places, a few different chains, you need to know where this is because if you’re not tracking it, odds are they’re probably not tracking it either.
So you need to make sure with consignment, the whole point is that you can try out some of these new products to get into new markets, new exposure, and you can also try to create your own different lines while also offering different bases of what you produce or what you supply.
So, from the tracking side, some really important things to make sure that you are aware of is the agreements that you have between individual stores, even the larger chains. The agreements can be anything from how long you’re going to carry that product until it has to be returned. If a customer returns something, who pays for that cost? If they return product just because it isn’t selling, who covers that? What is freight policy? All of these things, what constitutes the sale and when does ownership actually exchange hands?
There’s a lot of details that can go into this, so the important thing is that both parties, regardless of who you’re working with, understand the contract. And it also needs to be understood, the time periods, how long you’re going to have a product in here before they send it back, before they want to try something else.
And again, finally, we need to know how much and where. And this is the most important part, probably, of tracking and the need to have really good software. If you’re trying to track all pen-and-paper, you’re going to lose count. You need to know where everything is, when it’s been there, how long it’s been there, how much they have. You could even have the plan where you know at what store it’s being successful so that you can monitor these things, and possibly even make tweaks on your own end of how much you’re providing within the different categories and product lines that you may carry.
All of this – the whole point is to have good data. Which is what we keep hitting on over and over again. If you have good data, you can make good business decisions. And that’s the whole point of being able to track with consignment and making use of good software that can do this.
That’s this Whiteboard Wednesday. Join us again next week. Thank you!