How to Effectively Consign Surplus Stock: A Step-by-Step Guide

Excess inventory can be a significant difficulty for businesses, tying up capital, consuming storage space, and risking obsolescence. Consignment selling offers a practical solution to this problem by allowing you to offload consign surplus stock and recoup your investment. You can maximize returns by collaborating with retailers who offer your products and pay you only when they are sold.

This article provides a step-by-step approach to effectively consign your surplus stock, helping you minimize losses and turn excess inventory into profit.

What’s Consignment Inventory?

A supply chain tactic known as consignment inventory allows the supplier to hold onto the products until the merchant sells them.

This allows the retailer to offer products without paying upfront, paying only for sold items. The unsold products can get returned to the supplier. 

This model benefits the retailer by reducing financial risk and the supplier by ensuring product availability without immediate cash flow. 

However, careful management of inventory and relationships is required to handle stock tracking, sales payments, and storage efficiently.

Benefits of Consignment Inventory 

Consignment inventory provides numerous advantages when done correctly. It may benefit both sides.

• Reduce Storage Costs

Clearing out excess stock can make extra room in your warehouse for more profitable products.

• Improve Cash Flow

Consignment sales generate a cash influx even before the products are sold, helping to improve your short-term cash flow.

• Minimize Obsolescence Risk

Offloading slow-moving or potentially outdated stock through consignment minimizes the risk of being left with unsaleable items.

• Market Exposure

Consignment allows you to reach a vast audience through the retailer’s established customer base.

• Reduced Marketing Costs

You leverage the retailer’s marketing efforts to promote your products, minimizing your marketing spend.

Challenges of Consignment Inventory

Consignment inventory may only sometimes be the best solution. Here are some of the disadvantages of this supply chain method.

• Lower Profit Margins

Consignment fees typically range from 20% to 60% of the selling price, resulting in lower profit margins than direct sales.

• Limited Control

You relinquish some control over product presentation, pricing, and customer service the retailer offers.

• Risk of Unsold Inventory

You remain responsible for unsold items, potentially incurring their return or disposal costs.

• Brand Image Management

Ensure the retailer aligns with your brand image to avoid brand dilution.

A Step-by-Step Guide to Effectively Selling Surplus Stock

Here’s a comprehensive guide to effectively consign surplus stock and turn that dead weight into valuable revenue:

Step 1: Assess Your Surplus Stock

• Identify 

Conduct a thorough inventory analysis to pinpoint your surplus stock. Categorize by product type, brand, size, and condition.

• Evaluate

Not all surplus is created equal. Be realistic about each item’s saleability. Prioritize items still in style, in good condition, and have a proven sales history at your target market price point.

• Quantify

Determine the quantity of each surplus item you’re willing to consign. The key is to balance maximizing profit and minimizing leftover stock.

Step 2: Research Potential Consignment Partners

• Target Audience

Identify consignment stores that cater to your target audience and the type of products you’re consigning. Upscale boutiques won’t be interested in last season’s discount clothing.

• Reputation & Location

Research the reputation and location of potential consignment partners. Choose stores with a positive track record of selling similar items and a location convenient for your target audience.

• Commission Rates & Contract Terms

Commission rates and contract terms vary between consignment stores. Before signing an agreement, understand the commission structure (percentage of the sale price you receive) and any associated fees.

Step 3: Prepare Your Surplus Stock for Consignment

• Cleaning & Presentation

First impressions matter. Ensure your surplus stock is clean, ironed (if applicable), and free of damage or stains. A professional presentation increases the likelihood of a sale.

• Accurate Pricing

Research current market prices for your surplus stock and price it competitively in a consignment setting. When determining your pricing strategy, factor in the consignment store’s commission.

• Detailed Descriptions & Tags

Provide detailed descriptions of each item, including brand, size, material, and unique features. Precise and accurate tags make it easier for potential buyers to find what they want.

Step 4: Delivering Your Surplus Stock and Building a Partnership

• Professional Communication

Throughout the process, maintain clear and professional communication with the consignment store. This includes keeping them informed about the items you’re consigning and any updates on pricing or quantities.

• Delivery & Organization

Organize your consign surplus stock efficiently for smooth delivery to the consignment store. Ensure proper documentation accompanies the delivery, outlining the items, agreed-upon pricing, and your contact information.

• Building Relationships

View consignment stores as partners in success. Regularly check with them to discuss sales performance and adjust pricing or marketing strategies as needed.

Step 5: Monitor Sales and Replenish (if applicable)

• Track Performance

Most consignment stores offer online portals or regular reports to track the sales performance of your consigned items. Monitor these reports to understand what’s selling and what’s not.

• Replenishing Stock (Optional)

If specific surplus items are selling well, consider replenishing the stock at the consignment store (depending on the agreement) to capitalize on the demand.

• Unsold Items

In your consignment agreement, establish a clear timeframe for returning unsold items. Be prepared to collect any unsold merchandise at the end of the consignment period.

Consignment Inventory Best Practices

Managing consignment inventory can be complex without the right strategies. Suppliers and retailers should work together closely, use the right technology, diversify sales channels, and maintain clear communication. Here are some best practices:

Develop a Solid Contract

The contract is crucial. It should clearly outline terms like shipping, returns, payment schedules, and responsibility for damaged or lost products. It should also detail inventory management procedures, deposits, and sales efforts.

Forge a Strong Relationship

A good partnership is vital. Suppliers should help make the product successful, and retailers should work hard to sell it. Strong collaboration leads to better sales and a stronger relationship.

Use the Right Technology

Consignment inventory requires specialized software to track goods and invoices. To reduce discrepancies, look for solutions that offer both parties data analytics and inventory visibility.

Seek Multiple Sales Channels

Never depend on a single companion. Having multiple consignment partners reduces risk and provides more business options.

Communicate

Clear communication is essential. When issues arise, both parties should work together to find a mutually agreeable solution, reinforcing their commitment to the partnership.

The Final Word

Consignment can turn surplus stock into valuable revenue.  Evaluate your surplus, identify compatible consignees, and prepare your inventory meticulously. Open communication and a strong consignee relationship are crucial.

Prioritize high-quality, in-demand surplus.

Find a consignee with a strong reputation and matching customer base.

Ensure clean, accurately labeled, and well-organized inventory.

Establish clear expectations and maintain regular communication.

These guidelines will help you successfully manage surplus consign surplus stock and realize the hidden earning potential of consignment. Allow consignment to turn unwanted goods into a way to make money and expand your company.