What is Consignment Percentage and Why Should You Care?
Consignment percentage determines how sales revenue is split between the consignor (the supplier of goods) and the consignee (the seller). When you place goods on consignment at a store, the store agrees to sell them and pay you a percentage of each sale. Knowing this percentage is essential for understanding your actual revenue and ensuring the arrangement is financially fair.
How to Calculate Consignment Percentage
The formula is:
[\text{CP} = \frac{\text{Share of Sales}}{\text{Total Sales}} \times 100]
Where:
- CP is the consignment percentage.
- Share of Sales is the amount disbursed to the consignor.
- Total Sales is the total revenue from selling the consigned goods.
Calculation Example
Suppose you consigned goods that sold for a total of $200, and you received $70 as your share:
[\text{CP} = \frac{70}{200} \times 100 = 35]
Your consignment percentage is 35%, meaning you receive 35 cents of every dollar in sales, and the store retains 65 cents as their commission.
For a more favorable arrangement where you receive $120 out of $200:
[\text{CP} = \frac{120}{200} \times 100 = 60]
Your consignment percentage is 60%.
Industry-Specific Consignment Rates
Consignment percentages vary significantly by industry. Art galleries typically offer consignors 50 to 60 percent of the sale price, reflecting the gallery's overhead costs for space, lighting, staff, and marketing. Clothing consignment shops usually offer 40 to 50 percent, with higher-end or designer items commanding better rates. Antique and vintage stores often split 50/50, while online consignment platforms may offer consignors 60 to 80 percent since they have lower overhead costs than physical stores.
The consignment percentage you negotiate depends on several factors: the uniqueness and desirability of your goods, the volume you can supply, the store's foot traffic and sales history, and whether you or the store handles marketing and display. Higher-value items with proven demand typically justify higher consignment percentages because they represent less risk for the seller.
Consignment vs. Other Selling Models
Consignment is one of several business models for selling goods. In wholesale, you sell goods to a retailer at a deep discount (typically 50% of retail price) and they assume all risk -- if items don't sell, that's their problem. In consignment, you retain ownership and get unsold items back, but typically receive less per sale than the wholesale model provides per unit. Direct selling (through your own store or website) gives you 100% of the revenue but requires you to handle all marketing, customer service, and overhead costs. Each model has trade-offs between risk, effort, and per-unit revenue.