Coined from the Latin word "consignare," meaning "to seal," the term "consignment" refers to a commercial arrangement wherein goods or products are sent by one party, known as the consignor or seller, to another party, known as the consignee or retailer, to be sold on their behalf. In this transaction, the consignor retains ownership of the goods until they are sold, thereby maintaining control over their inventory.
When entering into a consignment agreement, the consignor and consignee establish the terms and conditions, including pricing, length of agreement, and commission rate. The consignee receives and displays the product in their store or retail space, attracting potential customers. Once the goods are sold, the consignee pays the consignor the agreed-upon price, typically minus a commission fee or percentage.
The concept of consignment is beneficial for both parties involved. For the consignor, this system enables them to reach a wider customer base, reduce warehousing costs, and mitigate the risks associated with unsold inventory. On the other hand, the consignee benefits from having a diverse range of products without the need for upfront financial investment.
This practice is commonly employed in various industries, such as fashion, art, antiques, and retail. It provides a platform for small businesses or individuals to showcase their products and expand their market presence while minimizing potential financial risks. Ultimately, consignment serves as a mutually beneficial agreement, allowing for increased product exposure, distribution, and revenue generation.
