Selling on consignment: a guide to selling candles in stores exploring the pros and cons of consignment selling for small candle businesses
If you're a candle maker exploring ways to get your handmade products onto store shelves, you've likely encountered both wholesale and consignment options.
In response to the many consignment-related questions we've seen online and in our Candle Making for Everyone Facebook community, this article will help you determine if the consignment model is the right choice for your small business.
What is consignment?
Consignment is a sales method for physical goods—like candles, soaps, and home fragrance products—where a maker provides products to a shop to sell on their behalf. The shop displays the products and handles the final sales transaction.
Until a product sells, the maker owns the item. Once a sale occurs, the shop and the maker split the sale price.
Consignment selling isn’t limited to businesses that call themselves consignment shops, consignment stores, thrift stores, or second-hand stores. On the contrary, some retail shops that sell only brand-new items use consignment arrangements to offer products to customers.
How does consignment work?
Though the details of consignment arrangements can differ by retailer, here’s how selling on consignment typically works:
1. Enter into an agreement with a shop. The consignment agreement outlines the terms and conditions that both the maker and the shop will follow. If you're unsure about any details in the agreement, consider discussing them with the shop first to clarify—or even negotiate—the terms.
An effective agreement includes details about the:
- Percentage split. Makers typically receive 60-75% of an item’s sales price, while the shop keeps the rest. Note if there are any other fees collected, like a flat-rate fee each month, in addition to the percentage split.
- Consignment period. How long will you and the shop work together? Is there an opportunity to extend the consignment period and what are the steps?
- Payment frequency and method. The agreement should clearly outline how frequently you can expect payment from the shop.
- Display and promotion. What are the expectations about merchandising products on consignment? Will the shop handle that or are you responsible for setting up the display?
- Inventory management. Will the store notify you when stock is getting low or if certain products aren’t selling?
- Instances of dirtied, damaged, lost, or stolen merchandise. Who is responsible for any losses due to handling, accidents, or theft? Do you, the maker, have the right to inspect the merchandise before accepting it back?
2. Bring in your products. Once the agreement is reviewed and signed, it’s time to introduce your candles to the retail space!
Makers are almost always responsible for delivering their products to the shop, or shipping them, which includes shipping costs. As items sell or don’t, you will need to restock or switch out products.
3. Receive payment for sales. In many consignment situations, the shop reconciles the sales for the past month and then issues payment to the maker.
Tips for working with shops when selling candles on consignment
- Ask for references from other consignors at shops you're considering. This will help you to better understand the nature of the consignment relationship so you can decide if a shop is a good fit for you.
- Review and understand the consignment terms! Take your time to thoroughly read any agreements. If you have questions, reach out to the shop for clarification or seek the advice of an attorney before signing or committing to anything.
- Get the agreement in writing. Document expectations and protect yourself by having all parties sign a written agreement.
- Keep an open line of communication. Relationships are at the heart of being successful in business! Stay in regular contact with shops to understand their needs and address any concerns promptly.
What is the difference between consignment and wholesale?
If you're familiar with selling products in shops, you may notice some similarities and differences between consignment and wholesale. Let’s explore them!
Comparing consignment and wholesale
Similarities:
- Retail presence. Your products are on store shelves, which lends legitimacy to your brand and products.
- Exposure. You can reach a wider audience by having your products in stores. This can lead to increased brand visibility and other exciting opportunities.
- Building and maintaining relationships with shops. In both wholesale and consignment models, establishing and nurturing relationships with retail partners is crucial. Clear communication, trust, and collaboration are essential for successful, long-term partnerships.
Differences:
- Payment and ownership structure. With wholesale, a shop purchases your goods upfront and outright—usually for 50% of the retail price. In a consignment arrangement, you retain ownership of your item until it sells and receive payment after the final sale is complete.
- Risk distribution. The shop takes on more risk with wholesale because they purchase your products and are responsible for selling them. The maker takes on the greater risk with consignment because you only receive payment when an item sells.
Want to learn more about wholesale and selling your candles to retailers? We’ve got you covered with these guides and articles!
Should you sell your candles on consignment or wholesale?
The decision to sell your candles on consignment is entirely personal. Each business owner must weigh the pros and cons against their risk tolerance and other preferences. Consider the following when deciding whether consignment is right for your business.
Pros of consignment
- Low barrier to entry. Ideal for getting your foot in the door as shops don’t have to commit to buying your products and may be more willing to work with you.
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Sensory appeal. Scented products are best experienced in person and often sell better in stores than when offered strictly online.
Trial period. Consignment can be a way to test whether your products fit well in a given shop. If they don’t, you’re free to move on. - A wholesale stepping stone. If your candles sell well on consignment, this info establishes that they’re a good choice for wholesale—both in the shop you’re consigning to and potentially with other shops!
- Experience building. Completely new to selling in shops? Selling on consignment can help determine if this is a method you enjoy enough to continue pursuing.
Cons of consignment
- Inventory tie-up. Consignment requires setting aside inventory that you could otherwise sell online or at markets. Can you comfortably maintain enough inventory to supply consignment accounts and also sell your candles elsewhere?
- Payment delays. Can your business afford to wait on the proceeds from consignment sales? If you need to receive prompt payment for your products, wholesale may be a better fit.
- Management effort. Consignment can take time and organization to manage inventory, relationships with shops, and payment. Some shops are more organized than others so there may be instances where you have to chase down payment for sold items.
- Production risk. In consignment, you must make products in advance, not knowing if they’ll ultimately sell. This speculative approach is in contrast with making products based on orders received.
“One shop I worked with on a consignment basis individually labeled every candle and wax melt with price tag stickers. The first time I took back some out-of-season stock, I realized that the price tags wouldn’t peel off cleanly. I spent A LOT of time with Goo Gone removing the tags and cleaning the candles so they could be used for wholesale orders, website sales, and markets. This was a headache that I didn’t anticipate!”
Closing notes on consignment
Consignment is often part of a multi-channel selling strategy that includes online retail, in-person markets, and wholesale.
We’ve noticed that as candle businesses get further into their journeys, they often prefer wholesaling over consignment because of the more predictable revenue stream and streamlined process.
But consignment has its place, especially for newer makers who are establishing their brands and building relationships with retail shops! It’s a valuable opportunity to test the market, receive customer feedback, and refine product offerings based on real-world interactions.
Are you interested in trying consignment? Do you think consigning is a good choice for your business? Or do you already consign your candles? Let us know your thoughts and experiences with consignment in the comments!
And if you’re interested in more candle business content, be sure to check out our Business Guides. You’ll find in-depth articles on topics like wholesale, shipping, selling online, and more!