What do you think of when you hear the word “consignment?” I’ll admit, it’s kind of an outdated idea. But when funds are low, most people have to get creative about making money and shopping for new stuff, so the idea of buying and selling used goods doesn’t sound so bad.
Recently, I was cleaning out my closet and I realized that I had a pile of outdated clothes that had rarely been worn and that were mostly high-quality and name-brand. In any other case, I would have simply dropped a bag of old clothes to our nearest charity, but I started thinking about a new consignment shop that opened near me. I wanted to give it a shot to see if I could have any success selling on consignment, so I loaded up my bag of clothes and headed over.
Upfront Payments
Consignment stores typically work in two ways: upfront payments or profit sharing. There are pros and cons to each method, and not every consignment store offers both options.
When you’re offered an upfront payment for your gear, a store employee will go through your offerings to see what would be able to be resold in the shop. Generally, there is a set price for each item, such as $10 for a pair of shoes or $5 for a shirt. Once all the items have been selected for consignment, the remainder can be taken home or donated to charity. Then, the prices of all the clothes and goods are added up, and you’re offered an amount in cash or in store credit on the spot.
Often, the store credit amount is higher because it entices you to keep the money in-house. But if your bank account is hungry, it might be a good idea to accept the cash. Keep in mind that you don’t have to take the offer – if you feel that it’s too low, you can respectfully decline and head somewhere else.
Profit Sharing
If your consignment store operates by profit sharing, you won’t see any money or credit upfront. Instead, you’re assigned an account number and all of the items that are salable are tagged with that number. The consignment store employee prices all your items according to what he or she feels is a fair price, and then agrees to put your items out on the shelves and racks.
As the items are sold in the shop, you and the store split the profits at a rate agreed upon beforehand. You then collect your earnings via cash or store credit.
Pros and Cons
There are definitely pros and cons to each method. When you receive an upfront payment, you get your money immediately; however, you might not receive the best price. The person buying your gear obviously offers a price significantly lower than what the items will sell for in the store – that’s how the shop makes a profit. Still, it’s instant, and probably best if you need money now.
Profit-sharing can help you get a better price, but the problem is that you can’t guarantee that all of your items will sell right away – or at all. Money filters in at a slow trickle, even if it’s a higher amount overall.
