Consignment
A consignment is a legal agreement in which one party, the consignor, delivers goods to another party, the consignee, who then sells the goods for the consignor. The consignee is responsible for selling the goods and paying the consignor for them, less a commission.
There are two main types of consignments:
Simultaneous consignment
In a simultaneous consignment, the consignor delivers the goods to the consignee at the same time that the consignee pays the consignor for them. The consignee then sells the goods and keeps the profit.
Delayed consignment
In a delayed consignment, the consignor delivers the goods to the consignee before the consignee pays for them. The consignee then sells the goods and pays the consignor for them, less a commission.
Consignments can be used for a variety of purposes, including:
- Liquidating inventory
- Testing new markets
- Expanding into new markets
- Avoiding the costs of warehousing and shipping
- Getting around import and export restrictions
There are a number of advantages to using consignments, including:
- The consignor does not have to invest in inventory or warehousing.
- The consignee does not have to pay for the goods up front.
- Consignments can be used to test new markets or products without a large financial investment.
However, there are also a number of disadvantages to using consignments, including:
- The consignor may not get paid for the goods if the consignee does not sell them.
- The consignee may not be motivated to sell the goods if they do not have to pay for them up front.
- Consignments can be complex to manage and track.
Overall, consignments can be a useful tool for businesses of all sizes. However, it is important to weigh the advantages and disadvantages carefully before deciding whether to use consignments.