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Consigned Inventory: A Win-Win for Businesses and Customers

Consigned Inventory: A Win-Win for Businesses and Customers

In the intricate world of retail and supply chains, a strategy known as "Consigned Inventory" is quietly revolutionizing the way businesses operate. It's a win-win scenario where suppliers and retailers come together, creating benefits that extend to customers as well. In this exploration, we delve into the concept of consigned inventory, uncovering how it transforms the landscape of commerce to the advantage of all involved.

This blog post will discuss the benefits of consigned inventory for both businesses and customers. It will also provide tips on how to find and buy consigned inventory.

What is Consigned Inventory?

what is consigned inventory

Consigned inventory refers to goods or products that are placed in a retail store or distribution center but are still owned by the supplier or manufacturer until they are sold to the end customer. In this arrangement, the retailer essentially acts as a distributor or seller on behalf of the supplier, who retains ownership of the inventory until it is purchased by a customer. Consigned inventory management can help suppliers manage their stock levels while giving retailers a broader range of products to offer without the financial burden of purchasing the inventory upfront.

How does consigned inventory work?

how does consigned inventory work

Consigned inventory operates on a simple yet effective principle: suppliers or manufacturers provide their products to retailers or distributors, but they retain ownership of the inventory until the products are sold to the end customer. Here's how it works:

  1. Agreement: The supplier and retailer agree to a consignment arrangement. This typically involves terms related to the products, pricing, duration, and the commission or fee that the retailer receives for selling the products.
  2. Delivery: The supplier delivers the inventory to the retailer's location, such as a store or warehouse. The retailer does not pay for this inventory upfront, as it remains the property of the supplier.
  3. In-Store Placement: The retailer places the consigned products on their shelves or online store, making them available for customers to purchase.
  4. Sales: When a customer buys one of the consigned products, the retailer completes the sale as usual, including processing the payment.
  5. Reporting: Periodically, often monthly or as agreed upon, the retailer provides the supplier with a report detailing the sales of the consigned products.
  6. Settlement: Based on the reported sales, the supplier invoices the retailer for the sold items, typically minus the agreed-upon commission or fee. The retailer pays the supplier for these sold products.
  7. Unsold Inventory: Any unsold consigned inventory remains the property of the supplier, and it may be picked up or restocked as agreed upon in the consignment agreement.

How to manage consignment inventory?

manage consigned inventory

Effective consignment inventory management requires careful planning, clear communication, and precise tracking. Here are steps to manage consignment inventory successfully:

  1. Establish Clear Agreements: Start with a well-defined consignment agreement. Outline terms such as product details, pricing, commission rates, duration, and responsibilities for both the supplier and retailer. Ensure both parties have a shared understanding of the arrangement.
  2. Inventory Tracking System: Implement a robust inventory tracking system that monitors consigned products separately from owned inventory. This system should provide real-time visibility into consignment levels, sales, and replenishment needs.
  3. Regular Reconciliation: Conduct regular reconciliations to ensure accurate reporting and billing. Compare sales records with the inventory on hand to identify any discrepancies or missing items.
  4. Sales Reporting: Maintain a consistent schedule for reporting consignment sales to the supplier. Accurate and timely reporting is crucial for invoicing and restocking.
  5. Secure Storage: Store consigned inventory separately from owned inventory, clearly marking consignment items to prevent confusion. Ensure the security and condition of consigned products.
  6. Merchandising and Visibility: Display consigned products prominently and effectively in your retail space or online store. Effective merchandising can boost sales and encourage customers to browse consigned items.
  7. Replenishment and Rotation: Monitor consignment inventory levels closely and work with the supplier to replenish products as needed. Regularly rotate stock to ensure that older items are sold first.
  8. Customer Engagement: Train your sales staff to be knowledgeable about consigned products and to promote them to customers. Encourage staff to highlight the benefits and unique features of these items.
  9. Communication: Maintain open and regular communication with the supplier. Discuss sales performance, feedback from customers, and any changes or adjustments needed in the consignment agreement.
  10. Performance Evaluation: Periodically evaluate the performance of consigned products. Identify which items are selling well and which may need adjustments in pricing, placement, or marketing efforts.
  11. End-of-Term Considerations: If the consignment agreement has a specific duration, plan for end-of-term activities, such as returning unsold items to the supplier, renewing the agreement, or negotiating new terms.
  12. Data Analysis: Leverage data analytics to gain insights into customer preferences and consignment product trends. Use these insights to refine your consignment inventory strategy.
  13. Legal and Compliance: Ensure that your consignment agreement complies with all relevant legal and regulatory requirements. Seek legal counsel if necessary to protect the interests of both parties.

Benefits of consigned inventory for businesses

consigned inventory benefits

Here are some of the benefits of consigned inventory for businesses:

  • Increased sales: Consignment inventory can help businesses to increase sales by providing them with a wider range of products to offer their customers. It can also help to attract new customers who are looking for unique or one-of-a-kind items.
  • Reduced inventory costs: Consignment inventory can help businesses to reduce inventory costs by eliminating the need to purchase products upfront. Businesses only pay for consigned items once they are sold.
  • Access to a wider range of products: Consignment inventory can give businesses access to a wider range of products than they would be able to afford to purchase on their own. This can help them to meet the needs of a wider range of customers.
  • Improved customer satisfaction: Consignment inventory can help businesses to improve customer satisfaction by providing them with a wider range of products to choose from and by giving them the opportunity to find unique and one-of-a-kind items.

Consignment inventory best practices

Consignment inventory can be a great way for businesses to increase sales and reduce costs. However, it's important to follow some best practices to ensure that your consigned inventory program is successful.

Here are some consignment inventory best practices:

  • Choose the right consignors. It's important to choose consignors who have high-quality products that are in demand. You should also consider the consignor's reputation and reliability.
  • Set clear expectations. Make sure that you and the consignor have a clear understanding of the terms of the agreement, such as the consignment period, commission rate, and return policy.
  • Market the consigned inventory effectively. Promote the consigned inventory on your website, social media, and in your store. You can also offer discounts or promotions on consigned items to attract customers.
  • Track your inventory carefully. It's important to keep track of your consigned inventory levels so that you can replenish items that are selling well and remove items that are not selling.
  • Communicate regularly with your consignors. Provide your consignors with regular updates on how their items are selling and send them payments on time.

Consignment process for your business

The consignment process for your business can vary depending on the type of products you sell and the specific needs of your consignors. However, there are some general steps that you can follow:

  1. Identify and recruit consignors. The first step is to identify and recruit consignors. You can do this by advertising in local media, attending trade shows, or networking with other businesses.
  2. Establish a consignment agreement. Once you have found some potential consignors, you need to establish a consignment agreement with each one. This agreement should outline the terms of the arrangement, such as the consignment period, commission rate, and return policy.
  3. Accept the consigned inventory. Once you have a consignment agreement in place, you can start accepting consigned inventory from your consignors. Be sure to inspect the inventory carefully before accepting it.
  4. Market and sell the consigned inventory. Promote the consigned inventory on your website, social media, and in your store. You can also offer discounts or promotions on consigned items to attract customers.
  5. Track your inventory carefully. It's important to keep track of your consigned inventory levels so that you can replenish items that are selling well and remove items that are not selling.
  6. Pay your consignors. Be sure to pay your consignors on time and in accordance with the terms of the consignment agreement.


Consignment inventory is a win-win for businesses and customers. It offers businesses a way to increase sales, reduce inventory costs, and access a wider range of products. It also offers customers access to high-quality products at a lower price, unique and one-of-a-kind products, the opportunity to support local businesses, and a more sustainable shopping option.

If you are a business owner, consider offering consigned inventory in your store. It is a great way to expand your product offerings and attract new customers. If you are a customer, consider shopping for consigned items. It is a great way to save money, find unique items, and support local businesses.


Here are the most frequently asked questions related to consignment investory:

Is consignment included in inventory?

Yes, consigned inventory is included in inventory. Inventory is defined as all of the goods and materials that a business has on hand for sale or to be used in the production of goods for sale. Consigned inventory is still considered to be the property of the consignor, but it is in the possession of the consignee for the purpose of sale.

What is consignment model?

Consignment model is a business model in which a retailer, also referred to as a consignee, agrees to pay a seller, or consignor, for merchandise after the item sells. This is in contrast to the traditional retail model, where the retailer purchases the inventory upfront and then sells it to customers.