Consignment Inventory, With an Example for Makers

Consignment means you place your products in someone else's shop and get paid only for what sells, minus the shop's cut. Until a customer buys it, the stock is still yours: it's on your books, it's your risk if it's damaged or goes missing (unless the agreement says otherwise), and it's yours to take back. Shops like it because they don't pay up front; makers like it because the split usually pays more per item than wholesale. The work is in the records: what you delivered, what the shop says sold, what a count finds on the shelf, and a settlement each month. Below is a month worked through, what the agreement should say, how consignment compares with wholesale, and how to keep track.

The short version

• You keep ownership until it sells; the shop keeps its share of each sale and pays you yours.
• Splits vary; 60/40 or 70/30 in your favor are common for handmade goods.
• Delivered − sold = should be on the shelf. A count checks it.
• Settle monthly: sold units × your share, plus any missing units the shop agreed to cover.
• Consignment pays more per item than wholesale, but you carry the cash and the risk.
• Treat the shop's shelf as one of your stock locations.
• TaroStack tracks stock at a consignment shop as its own site. More below.

A month, worked through

Windward Roots, the made-up taro business I use in these examples, places guava jam in a gift shop at a retail price of $12, on a 65/35 split: Windward Roots gets $7.80 for each jar that sells.

Delivered Oct 1                      48 jars
Shop's sales report for October      31 sold
Should be on the shelf               48 − 31 = 17
Counted on Oct 31                    15
Missing                              2

Without the count, the two missing jars would have stayed on paper as "on the shelf" until they never sold. The agreement decided who pays for them; without one, it's usually you.

Consignment against wholesale

Consignment pays 55 cents more per jar here, but only for jars that sell, and your cash sits on the shop's shelf until they do. The jar cost comes from starting a jam business, and setting a wholesale price is in how to price handmade items for wholesale.

What the agreement should say

For food, the dates clause matters most: a shop has little reason to rotate stock it hasn't paid for, so either you rotate it on your visits or the agreement says how it's handled. Rotation habits are in stock rotation methods.

Where this stops working

One shop is a notebook page. Then there are five shops, each with its own split, each sending sales in its own way, jars from three batches on their shelves, and visits every few weeks. The notebook says what was delivered; the shops' reports say what sold; nobody knows what's really on each shelf until a count, and the stock in shops is missing from your own inventory value altogether. When a jam batch is recalled, finding which shops have it means calling them all.

How TaroStack does it

TaroStack treats each consignment shop's shelf as one of your stock locations, because until it sells, that's what it is.

Each shop is a site. Stock at a consignment shop sits at its own site, still yours and still in your stock value. A delivery to the shop is a transfer, with stock in transit until it lands and a transfer note to print, and it carries the lots, so you know which batch is on which shop's shelf.

Counts settle the month. When you visit, count the shelf on your phone, even with no signal, and TaroStack shows what each difference is worth before you post it. Record the month's sales from the shop's report against the shop as a customer; anything missing is billed to the shop if the agreement says so, or written off with a reason, so the settlement, the stock and the losses all agree.

And dates and recalls reach the shops. Every lot carries its dates, and TaroStack forecasts what will expire before it's sold, shop by shop, so you know which jars to pull on your next visit. If a batch is recalled, one report shows which shops and customers have it and what's still on each shelf.

Lots, counts, the expiry forecast and recalls are on every plan, from $49 a month; more than one site, with transfers between them, is on Standard at $99. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.

Questions people also ask

How does consignment work for small businesses?

You place products in a shop, the shop sells them and keeps an agreed share, and pays you the rest, usually monthly. Until an item sells, it's still your stock and usually your risk.

What is a typical consignment split?

For handmade goods, splits like 60/40 or 70/30 in the maker's favor are common, but every shop sets its own. Compare what you'd receive with your wholesale price.

Is consignment better than wholesale?

Per item, consignment usually pays more; in the example, $7.80 against $7.25 a jar. But you're paid only when items sell, and unsold or damaged stock is usually yours.

How do you track consignment inventory?

Record what you deliver, what each shop reports sold, and count the shelf when you visit. Delivered minus sold should equal what's on the shelf; the difference is missing or damaged stock.