What consignment selling is, and how the bill works

Selling on consignment means you leave stock in a shop and the owner pays you only for what sells. Whatever has not sold is still yours, sitting on their shelf, waiting for a buyer. It is the usual arrangement when a shop does not yet know whether your product will move: you are taking away their risk of buying something that then sits there.

The sum

This is where the confusion starts, and it is worth reading slowly, because it is a single subtraction.

When you visit, you count what is still on the shelf. That is the only number you need. What you recorded last visit, minus what is still there today, is what sold.

That is the whole calculation. Nothing else you do that day changes it.

What you deliver today is not part of it

This is where nearly everyone slips, and where a spreadsheet starts producing numbers that look wrong.

Today, as well as collecting, you are going to leave more stock. Say the shop has been selling well and you decide the shelf should hold 20 from now on, so you leave 17.

Put another way: the delivered quantity and the amount owed are two numbers that do not touch. Today you delivered 17 and you are owed for 13. You can change one and watch the other sit perfectly still, and that is not a fault.

Replacements are never charged

If you find damaged or expired stock, you take it away and leave fresh in its place. That is never charged to the owner, on consignment or on direct sale.

There is a subtlety worth noticing. Damaged stock still counts as “still on the shelf” when you count on arrival, because it genuinely was. Since it never sold, it never entered the bill in the first place. There is nothing to deduct — deducting it again would undercharge.

How much to leave

Restocking is a different sum from billing, and also a simple one: target, minus what is left, plus what you are taking away.

When to move a shop to direct

Consignment takes the risk off the shop and puts it on you: your stock sits on their shelf, unpaid, until it sells. Once a shop has been selling steadily for a few months, it is reasonable to propose direct sale — they pay for what you leave, on the spot, and your money stops being parked on other people’s shelves.

There is no hurry. A shop selling well on consignment is a better business than one that stopped buying because you asked for payment up front too soon.