How to Write a Consignment Contract Properly


If you are interested in a consignment business, or you currently have one and want to "spiff up" your contract, follow my easy tips to be very precise in letting clients know what you expect in your shop!

Things You'll Need

  • Contract
  • Signature
  • Items for consignment
  • To a current or future client who wants to consign, the contract is the most important part of why they bring things in. Clients need to know the basic information of what and when to bring in, how much to bring in, what the split is, what happens to the stuff at the end of the consignment cycle and how and when they are to be paid. These items all need to be addressed when writing a consignment contract.

  • The first item to figure out when drawing up a contact is the length of time for each consignment, most stores do a 60 or 90-day cycle. I recommend using a 60-day cycle since your shop will change more often and items won't linger there for months on end. Shoppers always like new things to look at and purchase! Also, what the consignment split will be. Some shops still operate at a 50/50 split, but on average it is a 60/40 split, the shop keeping 60% of the sale, the consignor getting 40%. Don't forget to come up with different splits for different items, if it applies. For example, if someone consigns their handbeaded jewelry at my shop, we always give them 70%, we keep 30%, since they are paying for all the supplies and doing the work. Some furniture items, or more expensive items may deserve a different split. You can make your own rules, but always make it fair and worthwhile to the consignor, since that is how you get your inventory!

  • Contract should note what you take in for consignment (ladies, children's, home decor, etc.), how you want items presented (always note that you expect clothing items to be washed or dry-cleaned, and free of all stains, holes, broken buttons or zippers, too much wear or major flaws), and how many items can come in at a time (If you stick to your guns on how many items you will accept, your shop will most likely remain tidy and not overloaded). Also note in the contract the days you accept consignments. Some shops do only drop-offs at certain hours on certain days, some require an appointment.

  • Let the consignor know what happens to their items if they go unsold. Have a local charity arranged to come and pick up items once or twice a month for donation. Consignors usually like to have the option to pick up what didn't sell, but that is not required. You should decide what works best for you. If you just want to donate, be up front and tell them why. If you allow the consignor to pick up unsold items, figure out how that can be done. Some shops will allow the consignor to come in and pick out their unsold items going by your inventory lists. My shop will pull the items for you for a small fee. Keep the consignor in mind when figuring this all out. Realize that if you are a donate-only shop, you may miss out on some exquisite items, because the person would want them back if unsold!

  • Address the payment options. Explain how you pay out for sold items and when they can collect payment. My shop offers two methods of pay. They can pick up a check at the end of the consignment period, or they can use the money in their account for store credit to purchase something. I highly recommend this option, since it brings in more business!

  • Including all of these steps into a contract will help it to be a proper contract, binding and legal. Make sure that you have the consignor sign either the contract itself at the bottom, or another attached paper with their contact information on it! Be thorough, but always try the best to stick to your rules. If you don't, people will start to take advantage. Also, ALWAYS keep your consignors in mind on how to keep them coming back, especially if they have wonderful items! If someone wants to consign, but they live out of town and pull up having items in the car, try your best to help them or recommend another place if you can't take it. Don't overcrowd your shop or shoppers will stop coming and will complain about the mess! Be strong, but humble and good luck!

Tips & Warnings

  • Stop into other consignment shops and ask for their contracts to help you along with ideas.
  • You should never have set prices, so don't include it in the contract. Prices should be based on brand name, retail costs, and condition of each item!
  • Don't overload your shop. Shoppers hate it!
  • Don't accept crap! Items should be looking as new as possible.

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