Small shops, both on and offline, sometimes participate in the consignment sales process. It is a way for a small operation, such as a small art shop or bookstore, to get up and running fairly easily. It is also a way for a small manufacturer or seller to get exposure for his products.
In a consignment arrangement, a seller or manufacturer makes an agreement with a store owner or distributor to carry his products without upfront payment. The store owner or distributor does not have to make a payment unless someone buys the item. It is up to the person who supplies the product to stay in touch with the store owner to find out items that are sold.
The first step in the consignment sales process is for the seller to draw up an agreement with the store owner or distributor. The agreement contains basic details about the price the store owner or distributor must pay when items are sold, as well as the length of time the item can remain in the store owner's possession before the seller will retrieve it from the location. It also contains information about the condition that the store owner or distributor must return the product in if it does not sell.
After providing the store owner or distributor with the product on consignment, the seller or manufacturer must call periodically to check on sales. In some cases, a professional consignment shop owner will take the initiative to call the seller and ask him to come pick up payment. This step in the consignment process is sometimes the most trying for a seller, because unprofessional storekeepers and distributors may not tell the truth about items that are sold to avoid making payment.
The final step in the consignment process is collection. The seller must collect payment on products sold either in person or via online payment. This is also a difficult step for a seller or manufacturer, because he does not have a guarantee that the store owner will submit payment owed on the sold items. If a product has not sold after many months, the seller may decide to end the consignment agreement and retrieve the item. If all products have sold and the store owner pays as agreed, the two parties may agree to renew the consignment agreement and repeat the process again.