The new era of selling on consignment pt.2
Following up on the first post, today’s entry discusses a consignment trend exemplified by a retailer I will call SA. This company has been selling young ladies apparel via the web for several years.
SA promotes an emerging designer’s program that sounds pretty exciting to someone who is just getting started but it is not without formidable and costly risks. The least costly element of their program is the 40% commission they’ll pay you. The rub comes in that if accepted, you’ll be required to produce a minimum of 400 units per style and colorway. At the same time, your garments will have to be sized and fit in accordance to their guidelines. If this differs from pattern sizing you’ve developed previously or for an ancillary line, this represents additional costs all its own.
Keeping in mind that this is not a sale but consignment, they will hold your product for fulfillment (which they should of course) and pay you based on any sales that may arise of your items. If you don’t sell anything… well, you’re out a whole pot of money. Before that they will mark down your items; I don’t have a markdown schedule so I don’t know how aggressive it is. In any event, if the stuff doesn’t sell within a prescribed time frame, you’ll get it back less any shipping, handling and or warehousing fees.
On the plus side, SA necessarily provides vendor relations, merchandising, photography, all sales functions to include returns and fulfillment and of course, marketing support. SA also says they can provide recommendations for production and pattern services -mostly off shore. You’d have to go offshore just to break even. There is a cost to the value SA provides if you don’t have the infrastructure built in so it’s possible this would be worth it to you. The problem is that a retailer always needs a 50% markup (so it only makes sense they’d charge an additional 10% for the provided services) but consignment deals are traditionally 60/40 in your favor. Considering the value of services provided, it would seem more fair if the split was 50/50.
The negatives of the deal aren’t limited to atypically low commission, sizing limitations, strict style restrictions, and being forced to produce a quantity of styles for which you have no sales to back them up, it could also negatively impact the perceived value of your label moving forward. You can’t be so hungry for a sale that you fail to critically evaluate your buyer (or “buyer” in this case) for its possible impact on your brand’s developing reputation. As hungry as you may be, it is possible this retailer is not ideal for you.
Speaking of impact, further investigation shows that SA is possibly conservative with respect to inventory and holds inventory for years. Literally. I find mention of a style produced by an independent designer that launched May 2009 and the same style is still available for sale 3 years later. Same colorway. Same fabric. Don’t jump up and down and clap your hands, this isn’t good. Having styles follow you around for years (it’s not a classic) could be an embarrassment making you look dated.