Consignment and the Designer

I am a little hesitant to write about this subject, because it will no doubt be controversial. I decided that it’s important enough to bring up, and am hoping that it can be open a dialog between retailers,  artist/designers and shoppers so that we can work out the kinks.

The Background
Designers and wearable art artists want to sell their handmade and one of a kind items (OOAK) in a retail setting. Most stores willing to sell OOAKs will choose to sell them consignment* style, as it presents them with little risk. When a store consigns an item, they can gain profit from it without paying up front, though their profit is much less than normal retail. In this situation, the artist/designer holds all the risk: they outlay money for materials and put time into creating the item. Considerations for the store would be: is this product worth the space it takes up in my store? Does it fit my demographic (price point, quality, style)? Will it bring other business to my store?

The normal procedure for a manufacturer/wholesaler  is to sell items at wholesale to a retailer. In this case, if an artist/designer sells at wholesale, the retailer holds the risk, because the artist/designer has been paid for the product. Wholesale is typically 50% of the retail price, so the artist/designer needs to make sure that the retail price is set high enough to make enough profit. There is the understanding that the profit margin can be slimmer because the retailer typically purchases a greater number of items at once (though this may not apply working with OOAKs).

The Problem
While the typical consignment was at 70/30 (70% goes to artist/designer, 30% goes to retailer), some stores have moved their consignment lower, to 50/50. Essentially, they are offering only wholesale price (with tiny profit for the artist/designer) while taking on little risk.

Consider:

  • Inventory depreciates over time. Though a product may not literally “go bad,” it does go out of season if it is apparel, and it can lose perceived value over time if it does not sell.
  • Lost, stolen or damaged inventory  has no value to the artist/designer

From a designer’s perspective, particularly with OOAKs, profit margins are already slim at 70/30 consignment. It’s rare to get enough income to really make up for the time and materials put into a product, much less to gain a profit (earn more than materials plus labor). In order to compensate for a sale at 50/50, the designer/artist would need to raise their retail price. This would mean a potential loss in sales, if price point is important to the buyer. It also means that items they sell through their personal websites would be priced lower than items sold through boutiques. Would you rather buy online, get a product cheaper and have to wait a few days, or get instant gratification?

Other Options
There are other options. I have my own web catalog, and they are fairly easy to set up if you are at all computer savvy. WordPress websites (free) offer a basic cart system, and for about $50 you can upgrade a WP site to something that works quite well. Pair that with a domain name and web space, and you can be in business for about $50 per year plus some small start-up fees (templates, cart system, etc.). The other upside is that you can now sell to anyone in the world. The trick is getting traffic to your website, which takes time and knowledge.

Another option is to sell in a venue like Etsy, which is essentially a giant online boutique. The set-up is free, and you pay a small percentage at the time of each sale. I found posting items on Etsy to be a little cumbersome, but that may have improved in the meantime. The up side with Etsy is that they already have heavy traffic to the site. Unfortunately, there are so many vendors that your items may be one in a sea of thousands of similar items.  One key to making sales is to post items at high traffic times and spread over several days: each time you post, the item image appears in the “recently posted” image roll.

Some newer web stores have cropped up in the meantime. One, USTrendy, has been around since 2008. The store is modeled on the Etsy idea, where designers add their own items and USTrendy takes care of driving traffic to the website. They also take a small percentage of sales, and are counting on a large quantity of sales spread over a large number of users to gain them profit. Locally,  Aesthetic Designs Style has started a web boutique, based more on a traditional consignment boutique.

Vendor tables at events are another option for sales. If you’re not a sales person, these are typically the most difficult. The artist/designer pays a fee to set up a table at an event, where the event drives traffic to your table. The cost of the table rises the more popular and established the event is (for instance, art fairs and bridal shows can be fairly expensive). Some events even charge a percentage of your sales, so unless you are really confident that you will make  a lot of sales, I wouldn’t spend a lot in vendor fees. Items that typically do well are jewelry, accessories and other smaller items that don’t need to be tried on, and are easily carried.

Gallery Models: Future Options?
Looking at art galleries for comparison, I see that there may be other options for independent boutiques other than retail or consignment.

  • Co-op – (example Pogue’s Run, Artists on the Square)  Artists pay a fee to join a co-op, which is set up as a communally owned store. Each artist then has to volunteer a set number of hours to mind the store. The Co-op takes a very small fee from sales. Pros: cost to the artist is low. Cons: time commitment can be a real problem, especially if the artist/designer has a full time job. Also, artists may not be the best salespeople!
  • Showroom style shops – (a friend called this a “vanity gallery” in the art world, example A & H Collections) The artist/designer pays a monthly fee to rent space in a shop to display their items. Sometimes the shop also takes a percentage of sales.  This is great for the boutique owner if they can fill the space, as their rent is covered whether they sell anything or not. From a designer standpoint, it’s very risky. If you know you will sell significantly more than your monthly fee, you’re ok. Otherwise you can end up being in the hole every month. Make sure the sales team in this type of shop is very strong.

Service and Sales
With art galleries, generally the higher your fees are to the gallery, the more service you are getting. A gallery that takes 50% commission sells high priced, high quality work and promotes it heavily. Their sales staff will be top notch. I think we should expect the same from a boutique that charges a 50% commission: hard hitting sales teams, great merchandising (store displays that are artfully done and changed up frequently), social media marketing, and most of all: sales.

*Consignment is the act of placing a thing (such as a handbag) in the hand of another, but retaining ownership until the goods are sold.  A percentage of the sale goes to the retailer for the service of selling the item, while the rest goes to the owner of the item (in this case the artist/designer).

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