Digging Deeper About Consignment in the Retail Business

The question of what consignment is is becoming more common as the business becomes more popular. Consignment has become a business model that is considered effective in various industrial sectors.

Basically, consignment is a selling concept where one party entrusts the goods he is selling to another party.

In order to expand market share, the consignment concept is being implemented by several business owners. This concept requires in-depth research to determine people's potential needs for the product.

What is the consignment concept like? For those of you who want to know more, read this article until the end!

Definition of Consignment

Consignment is a collaboration between two parties, both the owner of the goods and also the party who wants to help sell it. This consignment concept is when the consignor (consignor) entrusts goods to the entrusted person (consignee) and promotes them through any channel.

The purpose of this consignment concept is actually to expand the market for the products or goods being sold, but profits can still be obtained in large amounts.

Usually the consignment concept will be used for business people who have large-scale production and want to expand the market to various groups. Meanwhile, consignees also vary from shops or individuals.

So, how does the consignee make a profit from this business? There are two ways, namely; profit sharing system or increasing the selling price of the goods that have been entrusted.

How Consignment Works

After understanding the concept of what consignment is, then how does it work? Usually before taking an item to try to sell it as a whole, the consignee will do research.

The research carried out aims to find out the right sales and promotion locations. In this consignment concept, knowing the market and the people who potentially need the product or goods you want to sell is very important.

Once the consignor is sure, he will contact the consignee to deliver the goods and make a business agreement. Make sure you keep your business agreements in writing so that you don't miss anything in the agreement.

Benefits for Consignees

So what advantages does it provide for those of you who want to start a business with this consignment concept? There are several advantages that will benefit you as a beginner businessman, namely:

Power Capital

Consignees only have capital to promote and sell goods or products. In a consignment system, the consignee acts as a field seller where what is needed is the sales strategy itself. As a consignee, the capital required is also not large because it does not require a lot of production costs.

Minimal Losses

By doing business with a consignment concept, you don't need to think about fantastic losses. As a consignee you only need to pay the consignor when you have sold the goods. Quite interesting, right?

Collaboration with Various Parties

As a consignee, you are free to determine who will be the consignor. In this case you benefit from the connection side.

The more you get to know potential consignors, the wider your connections in business will be. This will increase effectiveness in sales without spending a fantastic amount of capital.

Disadvantages for Consignees

Even though it has its own advantages, the consignment concept also has disadvantages. For those of you who want to try becoming a consignee, first understand the disadvantages below:

No Sales, No Profit

In the consignment concept, what you need to know is that you will not get income if the product or goods are not sold.

Because you only take or entrust the goods, profits will be taken from profit sharing or you will increase the price of the product or goods. Therefore, in the consignment business concept you need to be diligent in promoting and understanding the market.

Not as Much Profits as Consignors

This definitely happens, especially in a profit sharing system. The consignor will definitely take a higher percentage of profits on the grounds that they incur production costs for making the product.

So, as a consignee, you are the one who just sells the product, it is very fair that the percentage given is lower than what the consignor gets.

Risk of Losing Consignor

As a consignee, you need to know that you could lose the consignor even though you have sold the product. The consignor has the right to determine which consignee he thinks is most suitable to sell the products or goods they make.

If it is felt that it is not suitable for the consignee, the product or goods will be withdrawn and they will look for a consignee that is more suitable for their purposes.

You also need to know that business performance is very dynamic and of course there are advantages and disadvantages to it. For those of you who want to start a business without fantastic capital, you can try the consignment concept.

However, you also need to think about interesting promotions and how to sell goods or products from the consignor you want. So are you interested in trying a business with a consignment concept?

Before starting, you need more knowledge regarding consignment concepts, especially about large-scale supply chain systems. Taking the Supply Chain Management training program from prasmul-eli could be the solution!

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