SOME COMMENTS ON CONSIGNMENTS
by Alan J. Zell, Ambassador of Selling

Placing work on consignments is a common practice between artisans and galleries. However, for several reasons, consignment merchandising is a very dangerous business arrangement, at best for artisans.

One, is when artisans place their work on consignment, they are underwriting the expenses of the gallery or store. There is no guarantee that they will make a sale or that you will get any money. Few galleries pay for their inventory before it is sold. It is the artisans' money that is tied up, not the gallery's. Yes, I know that without galleries, artisans would have fewer places to show their work. The percentage of sales the gallery gets pays for any promotional costs and the "rental" of the wall, counter, table, or floor space occupied by artisans' work.

Secondly, and all too often, when someone does not have their own money invested in something, they have much less respect for it than if they owned it. This manifests itself in the way the works are shown and cared for. It is a universal problem in many fields, not just with crafts.

This article is not going to change the way business is done between artisans and galleries. But I want to give both something to think about. Business changes. What promoted progress in the past may be deterring it now. What works today may not work tomorrow.

Third, many retailers who might be open to buying craft work are wary of doing so because their competition can offer the same work without having to invest in inventory. If the craft industry is to expand, it will have to look to venues other than galleries to sell its wares. (See the article on "Handling And Expanding The Craft's Marketplace.")

However, there are ways to use consignments that are beneficial to artisans, galleries, and other businesses that sell craft work as a means of getting additional sales -- sales that might not have been made without the consignment arrangement.

One consignment method is to back up the original purchase with extra items. This is done with the condition that after X number of days or weeks, the gallery or store will agree to keep in stock the same dollar amount as the original purchase.

Example: The original order is $500.00. It is backed up with a consignment selection of $300.00 giving the store or gallery a selection of $800.00 worth of work. At the end of X days or weeks there is an inventory count. If the total on hand from both the original order and consignment is more than $500.00 the gallery or store may choose which $500 worth of work they wish to retain. The balance the artisan takes back. If the inventory is less than $500.00, the gallery will, according to the agreement, order additional work to bring their inventory up to the amount of the original order. More than likely they will be open to buying more because the work has been selling.

There are advantages for both artisans and galleries for this type of arrangement. First, since no one knows what will sell, buyers are reluctant to buy when there is no track record. The consignment gives them a wider selection, and therefore will help the gallery or store determine which sells best in their environment. In some cases buyers don't know how much depth to buy. Offering backup consignment may ease their buying conscience. For artisans, the advantage is that they are putting the gallery's reorder in before the reorder is written.

A second use of consignment is to enhance the introduction of an artisan's work. While the opening order may be sufficient to meet opening order requirements, it may not be enough to make a splash. It should be work the gallery or store would not otherwise purchase. These might be items considered but not purchased or large or expensive works. The consignment would be for a limited amount of time.

These two types of consignments do not have to be limited to galleries. They can be applied to any situation where the customer is buying goods for resale. They are healthy programs for both artisans and their reselling customers.

The third way to use consignments is for special showings or events with a limited program time. The program should not be an excuse for not buying inventory. There may be places where such a program would last a month or more, but these should be the exception to the rule, not the rule.

A variation of this is to make arrangements with a local charity to have work on display at a fund raising event. The buyers get a tax deduction for the percentage of sales that go to the sponsors. There have been some events where the percentage going to the charity varied by the class of ticket purchased. If patrons were buying they would get a 15% or 20% tax-deduction, with that amount going to the charity. Regular ticket purchasers' purchases and the charity would get a smaller percentage. Often, when the work under consideration is more expensive that other items, many regular ticket purchasers will upgrade to the patron status to get the larger tax deduction. The charity gets more and the artisan sells more expensive works.

A fourth way to use consignment is with retail customers. Many potential customers would like to try what they are considering in the environment in which it will be placed. A courtesy all artisans should be willing to extend. Beware, however, that there are people who will ask for a consignment because they want to impress someone at an event. Some artisans charge for retail consignments, the apply the fee toward the price if there is a sale.

Setting policies for consignments is a method all artisans should have and should make available to their customers, both wholesale and retail. The policies should cover length of time, how the work will be displayed, who is responsible for damage, and the costs associated with packing and handling, delivery, reboxing, and returning. Without a written policy and a request for a signed agreement, customers may take advantage of the situation and make consignment the only way to do business.

Consignments can yield positive results for craft artists and their customers when conducted in a businesslike manner. But when they are not, they can be dangerous for both.

This article was written to help you and your business. If you believe some of these articles will be helpful to your business, please e-mail me your comments on how you will apply them. ajz

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Copyright © 2000-2007 Alan J. Zell, Ambassador of Selling, Portland, OR. All rights reserved.

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