Concession, consignment and wholesale: the three models compared
Who owns the stock, sets the price and carries the markdown risk depends on the commercial model. How wholesale, consignment and concessions differ.
KEY TAKEAWAYS Summary by the editors
- In wholesale the retailer buys and owns the stock and carries the markdown risk; in consignment and concessions the brand keeps ownership until sale.
- Consignment lowers the barrier for a retailer to try a brand but ties up the brand's working capital and depends on reliable sales reporting.
- Concessions give brands the most control over presentation and pricing, along with the highest operating commitment.
- Many department stores and multi-brand retailers have shifted space towards concession and consignment terms to reduce their own inventory risk.
- Brands should model the full cost of each option, including staffing, logistics, returns and capital, and agree data terms upfront.
When a brand appears in a department store or multi-brand retailer, the shopper rarely knows on what terms it is there. Yet the commercial model behind the rail determines who owns the stock, who sets the price, who staffs the space, who bears the markdown risk and who sees the customer data. The three main models, wholesale, consignment and concession, divide those responsibilities very differently, and choosing between them is one of the most consequential decisions in a brand's distribution strategy.
What is the wholesale model?
In traditional wholesale, the retailer buys merchandise from the brand at a wholesale price, takes ownership and resells it at a retail price it sets, usually guided by the brand's recommended retail price. The difference between the two prices, the intake margin, is the retailer's reward for taking the inventory risk.
For the brand, wholesale offers volume, predictable revenue once orders are invoiced, and reach into stores it does not have to operate. The trade-off is control: the retailer decides how much to buy, how to present it and when to mark it down, subject to whatever agreements the brand can negotiate.
How does consignment work?
Under consignment, the brand places stock in the retailer's store but keeps ownership until the item is sold to the end customer. The retailer pays the brand only for what sells, usually at an agreed price or after deducting an agreed share. Unsold stock is returned to the brand at the end of the agreed period.
Consignment lowers the barrier for retailers to take on a new or unproven brand, because they carry no inventory risk. The brand carries that risk instead, together with the working capital tied up in stock it has not yet been paid for. It also needs reliable sales reporting from the retailer, since its revenue depends on it.
What is a concession?
In a concession, often called a shop-in-shop, the brand effectively occupies and operates a defined area within the retailer's store. The brand owns the stock, often supplies or funds the staff, controls the visual merchandising and sets prices within agreed rules. The retailer usually processes the sale through its own tills and keeps a commission on turnover, sometimes with a minimum guarantee.
Concessions give brands the most control over presentation and the closest customer contact short of their own store. They also bring the highest operating commitment: inventory, staffing, fixtures and the full markdown risk sit with the brand.
| Factor | Wholesale | Consignment | Concession |
|---|---|---|---|
| Stock ownership until sale | Retailer | Brand | Brand |
| Inventory and markdown risk | Retailer | Brand | Brand |
| Retail price set by | Retailer, often guided by the brand | Agreed, often brand-led | Brand, within agreed rules |
| Staffing | Retailer | Retailer | Usually the brand |
| Brand control of presentation | Low to moderate | Moderate | High |
| Retailer's income | Margin between buying and selling price | Share of sales on items sold | Commission on turnover |
| Brand cash flow | Paid on invoice terms | Paid after sale | Paid after sale, net of commission |
| Sales data for the brand | Depends on the agreement | Essential for settlement | Typically detailed sell-out data |
Why are retailers shifting risk towards brands?
Many department stores and multi-brand retailers have moved part of their space from wholesale to concession or consignment terms. The logic is straightforward: fewer markdowns on their own books, less working capital tied up in stock, and a more predictable return per square metre.
Brands have mixed feelings. Some welcome the control, particularly over pricing and presentation, and the direct visibility of sell-out. Others find that the cost of stock, staff and returns makes concession space less profitable than wholesale, especially in stores with modest footfall. A related development online is drop shipping, in which the retailer lists the brand's products on its website while the brand holds the stock and ships the order.
How should a brand choose the right model for each account?
There is rarely one answer for an entire distribution network. The right model depends on the account, the category and the brand's own capabilities.
- Choose wholesale where the retailer has strong buying expertise, a loyal customer base and the balance sheet to commit to inventory.
- Consider consignment to enter a new account or test a category, provided sales reporting is reliable and the arrangement is time-limited.
- Choose a concession in high-traffic stores where presentation matters and the brand can staff and replenish the space efficiently.
- Model the full cost of each option, including staff, fixtures, logistics, returns and the cost of capital tied up in stock.
- Agree data terms upfront, including which sales, stock and customer information each party receives and how often.
What does this mean for wholesale teams?
For brand sales teams, the blurring of models changes the job. Selling a seasonal order is only part of it. Managing stock in a partner's store, analysing sell-out and negotiating commercial terms across several models is increasingly the norm. Brands that can run all three models with the same discipline, and switch between them as accounts evolve, are best placed to keep their distribution profitable in a consolidating retail landscape.
Frequently asked questions
What is the difference between consignment and wholesale?
In wholesale the retailer buys the stock and owns it, so it carries the risk of unsold goods. In consignment the brand keeps ownership until each item is sold to a consumer, and the retailer pays only for what sells.
How does a concession differ from consignment?
Both leave stock ownership with the brand. In a concession the brand also typically operates the space, including staffing, presentation and pricing, and pays the retailer a commission on turnover, whereas consignment stock is usually sold by the retailer's own staff.
Which model is most profitable for a brand?
It depends on the account. Wholesale transfers risk to the retailer at a lower margin; concessions can deliver higher margins and control but carry staffing, stock and markdown costs. Brands should model the full cost per account rather than compare headline rates.
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