What is consignment in fashion wholesale?
An arrangement where a brand places stock with a retailer but keeps ownership until the goods are sold to consumers.
In short
Consignment is an arrangement where a fashion brand places stock with a retailer but keeps ownership until the goods are sold to consumers. The retailer pays only for what it sells and returns the rest, so the brand carries the inventory risk.
How does it work in practice?
The brand and retailer agree which products will be placed, the selling price, the retailer's share and how often sales are reported and settled. The retailer displays and sells the goods as usual, then reports sales periodically and pays the brand for the units sold. Unsold stock is returned or transferred at the end of the agreed period. Accurate stock reporting and regular reconciliation are essential, because the goods remain on the brand's balance sheet.
Why does it matter?
Consignment can help new or emerging brands gain shelf space with cautious stockists, because the retailer takes no inventory risk. It can also let established brands test new markets or categories. For the brand, however, consignment ties up capital and requires good visibility of retailer sales data. Compared with a concession, the brand usually has less control over presentation and staff.
How is AI changing it?
AI improves consignment by using retailer sales and stock data to forecast demand at each location and recommend how much stock to place or withdraw. It can detect discrepancies between reported sales and stock movements and suggest transfers of slow stock to stores where it will sell. This reduces the risk of large returns at the end of a period.
Common pitfalls
- Placing stock without reliable sales reporting from the retailer.
- Unclear terms on damage, loss or shrinkage.
- Letting consignment stock age in store instead of moving it to better locations.
- Underestimating the capital and admin consignment requires.
Frequently asked questions
What is the difference between consignment and wholesale?
In wholesale the retailer buys the goods and owns them. In consignment the brand keeps ownership and the retailer pays only for what it sells.
What is the difference between consignment and a concession?
In consignment the retailer sells the brand's stock as part of its own assortment. In a concession the brand runs its own space within the store, usually with its own staff.
