As a designer, one of your goals may be to have your designs sold at your favorite boutique or retailer. In most cases, there are two options to getting your product in a boutique, consignment and wholesale.
Wholesale means that you sell your product at a discount to a boutique or retailer and they resell it for a profit. The boutique pays for the product upfront and then owns the product and is responsible for selling it. You will generally have a minimum order amount that will vary from business to business.
A simple pricing formula you could use:
Cost of supplies + labor + 10-15% for overhead costs = total cost
Total cost x 2 = wholesale price
Wholesale price x 2 = retail price
Consignment means that you make an agreement with the boutique or retailer to sell your items. They do not own your product but are responsible for selling it. You get paid when the product is sold and the boutique or retailer will take a percentage of the sale price as a commission. Typically, consignment agreements are based on a 60/40 split. You get 60% the boutique gets 40%.
So the question becomes, which option should you choose to build and grow your fashion business?
We talked with a few boutique owners to get their advice on whether they'd recommend consignment or wholesale accounts for emerging/independent designers. Here’s what they had to say:
WHITNEY // WM GOODS
I understand from a designer’s perspective that offering consignment lengthens the timeline for making a financial return, but I think it’s a great way to offer your line risk-free to shops. From my perspective as a buyer, there are two major reasons why I would want to pick up a new line on consignment. The first is that I might be interested but my budget might not allow me to pick it up. Consignment alleviates that concern. Secondly, I might personally be interested and excited about a line and want to bring it in, but I’m not quite sure if my customer will ‘get it’ in the same way. This is a great way to test the waters without taking on a financial burden.
Especially as a small boutique, we have tight budgets for seasonal allocation and our priority goes to our current partners, so as a new line, it’s probably the best option for getting in. Hopefully, it will sell through well and in future seasons you’ll have the numbers to switch from consignment to wholesale.
LAURA // JOHAN
I love to start brands off on consignment, especially smaller local brands. I know consignment can be a dirty word for designers - many have been burned by unorganized shops and irregular payouts. From a shop perspective, it is such a great, risk-free way to try out a brand. And from a designer perspective, it can be make or break as far as building a desirable list of stockists. If the trust is there between the two parties involved, consignment on a small scale can be a win-win. If you do stick with wholesale only, "no minimums" is the magic phrase!
JILLIAN // SEVEN SISTERS
For emerging designers/independent designers I'd absolutely recommend offering consignment to a few select stores when starting out. Be strategic about who you want to get your product in front of. Seek out stores that carry other brands you want your brand to be associated with and go after them. Also, be smart about choosing stores that are a good "fit" for your brand. The buyers will be sussing out whether or not your brand is a good fit with their brand as well. If store budgets are maxed out at the end of the buying season, but the buyers like your work, they'll be much more likely to add you to the line-up if you're willing to offer consignment. That way it's not a risk for the store and it's an opportunity for you to get your product in front of customers and buyers from other shops alike. If a store has a good social media following that's a plus. Ask if they'd be willing to showcase your work on their channels.
Doing consignment just for the free advertising in itself may be worth the upfront cost of offering consignment. That said, depending on your cash flow, start conservatively and make sure there's something in it for you. Like I said, be very strategic about the stores you're offering consignment to as it's a large upfront cost for you with no guarantee on recouping your investment.
ANDI // WEST END SELECT SHOP
I think if you're just really truly starting out then consignment might be a great way to break into the retail scene. It's a no-risk arrangement for the retailer so if they like what you have then you'll have an easier time selling it in. Things to consider: do you have stock or will you have to make it? What's the plan if it doesn't sell? How long will you give it on the floor? Are they allowed to mark it on sale after a while? What's he plan if something is damaged, stolen or returned? There are many things to consider and it's really case-by-case! As a retailer I've done it both ways and I much prefer consignment for the low-risk factor!
Regardless of which approach you decide to take, you will need to have a payment contract specifying how you will get paid and how often. You will also want to a line sheet and an invoice template. If you choose to do consignment, you need to have an agreement that states how long products will be on sale before the boutique must return to you. You will also want to have an agreement that states who will pay for your product if it is broken or stolen while in their boutique. For both scenarios, you will need to set up shipping arrangements and decide who will pay for it if the store isn’t local.
Do you have any consignment or wholesale accounts? Whats your experience been? Join the conversation and comment below.