Consignment vs. Wholesale: What’s Better for Your Bottom Line?

One choice that nearly all prospective business owners will have to make as they begin to choose what type of products they will be offering in their stores is whether to choose consignment or wholesale merchandise. Both offer their own set of perks, but it will ultimately be up to you whether you decide to go the consignment or wholesale route. It is definitely important to know the difference between these two markets so you can figure out which is better for your own personal bottom line. With that goal in mind, here are some tips for deciding whether consignment or wholesale is best for you.

Wholesale

First, examine the wholesale market and what it can do for your bottom line. Let us say you have a product line that you are interested in selling. Should you go the wholesale route? If you go the wholesale route that means you will be selling your product line directly to retailers. This means that you will only be dealing with wholesalers most of the time. This also means that you will be spending a lot of time at trade shows, because trade shows is where most of the most important wholesale deals are made. However, when you go the wholesale trade show route, you should know that there are expenses and costs involved.

For instance, although most wholesale trade show exhibitors do well most of the time, there are many costs involved with attending trade shows. Many times, it can cost thousands of dollars to exhibit at trade shows. The decision to exhibit your product line at a wholesale trade show is always a risk and gamble. It is never guaranteed that you will receive many orders at wholesale trade shows. This means, for instance, that you may have to plunk down $5,000 to exhibit at a trade show, and not make enough deals at the trade show to turn a profit, or even come up even. However, sometimes the gamble is well worth it. Some wholesale dealers report taking in thousands-worth in orders at trade shows. It is up to you to decide whether the gamble of exhibiting at a trade show is worth it to you.

Even if you do quite well at a trade show, be prepared to not break evenly immediately. For instance, the expenses for setting up at a trade show event can definitely eat into your immediate profit. Play it safe and expect to not break even until a long time afterwards. This is due to many reasons. For instance, many buyers, especially large corporate buyers, do not customarily pay for their merchandise right away. Most buyers will purchase using a conventional 30-90 day payment system. Different buyers have different buyers, but it is entirely possible that you will not receive payment until shipment has been made.

Consignment

If all this waiting around business sounds like too much time and investment for you, there is another route that you can take: the consignment route. Consignment is a good idea for those who do not have the cash flow ready to do the wholesale trade show circuit. Say that you have developed a product line of craft products for which you see great potential for selling to a wider market. What does it mean when we say that you will put your products in consignment? Consignment simply means that your product line will be placed in stores to be sold directly to the product. Most of the time, consignment is free. However, some businesses that offer wholesalers consignment do charge a nominal fee. How do you make money through the consignment process? Simple enough, you make money whenever your products sell. The profits are split between you and the shop that is offering your product through consignment. Sometimes the split can be upwards of 50 percent, but it always depends on the deal that you make with the shop that is offering your product through consignment. There is less of an upfront investment and gamble when you take the consignment route. However, wholesaling your product line can help you reach many more consumers in a faster and perhaps more profitable manner.

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