Understanding Consignment: A Simple Guide to Consigner and Consignee Roles

In the world of business, especially in retail, logistics, and distribution, the term consignment often comes up. It’s a common practice that benefits both sellers and buyers, especially when inventory risks need to be minimized. But what exactly is consignment, and who are the key players involved?

Let’s break it down and focus on two central roles: the consigner and the consignee.

What Is Consignment?

Consignment is a business arrangement in which goods are sent by one party (the consigner) to another party (the consignee) for the purpose of sale. However, ownership of the goods remains with the consigner until the items are sold.

This type of agreement is popular in industries like fashion, art, books, automobiles, and even in secondhand or thrift stores.

Who Is the Consigner?

The consigner is the person or business that owns the goods. They provide products to the consignee with the hope that the consignee will sell them on their behalf.

Responsibilities of the Consigner:

• Sends goods to the consignee without transferring ownership.

• Maintains ownership until the goods are sold.

• Often bears the risk for unsold inventory (depending on the agreement).

• Receives payment only after the goods are sold by the consignee.

For example, a clothing brand might consign a new collection to a boutique store. The boutique showcases and sells the clothes, but the brand (the consigner) owns the items until they are purchased by customers.

Who Is the Consignee?

The consignee is the person or business that receives the goods on consignment and sells them to end customers.

Responsibilities of the Consignee:

• Holds and displays goods for sale.

• Does not own the goods, but is entrusted to sell them.

• Pays the consigner after the sale of the items (typically keeping a percentage as commission).

• May return unsold items depending on the agreement.

Using the same example, the boutique store is the consignee. They present the clothes to their customers and handle the sales process, but they don’t actually own the clothes until they’re sold.

Key Benefits of Consignment

For Consigners:

• Wider market exposure without the need to open physical stores.

• Lower upfront costs for inventory distribution.

• Retained ownership until actual sale.

For Consignees:

• Stocking inventory without purchasing it upfront.

• Ability to offer more product variety to customers.

• Reduced financial risk since they only pay after the sale.

Conclusion

Consignment is a powerful business model that creates a win-win for both consigners and consignees. It enables product distribution with shared risks and flexible terms. Whether you are a manufacturer looking to expand your market or a retailer wanting to diversify your inventory, understanding how consignment works — and the responsibilities of both parties — is essential for success.