Consignment
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Where can I find out more about selling on consignment?

 

A tutorial covering the basics of consignment selling is available at www.ezlister.net/xxxx. The information contained there in conjunction with these FAQs should provide you with a basic understanding of consignment selling.

 

How come there are the same options here as in the Manager module?

 

EZLister.net was developed to be as flexible as possible, and for the use of the broadest possible market segment. The designer of the EZLister.net system sells items from inventory, or products owned, as well as on consignment for others. It is probable that others fall into that same category. Therefore, it makes sense to have separate modules for those selling only from inventory, for those selling strictly on consignment, as well as for those selling items from both categories like the developer. The manager module is flexible enough to handle the needs of all three groups. However, for the benefit of those who only sell only on consignment, we include the consignment module. Either offers the same level of functionality and accomplish the same goals, the one you choose is a matter of personal preference and comfort level.

 

I don't sell on consignment, why would I consider using EZLister.net?

 

EZLister.net is not for the exclusive use of those selling from inventory, or for those selling on consignment. It is for both, or for either group. It is flexible and easy to use regardless of how you acquire the product you sell. If you do not sell on consignment, then ignoring those areas of the program has no impact upon the available features or the overall usefulness of the product. 

 

What is selling on consignment?

 

It all has to do with who owns the products sold. When you sell products for another on consignment, then technically the title or ownership of the products remains with the consignor, or the person who asks you to sell them. There are some legal implications here, such as who is responsible for the items, who should insure them, etc. That is why all people selling on consignment should have a legal contract with the consignor specifying the rights, duties, and obligation of each. There are standard consignment contracts available from the web, but before you use one, you should have it reviewed, modified and approved by your legal counselor to make sure it adequately protects the interest of all parties.

 

I've heard that consignment selling is very lucrative, why?

 

When items are sold on consignment for others the title to the items remains with the consignor. If it turns out that there are no willing buyers for these items, then the consignor must determine how to dispose or liquidate them. Items sold from inventory are owned by the seller. Therefore, the owner has to purchase the items and assume the risk that there is a market for them. By investing capital and assuming marketing risk, in theory the owner is entitled to a larger profit then the consignor. However, depending on how well they manage their business, it is often the case where the profit margin for owner/sellers is lower than that for consignors. Each individual business model and operation is unique, and the risks and rewards for every case must be determined on an individual basis.

 

Why do you say that the inventory cost should be $0 for consignment items?

 

By definition, ownership of items sold on consignment remains with someone other than the consignment seller. Even though the items are in his possession, and often referred to as inventory, they are not owned and therefore, do not have a cost basis. Only when the consignment seller has an ownership interest in the good sold is it appropriate to assign an inventory cost basis, and then the amount should only reflect the owner's proportionate share not the total cost of the item. 

 

If I sell on consignment and from inventory will it affect the financial statements?

 

The General Journal and Contribution to Profit and Overhead statements produced by EZLister.net reflect current accounting standards. Assuming that inventory information is entered properly, the system properly accounts for items sold from inventory differently then those sold on consignment for others. The system allocates the funds received to generally recognized accounts, and determines the contribution to profit and the cash flow resulting from sales.

 

Does eBay condone consignment selling?

 

eBay recognizes that consignment sales occur regularly on its site and there are no restrictions regulating this type of transaction. eBay offers programs tailored to consignment selling. Refer to eBay's site for additional information regarding their policy about consignment sales.

 

What are consignment fees?

 

Consignment fees are amounts paid by owners of property to others for selling their goods or products. Consignment fees can be paid based on whatever terms a consignor and a seller agree to. The most common forms of consignment fee are flat fees, or a pre determined price paid for the service regardless of the sale price, a percentage fee, or a percentage of the final price based on a predetermined stated rate, or a sliding scale fee, or a percentage rate of the sale price that varies as the sale price increases. These fees are calculated in a similar manner to final value fees. Click here, www.ezlister.net/xxxx for additional information about consignment fees. 

 

Why are there so many places in the program to enter consignment commission schedules?

 

In EZLister.net, the Administrator sets up the default consignment fee schedule for the organization. However, there will be the case when a specific consignor wants to engage your services, but the product to sell is so unique that the default consignment fee schedule previously established is not appropriate. There will also be those cases where a consignor may offer products that are so appealing, or in such quantity, that there is reason to modify the previously defined default commission fees schedule. In either case, the manger or consignment store operator can create the appropriate fee schedule exclusively for the unique requirements present and override the default schedule in effect for other clients. A new, custom consignor fee schedule has no affect on default commission schedules for more typical clients, or on any other custom fee schedule created for other consignors. 

 

In the first case, the appropriate place to create a custom fee schedule for an item with unique characteristics is the "Add New Item" section of the consignor module. In the second case, the appropriate place to create a custom fee schedule for a consignor with unique characteristics is the "Add New Consignor" section in either the manager or consignor module. The system provides several places to create or modify custom consignment fee schedules to make the system easy and efficient to use no matter what circumstance this challenging marketing channel presents.

 

What consignment fee should I charge?

 

There is no correct consignment fee schedule to charge. This is a function of local market forces and can only be determined after studying what others are charging, what consignors are willing to pay, and what level allows you to operate profitably. The correct consignment fee could be different in every locality and unique for each operation.

 

What fees can I charge to customers?

 

Fees incurred when selling items on consignment can either be absorbed by the seller or passed through to the customer. Obviously, from the standpoint of a consignment store owner it is desirable to pass as many fees as possible through to the consignor. However, whether or not this is possible will be dictated by local market forces and can only be determined by study. EZLister.net will accommodate either choice the consignment store owner makes. Furthermore, if it is necessary to deviate from the norm to secure a particular line of business, the system's flexibility easily allows this. All the owner has to do is create a custom consignment fee schedule for a client with specific demands when entering them into the system. All fees, consignor payable amounts, settlement reports and settlement checks will reflect changes for items sold on behalf of that client.

 

What happens if an item listed doesn't sell?

 

Items that don't sell remain the property of the consignor. Any subsequent action completed by the consignment store is a function of the agreement you made with the consignor. If you desire, EZLister.net can be configured to automatically relist the item, or to hold it from the market until you initiate additional action.

 

On the Add New Item Screen what are Deposits and what do the available choices mean?

 

In some cases, there will be auction insertion fees incurred for items that do not sell. One way owner's can protect themselves from incurring such fees is to charge a deposit to the customer when taking the product in for consignment. In the event that an item doesn't sell, the amount deposited can then be returned to the consignor less any fees incurred by the consignment store owner. 

 

In the field labeled Deposit:, the operator can enter the appropriate deposit amount required. Under this field are two additional fields each with a checkmark box associated permitting the selection of one or the other. Selecting the one labeled "Commission Plus Deposit" instructs the system to calculate the commission using the parameters specified, and to add the deposit amount to the result. In effect, this means that the deposit was non refundable regardless of the outcome of the auction. Selecting the field labeled "Commission Less Deposit" instructs the system to calculate the commission using the parameters specified and deduct the deposit amount from the result. In effect, this means that the deposit served as a down payment on the consignment commission. Again, the decision whether to charge deposits, and how to apply them at settlement is up to individual operators. EZLister.net provides the flexibility to implement the final decision taken.

 

What kinds of consignment fees does EZLister.net handle?

 

EZLister.net is flexible enough to allow any consignment commission fee schedule constructed. The most common consignment fees charged are: flat percentage rate: flat dollar amount; sliding scale commissions (similar to final value fee calculation); and deposits in advance of fees incurred. Please refer to www.ezlister.net/xxxx for a more thorough discussion of consignment fees.

 

Where is the amount owed to the consignor calculated?

 

The amount owed to a consignor is termed a Consignor Payable. From the Manager's Home Page, select reports, and then select Consignor Payable report. Select a particular consignor, or all (the default), the date range desired, and whether or not the consignor is paid or unpaid. If you selected paid as an option, the report will show all checks issued in the selected date range for the consignors. This report includes a complete settlement history that shows gross receipts, all expenses incurred the amount due the consignor, the check number, and the check date. If you selected unpaid as an option, the report will show all consignors that are due a payment for items that closed (shipped) in the date range selected. This report includes a complete settlement history showing the gross receipts, all expenses incurred, and the amount due the consignor. 

 

What date does EZLister.net use to consider a sale closed?

 

EZLister.net does not consider a sale as closed, or as final, until the product is shipped. Up until the product is shipped, one or more of the conditions existing for a sale to be considered as final have not been met. A sale should not be considered final until all funds have cleared and are available for deposit, and the item has left the effective control of the seller. Prior to these conditions being met, some event could occur that could invalidate the sale or cause its cancellation.

 

How can I find out if a consignor has been paid for the sale of an item?

 

There are several methods available depending on the factors known. If you know the consignor's name, search and find the EZLister.net Consignor ID number assigned. This is done from the Consignment module, Add Consignment option, Find Consignor page. After the consignor ID number has been found, go to the Consignor History option, enter the Consignor ID and the date range in question, and conduct the search. This returns a report showing all of the items that were listed and sold for that consignor within the specified date range. Locate the item in question, and the last two columns will indicate the check number and check date. If they are blank, then the consignor has not been paid for that item.

 

If you are searching for a specific item and you know the item ID number EZLster.net assigned, go to the Manager option, and select Item Search. Enter the Item ID, and click the search button. The report presented includes a column titled Sale History. Click the link in that column, and a report showing the sale history is presented. (NOTE: if this is one item from a multi item SKU, a sale history for all items in the SKU is presented.) Locate the item in question in the lower table, and the last two columns will indicate the check number and check date. If they are blank, then the consignor has not been paid for that item.

 

 

What Is Consignment Selling

 

Consignment selling refers to the process of selling an item for somebody else and receiving a commission payment after completing the sale of the item. The primary difference between consignment sellers and traditional retail sellers is that consignment sellers do not take title or have an ownership interest in the property they are selling. To many this method of obtaining product is appealing because inventory and associated carrying costs are eliminated.

 

When items are sold on consignment for others the title to the items remains with the consignor. If it turns out that there are no willing buyers for these items, then the consignor must determine how to dispose or liquidate them. Items sold from inventory are owned by the seller. Therefore, the owner has to purchase the items and assume the risk that there is a market for them. By investing capital and assuming marketing risk, in theory the owner is entitled to a larger profit then the consignor. However, depending on how well they manage their business, it is often the case where the profit margin for owner/sellers is lower than that for consignors. Each individual business model and operation is unique, and the risks and rewards for every case must be determined on an individual basis. 

 

There are several sources of consignors. These include individuals who do not have the time, ability or access to a consignment selling channel, manufacturers with surplus products, and retailers with product nearing the end of its primary selling cycle. All have the desire to liquidate their product in a manner that yields them the highest proceeds. An increasing number recognize that consignment selling represents the most cost effective method of realizing this goal. eBay is becoming a major selling channel used by consignment sellers. Drop off stores, or consignment stores that sell items for others on consignment using eBay, are becoming increasingly common. EZLister.net has a module that specifically addresses the needs of those operating consignment stores.

 

The Consignment Process

 

Typically, the owner of an item becomes aware of someone selling on consignment and contacts them. The seller specifies the selling methods used, the fees charged, and presents a legal contract specifying the terms and conditions of the consignment sale. The contract will specify the fees to be paid by the consignor, and those to be paid by the seller. The level of competition and prevailing market conditions will determine the total consignment fees and expenses that are the responsibility of each of the parties. Assuming that fees are passed through to the consignor, the seller may request a deposit to cover any anticipated selling costs. The amount of the deposit in turn will depend on the item's value and how complex it is to sell.

 

After the item is exposed to the market, assuming that the item is sold to a third party the seller collects the sale price. At this point, he has created a consignor payable or the amount due the consignor after deducting those selling costs paid by the consignor, and the commission due the seller. The seller prepares a settlement report specifying the fees paid, the net amount due the consignor, and presents this with the settlement check thereby completing the transaction. For those operating consignment stores, it is likely that one or more items will be included in each settlement report. EZLister.net prepares all necessary settlement reports, prints settlement checks on standard computer voucher check forms, posts the payment to the individual items, and maintains a check register for your settlement account. 

 

Typical Consignment Fees:

 

The following are fees associated with a typical sale using eBay. 

 

Auction Fees: include insertion and final value fees charged by eBay. These vary depending on the minimum asking price selected, the final selling price, and additional listing features selected to make your auction stand out. 

 

 

 

Payment Fees: include fees paid to third party companies for the handling of credit card payments or cash transfers. These can vary but approximate 3% of the total funds collected from the buyer.

 

 

 

Commission: this is the fee paid to the seller for creating the listing, posting and administering the auction, collecting and processing the payment, and shipping the item. The actual commission rate will be negotiated prior to consigning the item with the seller, or at the initial meeting when reviewing the item to be sold.

 

 

 

Listing Deposit: Each individual consignment seller will determine whether or not it is advisable or feasible to charge a deposit. As discussed, deposits may exist to compensate the seller for those fees incurred prior to selling an item in the event the does not sell. Local conventions will determine the amount of a deposit, and if the deposit will be credited to the commission paid, or be retained by the seller in addition to the commission paid.

 

 

 

Settlement: is the final accounting for a consignment transaction determining the final amount due the consignor for the items sold. Typically, a settlement report is presented with a settlement check after the sale is closed or completed. Settlement reports list the fees incurred by the respective parties including commissions. A settlement check is presented with the settlement report. EZLister.net uses the shipped date as the settlement date. This reflects the logic that a sale is not complete until the funds are received, posted and cleared for payment, and shipping an item is the date that best represents that these conditions have been met. 

 

Consignment Menus