Ultimate Guide to Online Consignment Software
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In today's rapidly evolving e-commerce and retail stores-saturated world, online consignment businesses have emerged as a popular option. Whether you are:
running an online consignment business
thinking about starting consignment
considering adding consignment to diversify your business
Efficient management of inventory, sales, and consignor relationships are crucial for success. This is where online consignment software steps in; to streamline operations and enhance overall efficiency.
In this comprehensive guide, we'll delve into the world of online consignment software, exploring its features and benefits, and demonstrate how it can provide you peace of mind when you make the right choice. Whether you're a seasoned entrepreneur or just starting out, this guide will equip you with the knowledge needed to make informed decisions to propel your business forward all while keeping your consignors feeling secure and confident in your relationship.
Understanding Consignment Sales and Inventory
Before delving into the specifics of online consignment, let's go over some terminology. Consignor versus consignee, consignment sales, consigned inventory and the consignment model are all critical to understanding before we learn how online consignment software can help us.
What is the Difference between a Consignor and a Consignee?
The consignor is the one who owns the inventory or property to be sold. The consignee is the seller of the goods and acts as the intermediary in the process.
What is a Consignment Sale?
A consignment sale is a transaction where goods are entrusted to a seller (the consignee) who agrees to pay the consignor a percentage of the sale price once the consignment item is sold. This arrangement allows the consignor to retain ownership of the goods until they are sold or the terms of the consignor agreement are expired.
The consignment model differs from a buy outright model (BOR) because the ownership of the goods is transferred to the buyer upon purchase. In consignment, the consignor retains ownership until the goods are sold.
What is Consigned Inventory?
Consigned inventory refers to goods that are placed in the care of a seller (consignee), with the intention of selling them on behalf of the owner (consignor). These items remain the property of the consignor until they are sold. The consignor typically receives payment for sold items after they are sold, minus a commission or fee retained by the consignee.
The Consignment Model
The consignment model operates on the principle of shared risk and reward between the consignor and the seller. While the consignor retains ownership of the inventory, the seller assumes responsibility for selling the items and earns a commission on each sale.
Why is Online Consignment Software Important?
The phone is ringing, the texts are coming in, you are listing items, ringing up sales, posting on social media...and making sure your consignors are satisfied and paid. I have been there, and it can be totally overwhelming! The last thing you want is to be worried about tracking consignments, consigned inventory, sales, and fielding questions from consignors. Isn’t this just too much extra work?
The answer is: it doesn’t have to be! The right online consignment software does the work for you, so you can focus on the things that matter, all while maintaining a great relationship with your consignors.
Advantages of Online Consignment
As a consignment seller, there are many advantages from using the consignment model. Some of these reasons include:
Zero Cost Inventory. The seller pays the consignor when and if the item sells; therefore, there is no investment capital needed.
Income Opportunities for Consignors. The seller is providing a service and an income opportunity for consignors by selling their items and providing them with a percentage of sales.
Assisting Consignors to Downsize or Sell an Estate. This is a common service sellers provide that is in high demand.
Reduced Financial Risk. Consignors benefit from reduced financial risk as they do not need to invest in physical retail space or incur upfront costs associated with stocking inventory.
Expanded Market Reach. Sellers can access a diverse range of inventory without the need to purchase goods upfront, thereby offering customers a wider selection of products.
Contributing to the Circular Economy. Consignment plays a significant role in promoting the circular economy by extending the lifecycle of products and reducing waste while providing income to consignors.
Disadvantages of Online Consignment
Even though there are many benefits to incorporating the consignment model, it can be intimidating and a bit overwhelming. Afterall, you become responsible for the sale of your consignors’ items.
Some of the disadvantages of consignment are:
Consignor Customer Service. In addition to customer service, consignment sellers provide customer service to their consignors as well.
Consignor Payouts. Paying out consignors is a part of the consignment model of business. Once a consignors item sells, the consignor will need to be paid their percentage of the sale.
Consignment Accounting. Consignors are paid out a percentage of their sales, and this needs to be tracked for accounting purposes.
Consignment Agreements. Consignors are paid and sales are made based on the terms in a consignment agreement.
Inventory Consignment Tracking. Consigned items need to be tracked under a consignor account adding a level of complexity to inventory tracking.
These are often seen as disadvantages of consignment. Although, as you will see, having the right online consignment software will alleviate these concerns.
How Can Online Consignment Software Help?
Let’s chat a little about how online consignment software can turn the disadvantages of consignment into a thing of the past!
Consignor Customer Service
Consignment sellers are responsible for providing customer service to their customers. In addition, consignment sellers must also provide customer service to their consignors to maintain trust and a positive relationship.
Online consignment software can make this easy and efficient by providing the following:
Access to consignor data
Transparency (consignor can see consigned items, pricing, and sales)
Payment reporting
Consignor Payouts
Consignment sellers provide payouts for consignors based on a predetermined percentage of sales. After the sale, the consignee remits payment to the consignor for the sold items, minus any agreed-upon commission or fee.
Online consignment software can make this easy and efficient by providing the following:
Tracking consignment percentages
Recording consignment sales per consignor
Totaling and reporting payouts per consignor
Consignment Accounting
Consignment accounting is a bit different than accounting for your store owned inventory. While you don't have inventory costs, your payments to each consignor need to be tracked. Both parties keep track of inventory, sales, and payments. The consignor may receive regular reports from the consignee detailing sales activity and inventory levels.
Online consignment software can make this accounting efficient by providing:
Consignment inventory accounting (keeping a record of your consignment items)
Payments made to consignor per year
Maintaining consignor records
Total payments made to all consignors
Calculating percentages for payouts
Consignment Inventory Agreement
Consignment agreements are a critical part of the consignor relationship. This agreement will lay the foundation for how your consignment business model will operate.
Your agreement should include things like the duration of the consignment period, the commission or fee the consignee will earn for each sale, and any other relevant terms. Once the consignor and consignee agree to the terms of the consignment agreement, you're in business!
Online consignment software makes consignment agreements easy to implement by:
Automatically implementing and reporting on your terms
Assigning items and consignor percentages
Assigning items a consignment period and end date
Consignment Inventory Management
Tracking your consignment inventory is a crucial component of a successful consignment business. Consignment inventory tracking or management is the process of monitoring and managing consigned inventory throughout its lifecycle, from the moment it is entrusted to the consignee until it is sold or returned to the consignor. Effective tracking ensures transparency, accuracy, and accountability in the consignment arrangement.
Using the right online consignment software makes this simple by:
Tracking and assigning inventory consignment to each consignor
Providing a unique identifier to each item in inventory consignment
Allowing inventory consignment to be commingled with your retail store or online business
Lifecycle inventory tracking from receipt to sale
5 Resources for Online Consignment Software
There are some great online consignment software options depending on your needs and budget. Here are some resources you might consider. In addition, there are reviews on Capterra.com where you can do a side by side comparison of different online consignment software options.
1. ConsignCloud. ConsignCloud is a cloud-based consignment software solution. It can help everyone from resellers who want to be consignment ready to consignment sellers balancing 1000s of consignors.
Starts at $119/month
Inventory Management and Tracking
Integrated Point of Sale (POS) System
Consignment Sales Tracking and Reporting
Shopify integration
Consignor Access Portal. Consignors can access their accounts and get real time updates on inventory, sales and payouts.
Variable Consignment Structure. Expiration dates and split % can be adjusted at the item level
2. My Reseller Genie. My Reseller Genie (MRG) is the only software here that is an accounting software. It’s designed specifically for resellers to track all their business numbers in one place, and also has a built in consignment tracking feature. If you don’t need a POS system and only need one split rate/consignor, MRG is a great, low cost option for resellers doing consignment sales.
Pricing Plans from $9.99/month-$19.99/month
Web-based Accessible from Anywhere
Ebay and Poshmark Integration. Automatically import sales, fees, refunds, and inventory from these platforms. (For all other sales platforms, you can bulk upload reports.)
Consignment Sales Tracking and Reporting
Accounting Software Solution
3. SimpleConsign. SimpleConsign is a cloud-based consignment software solution that is geared toward brick and mortar but adaptable to online resellers. This is a great solution for resellers in a brick and mortar that have a consignment heavy business model.
Starts at $159/month
Inventory Management and Tracking
Consignment Sales Tracking and Reporting
Sales Tracking and Integrated Point of Sale (POS) System
Consignor Access Portal. Consignors can access their accounts and get real time updates on inventory, sales and payouts
Variable Consignment Structure. Expiration dates and split % can be adjusted down to the item level
4. Ricochet Consignment Software. Ricochet is a consignment software solution that is geared toward brick and mortar but adaptable to online resellers through an additional e-commerce suite. This is a great solution for resellers in a brick and mortar that have a consignment heavy business model.
Starts at $159/month
Inventory Management and Tracking
Integrated Point of Sale (POS) System.
Consignment Sales Tracking and Reporting.
Consignor Access Portal. Consignors can access their accounts and get real time updates on inventory, sales and payouts.
Variable Consignment Structure. Expiration dates and split % can be adjusted down to the item level
5. Rose by Consignor Connect. Rose is a cloud based consignment software that integrates with Square’s services. This is a popular solution for resellers already using Square for Point of Sale (POS) and would like to add consignment to their business model. A good choice for resellers doing pop-up or sale events.
Starting from $50/month
Inventory Management and Tracking
Consignment Sales Tracking and Reporting
Mobile, Web-based Consignment Solution
Consignor Access Portal. Consignors can access their accounts and get real time updates on inventory, sales and payouts
Variable Consignment Structure. Expiration dates and split % can be adjusted down to the item level
Conclusion
Consignment can be such a lucrative business model, whether it is in addition to your established business, or the basis of your entire business. Leverage the advantages of low financial risk, zero inventory costs, and an expanded market reach by implementing a solid consignment model. Choosing the right software can overcome the disadvantages of consignment.
Make consignment accounting, customer service, agreements, payouts, and inventory tracking efficient and easy by choosing the right system and software to work FOR your business. Be confident, knowing that with the right software, you CAN manage it all and keep your consignor relationships flourishing!
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