Consignment stock is goods that you sell in your own name but that remain the supplier’s property until they are sold. You receive them into your warehouse or onto your shelves without paying for them. Settlement only happens once a customer buys: the sales proceeds go to the supplier, and you keep an agreed commission.
In trade law this model is called a consignment arrangement. The supplier is the consignor, you are the consignee. It is typical in boutiques, galleries, bookshops and for consignment stock in industry. It appears less often in online retail but is often confused with dropshipping.
- Consignment stock belongs to the supplier until it is sold, but it sits with you.
- You sell in your own name, invoice the customer, and settle with the supplier through commission.
- Unsold goods go back, so you carry no purchasing risk, but you do carry storage, liability and stocktaking duties.
- With drop shipment and dropshipping, the supplier stores the goods and ships directly; with consignment, you store and ship.
- In an online shop, the same rule applies to consignment as to any other supplier: stock and prices have to stay accurate at all times.
How is consignment stock settled?
The basis is a consignment agreement. It sets out the commission rate, the settlement period, return rules, and who bears transport, insurance and loss. When you sell, you issue your customer a normal invoice with VAT. With the supplier, you settle at fixed intervals, usually monthly: units sold, proceeds, commission deducted, remainder to the supplier.
For tax purposes, the delivery to the customer counts as your delivery, even though you were never the owner. The consignment statement also serves as the record of your purchase. How this looks in your bookkeeping is something to clarify with your tax adviser before the first consignment supplier goes on the shelf.
Where is the risk for you?
No purchasing risk, but possession. The goods sit with you, so you are liable for theft, damage and loss unless the contract says otherwise. You need space, a stocktake that separates third-party goods, and settlement figures the supplier can follow. The upside lies elsewhere: you can test a range without tying up capital.
Consignment stock, drop shipment or dropshipping?
All three models sell someone else’s goods without buying them for stock. The difference lies in storage and shipping.
Consignment stock
Stock held by you
- Ownership before the sale: Supplier
- Storage: With you
- Shipping to the customer: You
- Payment to the supplier: After the sale, proceeds minus commission
- Unsold goods: Go back
Drop shipment
Stock held by the supplier
- Ownership before the sale: Supplier
- Storage: With the supplier
- Shipping to the customer: Supplier directly
- Payment to the supplier: Purchase price per order
- Unsold goods: Does not apply
Dropshipping
Drop shipment online
- Ownership before the sale: Supplier
- Storage: With the supplier
- Shipping to the customer: Supplier directly
- Payment to the supplier: Purchase price per order
- Unsold goods: Does not apply
When is consignment stock worth it?
Probably not
- You have no space and do not want to run a warehouse
- The supplier demands minimum quantities or long commitment
- Settlement would have to be maintained by hand
- The goods age quickly or are fragile
Good fit
- Testing a new range without tying up capital
- High-value individual pieces that customers want to see
- Regional makers looking for reach
- Supplier reports stock and accepts returns
Managing consignment stock in an online shop
In the shop, consignment stock is a supplier like any other: its own products, its own purchase prices, its own stock. The difference sits in the settlement, not in product management. What actually costs you time is the same as with a drop shipment: creating products, calculating prices, keeping stock current and not losing track on restocks.
Import2Shop runs suppliers with their own warehouse alongside suppliers who ship directly. Products come from the supplier’s data feed into the shop, the sales price comes from your pricing rules, and stock is tracked per supplier. How this works alongside your own stock is explained on the own stock page, and the pricing rules are covered on the pricing page.
Frequently asked questions about consignment stock
What does consignment stock mean?
Goods that you sell in your own name but that belong to the supplier until they are sold. Payment only happens after the sale, minus your commission.
Who owns consignment stock?
The supplier, the consignor. You are only the holder and sell on their behalf, but in your own name.
How is consignment stock settled?
You issue the customer a normal invoice. With the supplier, you settle at fixed intervals: proceeds from the units sold minus the agreed commission, the rest goes to them.
What is the difference between consignment stock and dropshipping?
With consignment, the goods sit with you and you ship them. With dropshipping, the goods stay with the supplier, who ships straight to your customer. In both cases, the goods belong to the supplier until sold.
Who is liable if consignment stock is damaged?
Usually you, because the goods are in your possession. The consignment agreement can set this differently, for example through insurance taken out by the supplier.
Can I manage consignment stock automatically in an online shop?
Yes. Import2Shop imports products and stock from the supplier’s data feed, calculates prices using your rules, and tracks stock per supplier, whether the goods sit with you or with the supplier.
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Products, prices and stock for every supplier stay current automatically, whether consignment, drop shipment or your own warehouse. Cancel monthly.
