Consignment shop guide: how consignment works

A consignment shop sells goods on behalf of their owners and pays them a share of the price only once each item sells. The shop doesn’t buy the stock up front, which makes consignment a popular way to run a resale clothing store, a furniture or vintage shop, or a boutique that carries work from local makers.

This guide explains how consignment works, typical splits, what goes in a contract, how to price and mark items down, how to track each consignor’s items and payouts, and the steps to start a consignment shop of your own.

How consignment works

There are two sides to every consignment arrangement:

• The consignor owns the item. It might be a person clearing out their closet or a maker who wants to sell in a shop.
• The consignee is the shop. It displays the item, sells it and keeps a share of the price.

The basic cycle looks like this:

1. The consignor brings in items. The shop decides what to accept.
2. Both sides sign an agreement covering the split, pricing, how long items stay, and what happens if they don’t sell.
3. The shop tags, prices and displays the items.
4. When an item sells, the shop records whose it was.
5. On a set schedule, the shop pays the consignor their share of everything sold.
6. Items that don’t sell within the agreed period are marked down, returned, or donated, as the contract says.

Until an item sells, it still belongs to the consignor. That’s the key difference from wholesale, where the shop buys stock outright. If you’re comparing the two, see our guide on how to buy wholesale.

Consignment vs buying outright

Typical consignment splits

The split is how the sale price is divided between consignor and shop. There’s no standard, and it varies by what you sell, your area and how much work each item takes. As examples, many shops use splits like:

• 50/50, common for clothing and general resale.
• 40/60 (40% to the consignor, 60% to the shop) for lower-priced items that take as much handling as expensive ones.
• 60/40 or 70/30 in the consignor’s favor, sometimes used for handmade work, higher-value pieces, or when the maker does more of the work, such as setting up their own display.

Some shops use a sliding scale, with the consignor getting a bigger share as the price goes up. Others charge makers a small monthly fee for shelf space plus a lower commission. Whatever you choose, write it down and apply it the same way to everyone.

When you set your share, remember it has to cover rent, staff, card processing fees, tags and supplies, and the time spent sorting and tracking. A split that sounds generous can leave the shop with very little.

What goes in a consignment contract

A clear written agreement prevents most disputes. Every consignor should sign one before you accept their items. It typically covers:

• The split, and whether it’s calculated before or after sales tax and card fees.
• Pricing: who sets the price, and whether the shop can change it.
• Consignment period: how long items stay on the floor, often 60 or 90 days.
• Markdown schedule: when and by how much prices drop.
• Unsold items: whether the consignor must collect them by a date, and what happens if they don’t, such as donation or the items becoming the shop’s property.
• Payouts: how often (monthly is common), how (check, transfer or store credit), and any minimum.
• Loss and damage: who’s responsible if an item is stolen, broken or damaged in the shop.
• Returns: what happens to the consignor’s payout if a customer returns an item.
• Item list: a signed inventory of what was dropped off, with descriptions and agreed prices.

This is general information, not legal advice. Consignment rules vary by state, and some states have specific laws about consigned goods, especially art and craft work. Have a lawyer review your contract before you use it.

Pricing and markdown schedules

Pricing well is the hardest part of consignment. Consignors often value their things more than buyers will. Price for what sells in your shop, and explain your reasons.

A markdown schedule keeps stock moving, and agreeing it up front saves arguments later. A simple example for a 90-day period:

Many shops use colored tags or a date code on each tag, so staff can see at a glance which markdown applies. The discount calculator helps you work out sale prices quickly.

Tracking each consignor’s items and payouts

Consignment lives or dies on record-keeping. You’re holding other people’s property and money, and every consignor will want to know what sold and what they’re owed.

• Give each consignor an ID, like a number or short code.
• Put the consignor ID on every tag, along with an item code, the price and the intake date. Building the consignor code into each item’s SKU is a simple way to do it.
• Log every item at intake: description, price, consignor and date.
• Record each sale against the item, including the actual sale price after any markdown or discount.
• Run payouts on a fixed schedule. For each consignor, total their sales for the period, apply the split, and pay. Send a statement listing each item sold.
• Keep the consignor money separate in your own books. It isn’t your profit.

A small shop can manage this with a point of sale that tracks items by SKU, plus a spreadsheet that maps SKUs to consignors and calculates payouts. As you grow, dedicated consignment software that handles payouts directly may be worth it.

Your consignor payments may also have tax reporting requirements. Ask your accountant how to handle them.

How to start a consignment shop

1. Pick a niche. Kids’ clothes, designer fashion, furniture, vintage, or local handmade goods. A focus makes intake, pricing and marketing easier.
2. Check the local market. Visit other resale and consignment shops nearby, and note their splits, prices and what they turn away.
3. Handle the paperwork. Register the business, get a sales tax permit, and check local licenses and zoning. Some areas have rules for secondhand dealers.
4. Write your contract and policies and have them reviewed.
5. Find a space with room for intake and storage as well as the sales floor, or start smaller with a booth in an antique mall or a corner of an existing shop.
6. Set up your systems for tagging, recording sales and calculating payouts before the first item comes in.
7. Recruit consignors before opening, so you have stock on day one. Local makers from craft fairs and markets are good candidates.
8. Get insurance that covers goods you hold for other people.

Once you’re open, set up a free Google Business Profile so shoppers and potential consignors can find you.

Is a consignment shop right for you?

Consignment suits people who enjoy sorting, pricing and talking with lots of different suppliers. You trade the cost of buying stock for more admin: intake appointments, tagging, tracking and monthly payouts. Your stock also depends on what consignors bring in, so your shelves can be full one month and thin the next.

Some shops mix the two models: they buy their core stock wholesale and fill out the floor with consigned pieces from local makers or a curated resale rack. That gives steady margins on the bought stock and variety from consignment without tying up cash.

Where SleepingFire fits

SleepingFire doesn’t have a consignor payout feature, so it won’t calculate splits or pay consignors for you. It does handle the selling side: you can add each item with its own SKU (including a consignor code), price and stock count, ring up sales by cash, card or gift card, apply discounts for markdowns, and see exactly which items sold in your sales reports. From there, many shops total payouts in a spreadsheet. See how it works for boutiques, or read about sales reports.

Frequently asked questions