Consignment vs Wholesale vs Dropshipping – Detailed Look
INCREASING THE NUMBER OF STOCKISTS
After they have begun to germinate their business seeds, many entrepreneurs begin to consider stockists for their products or services.
It is critical to select stockists who are capable of representing your company’s brand.
Discovering whether your gallery or shop manages its suppliers through a consignment arrangement is critical to your success in business. This could be in the form of wholesale, drop shipping, or retail. This is a critical financial and logistical decision, and you must be well prepared for each scenario.
DBP has been involved in the stockist arrangement from “both ends.” A variety of wholesale and consignment arrangements were available through Angela’s website Leeloo. Renee was an illustrator who stocked Leeloo’s merchandise (and it was via her that I met Renee!). She also managed Baker and Bailey and executed several wholesale and consignment agreements with stockists on behalf of the company.
This knowledge, combined with some research, has led us to present some basic recommendations for Australian designers and producers on how to position themselves for success as a stockist.
The Process of Selecting a Stockist
First and foremost, do the brand and item correspond? You should make certain that your things complement the overall aesthetic of the gallery and that they are approachable to customers. Make a secret purchase and observe how it proceeds in-store or online to see what happens. You can use their business to gain a sense of how they operate theirs and then assess if yours is appropriate.
Also, see Dropship Selling Academy Review and Advantages for more information.
The fact that you don’t want stockists to be too close together is critical to remember. You should specify that only one stockist will be available within a specified distance of 5 kilometers, 10 kilometers, or more, depending on how crucial exclusivity is to your merchant.
Handy Tip: Include a list of your stockists on your website to show your appreciation for them. Your pieces will be on display between market stalls, allowing your audience to see them in person.
WHOLESALE
This is the favored option for the majority of manufacturers and retailers. It entails a merchant purchasing your products at wholesale from you and then reselling them to clients.
According to industry standards, the wholesale price is 50% of the retail price, minus a 10% GST registration fee. If you are a new producer, the cost of your products is a crucial consideration. You may have to re-evaluate your entire price structure to accommodate a wholesale relationship.
For another firm to make money selling your items, it is not a good idea to undervalue yourself. No matter how low your wholesale price is, you must examine the profit margin before proceeding.
Purchasing stock in bulk from a retailer is known as wholesaling. The retailer then must sell the stock within their own company. You can bet that these things were acquired through your wholesale catalog. Some online companies, such as Shopify, allow you to create a distinct login space or code for your wholesalers, allowing you to handle a single point of inventory rather than several points of inventory.
Also, see 24 Useful Google Chrome Extensions for Dropshipping for more information.
They may choose to display the things in a store or on the internet. This ensures that the branding is consistent across all brands. After your products have been purchased by an end retailer, you, as the manufacturer, have little to no influence over what happens to them. You can, on the other hand, supply the merchant with information about yourself, your products, and your sales technique to assist them in selling. The ability to influence final purchases is a critical responsibility for the sales personnel in a retail establishment.
It’s worth considering: If the merchant determines that it’s time for you to offer significant discounts on your things because they aren’t selling, you may wish to establish terms and restrictions. If you are concerned about the issue, you should make a decision regarding which brand to use.
A presentation of your products in your retailers’ stores may be appreciated. This assists in maintaining brand visibility in areas where it is not viable to do it otherwise.
Keep in mind to incorporate your contact information in your visual merchandising as well. This will enable the store to immediately replenish its inventory of your products. Do not be afraid to go to the store or check with your retailer to ensure that your things are authentic.
CONSIGNMENT
A consignment is a form of selling in which the majority of the risk is borne by the buyers. This structure can differ from one merchant to the next depending on the circumstances.
A consignment system is one in which a creator provides pieces to a reseller or retailer on consignment. The customer purchases the pieces, which are maintained by the reseller or merchant and resold to other customers. There is a possibility that the reseller will not pay the consignee for the items until they have been sold by the reseller.
Another crucial consideration is that the retailer will deduct a percentage of the retail price from the sale price. Assuming your consignment agreement includes a 30 percent commission rate and your things sell for $100, the merchant will pay you $70 once the item has been purchased. From one merchant to the next, the percentage rate varies slightly.
You may also be interested in reading How to Dropship Smartwatch with Top Suppliers?
The GST registration status of the firms may be affected as a result of this once again.
Galleries and other companies may fill their rooms with works without having to spend a lot of money on inventory that may or may not be sold in the short term. Producers have the option to be visible among other brands while still maintaining ownership of the things they produce.
Some stores may need you to agree to the terms and conditions of consignment before accepting your item. You should carefully read them and only accept the information that you are comfortable accepting.
Important to remember: Once you have established this arrangement, it is critical that you keep track of any goods that have been supplied, sold, and is still available. If it doesn’t sell right away, you can typically return it and resell it at a later date, for example, at a forthcoming marketplace.
A useful tip is to keep in touch with consignment stockists regularly to see how your things are performing. If your products are not selling, you may want to try switching to a different product line. If you haven’t already, ask for a monthly update on your account.
DROPSHIPPING
This concept enables retailers to operate their businesses entirely online, eliminating the need to keep inventory, ship orders, or handle shipping operations. In contrast to traditional retailers, which provide only the technology and sales platform for their businesses, logistics operators handle or outsource all other aspects of their operations to them.
This circumstance has numerous advantages and disadvantages for both the seller and the manufacturer. Dropshipping is a term that refers to the process of having items transported directly to you rather than to a stockist. You may be paid a yearly fee or a portion of the sales of things purchased through their online store. Dropshipping arrangements differ from one store to the next, so check with them first.
If an item is sold by an online or brick-and-mortar retailer, you will be notified. It is your responsibility to ship the item to the buyer on your behalf. In either case, the online retailer will have either purchased or contracted with a third-party logistics provider (often known as a “3PL”) to manage all of the business’s shipping needs. It is critical that you understand your delivery responsibilities and how you will pay for them.
In addition, check out Which is Better: Dropshipping vs Wholesale Comparison.
Dropshipping is simple for retailers, and it carries a low level of risk. Dropshipping is a convenient and cost-effective method of selling things online. A website must be developed and maintained by the store to facilitate sales and attract customers to shop with them. Order fulfillment is left entirely in the hands of the manufacturers.
It is critical to question yourself if you are receiving the most value for your money. How much effect does the retailer platform have over the purchasing decisions of customers?
It is critical to ensure that the retail brand you select is compatible with your company’s needs. You should check with other retailers to ensure that they have a good reputation. Dropshipping provides a chance for manufacturers to boost their brand awareness while also increasing their visibility. In addition to being less profitable, managing the deliveries requires more time and effort. Arrangements for drop shipping should be considered partnerships rather than a stockist arrangement that implies a client relationship.
When determining whether or not to link your company with a retailer, you want to be able to observe their marketing efforts and discover beneficial effects from the campaigns they do.
When there are a large number of manufacturers shipping from various places, there are numerous points of failure. If other manufacturers fail to pay attention to details or are sluggish to supply things to clients, this could hurt the reputation of your company.
You should be aware of how the store will manage returns and refunds, as well as the implications of this for you and your business.
Additionally, read How to Begin Dropshipping Travel Products with the Best Suppliers.
Provide drop shippers with an exclusive selection of products, as a helpful hint. This will allow you to manage your inventory as well as track the progress of the retail collaboration with the retailer in question. Dropshipping agreements are a terrific method to increase brand recognition and alignment while also generating revenue.
For Australian designers, artists, and other creatives interested in finding stockists to sell their products, the following information is for you. Before signing any wholesale, consignment, or drop shipping deal, be sure you understand the terms and circumstances of the agreement.
If you’re interested in setting up a wholesale business but aren’t sure where to begin, please contact us. Many of our mentors have been able to assist them in entering the wholesale market with their businesses completely prepared and their eyes wide open, which has been beneficial.