Question

Under what conditions would a seller be willing to sell on consignment? Under what conditions would a seller be willing to sell on terms of cash before delivery? Lastly, Under what conditions would a buyer be comfortable with each of these two extreme terms of sale? (on consignment OR cash before delivery)

Answer 1

seller willing to sell on consignment:

1.for save on inventory: The retailer doesn’t have to cough up the cash until the item is sold to the end user. In other words, the consignee doesn’t have to pay the supplier (or ‘consigner’) until the merchandise is sold, which improves cash flow on the part of the retailer.

2.there are some items of inventory that need to be in front of the customer in order to sell. I.e. merchandise that customers need to touch, taste or test before they purchase. Consignment selling makes it much easier for the supplier to convince the retailer to stock their product.

3.restock as it sell:A benefit for both parties is that consignment selling generally avoids lag times between selling stock and new orders arriving. It’s in the best interests of the supplier and retailer to keep the shop restocked, so inventory is usually replaced as soon as it sells. The lag time between goods sold and new goods arriving is potential business lost, which consignment selling avoids.

4. Reduces risk for new products or sales channels:Selling on consignment allows suppliers and retailers to ‘test the waters’ on the success of a new product or a new sales channel without running the risk of major financial loss. Retailers can introduce an unproven item or try an established product in a new sales channel before investing heavily in it. In the end it’s better for both retailers and suppliers to work out what product sells best in which arena before pouring more capital into it.

5.Introducing a new product allows both the retailer and supplier to judge what levels of inventory are turned over in particular time periods. This allows the retailer and supplier to eventually establish a more traditional bulk order system in realistic order quantities that suit both the former consignee and consigner. Ordering the right amount, selling the right amount and using consignment sales to change course every now and then establishes a stronger relationship between both parties.

sell on terms of cash before delivery

if the company in question has poor references from suppliers, request cash before delivery.

it is the most secure method because it ensures full payment before the delivery of the goods.