The Case for Consignments

The Case for Consignments

When you decide that it’s time to downsize your collection or raise money by liquidating an item or a whole collection, two questions will arise:

  1. Where do I go to sell the item or items?
  1. How much can I sell it/them for?

Next time you’re in the mood to sell, consigning the item to a dealer should be considered, as well as an outright sale.  Consignments are less well known than sales, but very profitable for collectors and dealers alike.

A consignment consists of the collector designating an individual or company to act as sole agent for the purposes of selling an item.  In other words, you authorize another party to act on your behalf, as your sales agent.  Sounds interesting?  Read on.

Advantages of Consignments

  • Most sellers will earn more money for their consignment than for an outright sale.  If you sell an item to a dealer, they will negotiate a price that is considerably lower than the market price for the collectible – sellers typically receive anywhere from 33% to 65% of fair market value.  While this may seem inequitable, this discount is essential to the dealer.  Dealers need to make money selling an item, as they are taking on the risk by acquiring a collectible and must pay sales costs and overhead costs, as well as an opportunity cost for tying up their money.  Since the item could sit for months after the dealer buys it, they need risk protection, in the form of the significant discount from market value.  If a collectible is consigned, however, the consignor (collector) will typically receive 75% or more of fair market value (even more for premium items), the remainder serving as sales commission to the dealer, covering the cost of selling and profit.  In short, consignors tend to earn significantly more money than sellers.
  • Consignors retain ownership of the item until it is sold.  Typically, consignors can cancel the consignment agreement if they decide to retain their collectible (opt not to sell).  In contrast, when you sell, the item is gone, gone, gone!  It’s human nature to have a change of heart, and consignment allows you that luxury.
  • Dealers may be more motivated to sell a consigned item than a collectible they’ve purchased.  Because the item is consigned, most dealers feel a greater sense of obligation to sell the item.  Both consignor and dealer won’t see a dime until the item is sold, so both will push to achieve that end.  In contrast, when a dealer purchases an item outright, they may let it sit in inventory for an extended period.  If they are not motivated to sell immediately, their offer to purchase from the collector will be lower.
  • Dealers are choosier about what they will buy versus what they will accept on consignment.  The reason is simple – the consignment is virtually risk-free to the dealer.  For the collector, this means that it could be more difficult to cut a deal to sell outright than to consign.

The Disadvantages of Consignments

  • A collector will have to wait longer to be paid when consigning, versus selling.  When a collector sells outright, they are paid immediately.  A consignment will take longer for the collector to realize a profit.
  • When the collector consigns, they do not control the sales process.  (If you’re a control freak, beware!)  Instead, the consignee (dealer) has sole discretion for marketing and closing sales.  The collector can make suggestions, but the consignee has no obligation to act on the suggestions.  Essentially, consignors grant the right to control the sales process to the consignee, acting as the sales agent.  After all, the dealer has a business to run.  They should act in the best interest of both consignor (collector) and consignee (dealer) and establish a consultative relationship with the consignor.

The Bottom Line

The decision to consign – or not – is a matter of assessing risk versus reward.  Consignors risk waiting longer – sometimes much longer – to reap the rewards from the sale of their collectible.  The reward is that consignors earn more – sometimes much more – than sellers.

It comes down to this.  If you need money quickly, sell the item to a dealer.  If you want to maximize profits and can afford to wait longer before pocketing the profits, consign.

Consult with your dealer to assess the pros and cons of consignment versus an outright sale.  Be honest and forthright about your needs and expect the same from the dealer.  In the end, your decision should result in a win-win situation for you, the collector, and the dealer.  When it’s win-win, you can’t go wrong.

Back to blog