Posted Wed, Sep 4th, 2013
Why consignment is always better

Why consignment is always better.

Consignment is the act of consigning or sending goods, essentially placing goods, in the hand of an agent (Consignee), but where the sender (consignor) retains ownership until the goods are sold.

Real Estate is a prime example of consignment at work. Property is "handed-over" to a marketing and sales professional who has intimate and in depth knowledge of the market and has immediate access to buyers and has established and successful marketing strategies. The consignor will pay a fee when the property is sold and the consignee will happily invest time and money to find a buyer. If the property is in fabulous condition, well maintained and cared for, then the consignee has a better chance of finding multiple potential customers who will pay the asking price.

The same concept exists with high-end analytical and clinical instrumentation. 3 to 5 years old, well cared for instrumentation may be better sold under a consignment arrangement rather than just selling to a middleman.

Think about it. The middleman, when buying your surplus instrumentation, has to account for all of the risk elements that could potentially impact his or her ability to make a profit. Time to sell, return on investment, repairs and refurbishment, risk of obsolescence, and cost of money. All of these factors will depress the value of the instruments as the risk is weighed up.

With consignment, none of these risks exist, and consignment becomes a win-win-win.

The consignor wins because they have access to a resource that has skill and knowledge in finding buyers, refurbishing, logistics and installation services so you don't need to burn your own resources trying to sell surplus equipment.

The consignee wins because they have control of equipment with none of the risk of ownership.

The buyer wins because they can better understanding of the history of the equipment and typically get answers from the existing users, minimizing any risk associated with the purchase

What does it all cost?

The sale proceeds are handled pretty much the same from consignee to consignee. Once the sale is complete, over and paid for, the consignee will issue a statement to the consignor that consists of any bona fide expenses that may have been incurred by consignor and consignee. These expenses are reimbursed first from the proceeds. The balance is normally split 70/30 in favor of the consignor. This can appear in a variety of forms. For example, some consignees only charge a 15% commission and charge the buyer a 15% buyers premium. Under either scenario, the net dollars to the consignor are the same as allowances are made on the sales price

Consignment is great if the seller is not in a rush for the cash. The opportunity to get a return closer to the retail value, versus cents on the dollar, is by far the best way to liquidate assets.