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      HomeProductsInventoryConsignment Products 101 for Singapore Retailers

      Consignment Products 101 for Singapore Retailers

      In the bustling retail landscape of Singapore, navigating the intricacies of consignment product is crucial for retailers and suppliers. As the market continues to evolve, the prospect of integrating consignment items into one’s inventory may evoke a sense of concern.

      Therefore, understanding the dynamics of this business model becomes crucial for those seeking sustainable growth and competitive advantage. In this comprehensive article, we will guide you into what consignment entails, its operational mechanics, and its significance in Singapore’s retail industry.

      Key Takeaways

      • Consignment offers a flexible, low-risk retail model beneficial to both suppliers and retailers.
      • Effective management of consignment inventory is crucial for success.
      • While advantageous, consignment also presents challenges such as delayed revenue for suppliers and inventory management complexity for retailers.
      • Implementing best practices like thorough vetting, regular inventory review, and tailored marketing strategies can enhance the effectiveness of consignment.
      • HashMicro provides tailored inventory management solutions, empowering businesses in Singapore’s dynamic retail environment.

      Table of Content:

        What Is Consignment? Definition and How It Works

        In the retail world, the term “consignment” refers to a unique business arrangement where goods are placed in the care of a third party (consignee) until they are sold. The original owner of these goods, known as the consignor, retains ownership until the items are purchased by a customer. This model is common in various sectors, including fashion, books, art, and furniture.

        In Singapore, consignment has emerged as a popular method for retailers to offer a diverse range of products without incurring significant inventory costs. For suppliers, consignment presents an opportunity to reach a broader market without the need for a physical storefront. But how exactly does this process work in the Singapore retail scene?

        When a product is consigned, it is entrusted to a retailer who agrees to sell it in their store. The consignor and consignee typically agree upon a price beforehand, and once the item sells, the consignee takes a percentage of the sales price as commission. The remainder of the proceeds goes to the consignor. This arrangement is beneficial for both parties as it reduces upfront costs for the consignee while providing market exposure for the consignor.

        However, managing consignment inventory can be challenging. Retailers need to track which products belong to which consignors, monitor sales, and ensure timely payments. To do so, many retailers have turn to effective warehouse inventory management systems that can handle these complexities, particularly in Singapore’s fast-paced retail environment.

        How Consignment Product Works

        Consignment Product

        Consignment product works by forging a symbiotic relationship between consignors and consignees. Consignors, often manufacturers or wholesalers, provide their products to retailers without demanding immediate payment. This arrangement allows retailers to expand their product offerings without committing substantial capital upfront.

        The process typically involves a contract or agreement that outlines the terms of the consignment, including the consignment period, pricing strategy, and the division of revenue upon sale. Retailers display these products alongside their regular inventory, making them available to their customer base.

        When a customer purchases a consigned item, the retailer processes the sale and later remits the agreed-upon share of the proceeds to the consignor. This system is particularly advantageous in sectors where product trends change rapidly, such as fashion and technology, allowing retailers in Singapore to keep their offerings fresh and current without the risk of unsold stock accumulating.

        How to Manage Consignment Inventory

        Managing consignment inventory involves a strategic approach to handling goods that are still owned by the supplier but stored and sold by the retailer. To initiate the process, an agreement is established between the supplier and retailer, outlining terms such as stock levels, pricing, and payment arrangements.

        Notably, the retailer only pays for the goods when they are sold, minimizing financial risk. Regular communication between both parties is crucial, ensuring accurate tracking of inventory levels and prompt replenishment when needed.

        Moreover, efficient record-keeping and technology solutions can enhance transparency, aiding in monitoring sales, returns, and overall inventory performance. This collaborative and transparent management approach ensures a win-win situation for both the supplier and retailer, optimizing the consignment inventory process.

        Advantages of Consignment

        Consignment brings numerous advantages to both suppliers and retailers in the Singapore retail market. For suppliers, especially new entrants, it offers a chance to enhance brand visibility by showcasing products in retail spaces without the need for their own investment in marketing or retail space.

        Additionally, valuable feedback from retailers and customers aids in understanding product performance and preferences. This approach also allows suppliers to manage inventory more effectively by placing products in multiple retail outlets, reducing the risk of overproduction.

        On the retailer side, consignment enables stocking diverse products without a substantial initial investment, providing a wider variety that caters to different customer tastes. The model allows for a fresh inventory and lowers the risk for retailers since products are not purchased upfront. A well-managed consignment system thus creates a mutually beneficial situation for both suppliers and retailers in Singapore, offering a flexible and risk-mitigated approach in the competitive retail market.

        To better understand the advantages of consignment for both suppliers and retailers, here are the key points:

        For suppliers For retailers
        Market exposure Reduced upfront costs
        Reduced risk and investment Flexibility and variety
        Customer insights Risk mitigation
        Flexibility in inventory management Enhanced customer attraction

        Disadvantages of Consignment

        While consignment brings numerous benefits, there are also challenges that both suppliers and retailers must consider. For suppliers, delayed payments until a product sells can strain cash flow. The success of a product hinges on the retailer’s sales proficiency, introducing uncertainty. Additionally, the risk of damage or theft during the retailer’s possession poses potential losses.

        On the retailer’s side, they face complexities in inventory management. This demands meticulous tracking and accounting for consigned goods. Furthermore, retailers grapple with limited control over consignment stock, potentially misaligned with customer demand. Devoting space and resources to slow-selling consignment product poses challenges for retailers.

        To better understand the disadvantages of consignment for both suppliers and retailers, here are the key points:

        For suppliers For retailers
        Delayed revenue Inventory management complexity
        Dependence on retailers Limited control over stock
        Risk of damage or loss Space and resource allocation

        Consignment Inventory Best Practices

        Effective management of consignment inventory is pivotal in Singapore’s retail sector, where efficiency and customer satisfaction are key. Retailers must navigate the intricacies of tracking, selling, and reconciling consigned goods, which requires a robust system that ensures accuracy and transparency. Here are some strategies to effectively manage consignment inventory:

        Implement an advanced inventory management system

        Consignment Product

        Utilize software that can specifically track consignment items, differentiating them from owned inventory. This system should be able to monitor sales, returns, and inventory levels in real-time. One of the best inventory solutions is HashMicro’s Inventory Management System. It offers various benefits, such as:

        • Effortless consignment activation: Activate consignment features seamlessly using HashMicro’s Inventory System configuration settings for a smooth consignment process.
        • User-friendly consignment reception: Easily receive consigned stock through a user-friendly interface, allowing manual receipt creation and accurate tracking linked to supplying vendors.
        • Seamless sales process: Navigate the sales process effortlessly with HashMicro’s system, treating consigned stock like any other item for an integrated approach to selling consignment product.
        • Traceability and reporting: Despite consigned products belonging to vendors, HashMicro’s Inventory System provides robust traceability and reporting features. Generate specific reports, such as stock on hand, for insights into consigned goods’ status and location.
        • Enhanced product movement visibility: Gain comprehensive insights into consigned product movement using the Product Moves dashboard. Understand quantity, reference documents, and locations for informed decisions throughout the consignment journey.
        • Comparative analysis tools: Utilize reference points within the system for comparative analysis. Benchmark consignment processes against competitors, identifying areas for improvement to maintain competitiveness in the market.

        If you are wondering about the costs, you can click this image below to find out one of the best inventory solution’s pricing schemes.

        download skema harga software erp
        download skema harga software erp

        Clear agreement on terms

        Both consignor and consignee should have a clear understanding of the consignment terms. This includes pricing, duration of the consignment, and the process for unsold goods.

        Regular inventory audits

        Conduct periodic checks to ensure the physical inventory matches the recorded data. By implementing periodic checks, businesses can proactively identify any discrepancies between what is physically present in stock and what is documented.

        This proactive approach serves as a crucial preventive measure against potential losses, as it allows for timely correction of errors, minimizes the risk of stockouts or overstock situations, and ensures the accuracy of financial records. For efficient and accurate inventory audits, you can utilize an inventory system.

        Efficient communication channels

        Consignment Product

        Maintain open lines of communication between consignors and consignees for updates on inventory status, sales, and any other relevant information.

        Staff training

        Ensure that staff members are well-trained in handling consignment product, from sales techniques to processing returns.

        By adopting these practices, retailers in Singapore can proficiently manage consignment inventory, leading to smoother operations and enhanced relationships with consignors.


        Consignment products offer a unique opportunity for both suppliers and retailers in Singapore’s retail market. By understanding and leveraging this model, businesses can enjoy increased flexibility, reduced risk, and enhanced product variety. However, it’s important to acknowledge the challenges and implement best practices for effective management.

        For retailers and suppliers looking to explore consignment opportunities, one of the most well-known software provider in Singapore, HashMicro provides innovative inventory management solutions tailored to the dynamic needs of Singapore’s retail landscape. Discover how this cutting-edge technology can streamline your consignment operations, ensuring efficiency and profitability. For further details, click the image below and experience the future of retail with a free demo of HashMicro’s warehouse inventory solutions today!


        Frequently Asked Questions About Consignment Product

        • What are examples of consigned goods?

          Examples of consigned goods include artwork, handmade crafts, and specialty products where suppliers provide items to retailers for sale.

        • What is the difference between resale and consignment?

          Resale involves purchasing items outright for later resale, while consignment involves selling goods on behalf of suppliers, with payment to the supplier made after the items are sold.

        • What items sell best on consignment?

          Products that sell best on consignment are often those in demand, unique, or niche, ensuring a steady flow of customers attracted to the diverse inventory offered by retailers.

        • What are some challenges of consignment for retailers?

          Challenges include managing complex inventory, limited control over stock, and allocating space and resources for consigned goods.

        • Can consignment work for all types of products?

          While consignment can be versatile, it works best for products that are in demand, unique, or niche, and where quality can be assured.

        Syifa Fadiyah
        Syifa Fadiyah
        In my role as a content writer, I regularly produced a few articles to assist businesses in need of a system. In addition, I authored a few helpful articles that are related to the method that businesses use.

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