What's the Difference Between Consignment and Buy Outright?

Intro

To customers walking into a second hand-store or strolling through an outdoor mall in search of something rare, unique, or inspiring, the business model of the seller is mostly irrelevant. For them it’s the vintage Reyn Spooner aloha shirt or the Churchill china that matter. But for businesses and sellers on the other end of the transaction there are significant differences in how they source and handle their goods. 

Below, we’ll break down the key differences between consignment, resale, “buy outright,” and traditional thrift stores. Whether you’re considering opening a store or deciding what to do with your great aunt’s shoe collection, understanding the ins and outs of each will help you make better decisions (plus, you’ll sound smarter at parties).

Consignment vs. Buy Outright

Wrapping your head around the resale/secondhand/consignment industry can be tricky, especially since many of the key terms get thrown around interchangeably. To set the stage, here are a few key definitions:

• Resale: the sale of anything that has previously been sold. This is a blanket term that covers the majority of what many people broadly consider the “second-hand” industry. Items might be used or with their original tags; what matters is that they’re being sold again.

• Consignment: the sale of an item on behalf of the current owner. Most consignment stores primarily sell second-hand (or resold) goods, but not always. For example, many art galleries, craft vendors, etc. sell brand new items on a consignment basis.

• Buy outright: acquiring ownership of a second hand item in order to resell it (with the store or vendor as the new owner). While “resale” can sometimes be used synonymously for “buy outright,” they’re technically different (though often overlapping) terms.

• Nonprofit Thrift: a 501(c)(3) charitable organization where inventory is most often obtained through donations (while we won’t spend a lot of time on this subset, we think it’s worth mentioning).

So: “resale” is a broader industry category that covers any secondhand shop, as well as most consignment stores. “Consignment” and “buy outright” are business models differentiated primarily by who owns the item being sold.

Another way to look at the difference between consignment and buy outright is to see who’s involved in the final transaction. In consignment, there is a store, a buyer, and a consignor—the person who supplies and still owns the goods being sold. In buy outright there is only a store and a buyer.

We wish there was a Venn diagram way to show all the overlap and difference (believe us, we tried), but instead, we’ve constructed this illuminating chart:

Advantages of Consignment

Now that we’re all on the same page, let’s take a closer look at why so many stores and sellers love the consignment model.

For Stores

For stores there are several advantages. First, the consignment model means that the main burden of supplying goods falls on consignors rather than the store. In a well-functioning setup, consignors are motivated to bring in their items and the store has to do minimal sourcing. 

Second, stores carry very little inventory cost. Since the consignors still own their items until they sell, stores can stock their racks and shelves without any upfront cost. The store doesn't pay for inventory until it sells, usually along the lines of a 60/40 split.

Finally, the consignment model incentivizes a constant rotation of fresh stock. Rather than waiting for old items to sell, stores can easily set up a model in which unsold items are returned (or heavily discounted) after a set number of days. The store doesn’t lose any money and new space is regularly available.

For Consignors

Consignment also offers a real upside for individuals with goods to spare. First off, consigning items takes minimal effort. Consignors don’t have to worry about photos, pricing, shipping, or coordinating a time to meet with buyers. The shop handles all that (and with ConsignCloud, it’s easy on their end as well).

Second, consignors get to take advantage of a store’s much larger reach and marketing effort. Consigning your items is, in many ways, simply hiring a professional seller. And even better, you don’t have to pay anything upfront. For many busy individuals the commission split is more than worth the hassle of listing and selling items on their own.

Finally, consignment offers a more engaging feedback loop for individuals who want to dive deeper. Selling through a store means you’ll get a much better understanding of the market and niche where your items belong; for some people that higher bar can turn into an intriguing side hustle.

Conclusion

As the resale industry and alternative forms of shopping continue to boom, consignment offers a win-win model for both stores and savvy individuals. It’s a model that’s been around for centuries and one built on aligned motivations: stores need something to sell, consignors need someone to do the selling. At ConsignCloud, our mission is to facilitate this model so that buying resale becomes the easiest choice for everyone. If you’re interested in joining in, we’d love to hear from you.