What is Consignment? Origin, Definition & Benefits of Consignment

A consignment is an arrangement where a person hands over merchandise to a dealer and gets paid only after they have sold the goods. Typically consignment goods are pre-owned and, as such, have implications for the circular economy. In this article, we look at how consignment arrangements work and their impact on the environment.

Origin of consignment stores

After the industrial revolution made clothing more available and cheaper, people treated clothing as disposable. Jewish immigrants in the US saw an economic opportunity and began to sell old but wearable clothing in pushcarts. 

The idea was unpopular because people saw buying second-hand clothing as an admission of poverty. It wasn't until Christian charities took advantage of the opportunity to raise funds through clothing resale that the idea gained some legitimacy. 

The word consignment originates from the French word ‘consigner,’ which means ‘to deposit.’ The consignment business model was an offshoot of resale clothing. They established it in the 1950s when high-class folks began to show interest in acquiring vintage couture clothes.

From then till now, consignment and thrift have gained wider acceptance. The associated environmental and economic benefits have opened people up to the idea extensively. Furthermore, the consignment business model has enjoyed increasing popularity in recent times thanks to the gradual adoption of a circular economy in today's world. 

As more people begin to take sustainability seriously, second-hand shopping is becoming trendy. Consignment stores are increasing by 7% annually, and there are over 25,000 consignment and thrift stores in the United States².

Related: History of Second-Hand Thrift Shopping

A look at the consignment model

The consignor and consignee are the two parties involved in a consignment transaction. The consignor is the original owner of the item who brings it to the consignee. We also know the consignor as the shipper. The consignee is the other party authorized by the consignor to sell items on the consignor’s behalf. We call the consignee the dealer.

The consignor and consignee split the proceeds, creating a mutually beneficial arrangement. In most cases, the consignor takes the larger percentage. But sometimes, the split is 50/50, or they set up the consignment arrangement in such a way that the dealer gets more.

Legally the consignor maintains full ownership of the item until they sell it. A retail store may operate on a special form of consignment arrangement where they help manufacturers sell their products without purchasing the inventory outrightly. 

For the consignee, consignment arrangements can be very profitable as they mean they do not need to stock the consignment shop at any personal cost. Depending on the agreement made, if an item does not sell after the agreed consignment period, depending on the agreement, they may return it to the owner or donate it to a charity. 

Many consignment shops are regular retail stores, but second-hand stores and their newer online thrift store counterparts are much more common consignment stores. The most common types of merchandise you find in consignment shops are clothing, furniture, books, infant clothing, toys, artworks, and antiques.

Apparel is the most popular consignment inventory. Clothing resale takes up 49% of the resale market.

How is a consignment shop different from a thrift store

Although consignment and thrifting operate by selling previously owned items, there are a couple of differences between both. Below are some differences

Inventory source

Thrift stores get their goods from donations, and the donors give up their ownership rights to the items and the proceeds made after the sale. However, the consignment store is selling on behalf of a person who retains ownership until the item is sold and receives payment from the seller.

If you want to sell unwanted valuables, consignment shops are a great help.

Profit

Another major difference between consignment and thrift stores is what they do with their profits. In the consignment business, the consignee takes a share of the consignment sales for personal gain. Thrift stores, especially popular ones like goodwill and salvation army, use their proceeds for charity.

Consignment stores are mostly for-profit ventures, while they establish thrift stores mainly to raise funds for charities.

How consignment shops promote sustainability

If you want to shop luxury goods sustainably, the consignment store is the place to start. Buying second-hand has many benefits that you don’t want to pass up as an eco-conscious person. Consignment selling has some benefits for people and the environment. Below are some of those advantages

Save money

A lot of times, the consignment stock is previously owned by someone who no longer needs it. The items are second-hand goods and typically sell for less than the price it would cost to purchase them brand new. 

Shopping at a consignment store can help you save on purchases. Not only do the items sell cheaply, but they might also be up for a bargain as well.

The exciting part is that you could stumble on genuinely unique items or designer brands at pocket-friendly prices. Further, consignment stores often stock items, and unsold inventory which is no longer produced, which means you can pick up new goods too at knock-down prices.

Reduce your carbon footprint 

A major advantage for you and the environment is that goods sold through consignment reduce your carbon footprint. Each item you buy comes with a carbon footprint gained from its environmental costs. The production and distribution of goods require energy or processes that emit greenhouse gases.

A pair of Levi Strauss jeans produces about 33.4kg of carbon dioxide throughout its lifespan⁴. That is equal to driving a car for 69 miles. 60% of that emission comes from production alone. A polyester shirt produces about 5.5kg of carbon dioxide.

Buying or selling consignment goods reduces the carbon footprint you acquire for owning an item because you are now sharing the environmental costs with another person.

Related:  How to Reduce your Carbon Footprint

Declutter and earn

You could have a sizable amount of clothing, toys, or furniture that you’d like to sell second-hand. But you don't have the time or space to hold a yard sale or set up a physical store or a resale store of your own. A consignment store comes in handy in such cases. 

You just enter into a consignment agreement and send your items to the store. Then you wait until the item sells to get your percentage of the sale. This makes it easier and more profitable to declutter your space.

A consignment shop may state explicitly what conditions your items need to be in. But usually clean and in fair working condition are general requirements. Easily repairable low-cost damages should not stop such shops from accepting your items.

Reduces resource waste

People are buying more clothes than they used to 16 years ago. And going by the storage statistics in the United States, clothes are not the only things people buy in excess.

Research revealed that although self-storage facilities increased to almost 20 million square feet in 2020, the country still recorded a decline in storage vacancy that year⁵. That trend of consumption is bad for the environment and, ultimately, the economy. 

In 2020 the Ellen MacArthur Foundation reported that the textile industry consumes about 98 million tonnes of non-renewable resources per year³. The industry’s 93 billion cubic meters of yearly water consumption has contributed to water scarcity in some regions. 

You should take your unwanted but still usable clothes, furniture, jewelry, and shoes to consignment shops instead of the dumpster. It prevents the resources that manufacturers put into producing them from going to waste. When you shop at consignment stores, you directly contribute to circular fashion. You reduce the need for manufacturing new products; this, in turn, slows down production. 

Slowed-down production is not bad as it sounds; it doesn't mean that companies will shut down or go bankrupt. Instead, it means that it forces manufacturers to slow down on raw material extraction. This is beneficial for the environment as it will give room for renewable resources to renew themselves. Also, it reduces the rate at which they consume non-renewable resources, ensuring that future generations will have access to them.

Reduces environmental pollution

The fashion industry is the most polluting. It accounts for 10% of global carbon emissions and 20% of the world’s wastewater. Plastic is suffocating marine life and endangering our health. Yet shoppers rush to buy the latest fast fashion outfit or plastic toy introduced to the market without considering how they are aiding environmental pollution.

Landfills emit greenhouse gases that contribute to global warming. 5% of global emissions in 2016 came from waste management solutions like landfilling and burning¹. In developing countries, landfill landslides have destroyed property and endangered lives. 

The World Economic Forum suggests that reusing 10% of plastic goods can cut off half of the plastic entering our oceans. Consignment stores help to reintroduce already loved and used items to new owners. A new owner of a pre-loved item is preventing production and waste pollution. 

Conclusion

Consignment sellers are doing the planet a favor. They help people sell valuable but unwanted items, keeping resources out of landfills and providing profit as an incentive to encourage resale.