The Pros and Cons of Sale or Return

Sale or return, also known as 'in consignment', is basically a loan of stock to a wholesale customer. No money changes hands at the time of handing over the stock, but usually, a formal agreement is signed at this point.

The retailer offers the stock for sale and only pays the supplier for the items that sell, returning the remainder at the end of an agreed period.

How it differs from wholesale buying

Unlike traditional wholesale buying, where the shop could be left with a surplus of stock, they can simply return any unwanted items to the supplier. So from the retailers perspective, sale or return is a very low-risk option. They can expand their range without any investment, although they will usually find that costs are adjusted to compensate for this benefit - typically to a 50/50 or 60/40 split in the supplier’s favour.

However, from the supplier’s side, sale or return is high risk. You are handing over your precious stock for free, trusting that the retailer will look after it, promote it properly, and return what’s rightfully yours at the end of the period.

Why sale or return might work for you

If your items are of a very high selling price, and the investment would be too great for a retailer, you may decide that sale or return is the best way to retail your products.

If you are very new, and/or have identified a ‘must-have’ retailer to take your product forward, you may come to an agreement while you ‘test’ the suitability of your brand in their store for a limited period. At the end of the timeframe, you can either switch to wholesale terms or part company.

What you should include in a sale or return agreement

If you decide to go down the sale or return route, it is essential to have an agreement in place. Your agreement should include the following information:

• A statement of ownership - declaring that the goods remain your property until they are paid for

• An inventory of what you have supplied, with quantities, descriptions, selling price and cost price

• The agreed return date

• Payment terms

• Who is responsible for safeguarding and ensuring the products while they are with the retailer:-

What happens if the goods are lost/stolen/damaged whilst with the retailer?

Making sale or return less risky

Be very choosy about who you work with because sale or return has to be based on trust. If you have any doubts about a retailer, listen to your gut instinct and stick to the usual wholesale terms.

If you are supplying an online store, take time to evaluate it and satisfy yourself that it is a professional and appropriate website for your product. If you are supplying a brick and mortar store, and if geography allows, take a look around to make sure the stock is cared for and well merchandised.

Stay in regular contact with the retailer, and keep accurate records of sales.

Getting the most out of sale or return

You can usually negotiate some extras from your customer - consider asking for a window display or email promotion. If you are loaning a statement piece or very expensive item it may even warrant a press release.

Give your B2B customers everything they need to be able to sell your products effectively. This might include point of sale materials, a demonstration, or just a sheet of paper that gives full product descriptions and details.

Side-stepping sale or return

If a retailer requests sale or return from you, and you don't feel comfortable, there are alternatives to simply saying 'No!' Dropping your minimum order amount is a good place to start; this allows the customer to dip their toe in the water with a small order to see if your brand is a good match for their store.

If you are looking to take wholesale orders online, try Orderspace for free for 30 days and see how much time and money you could save with our B2B eCommerce solution.

Further Reading:
Why your retail website won't work for your wholesale customers
Five B2C Principles You Should Apply To Your B2B Sales Process
Transitioning to an Online Wholesale Ordering System
How to Approach New Stockists
Wholesale and Retail Customers - Are They Really That Different?
Getting Started With Wholesale