PAY FOR RENT OR CONSIGN?

[Former_Member]

A friend and I are opening a small retail location in a booming beachside location. While I have had a retail location before, both of us have also consigned to other locations.

We plan on "renting" space for artists and craftspeople to display and sell their merchandise, while we manage the day to day operations. We think the situation may be quite beneficial for all involved, as we offer a promininent location with plenty of foot traffic, full staffing, marketing and website exposure, a weekly downtown craft market, a monthly artwalk and monthly events in the store...with a fixed monthly fee, rather than taking a % of sales.

We are wondering if anyone has feedback or comments about the viability of this idea?

[WovenByKim]

Sounds good to me. Where are you?

I have done it both ways in the past and find that paying rent is the way I prefer. It is also much easier for tax time.

[Former_Member]

We are in downtown Huntington Beach, California. Just 1 1/2 blocks from the ocean, and 1 block over from the pier...

We thought it might be good because it increases the "owners" interest in vendors sales, as we want you to be successful and stay in our store. Our concept is very green, and we will be looking for vendors with the same philosophy. We are using alot of found obects to create the store interior and build a very unique look.

We also are interior designers and will have a small design studio next door.

[Former_Member]

In my area, which is also a beachside community but on the east coast, the traditional consignment shop (40/60 split when the item sells) has pretty much disappeared. In it's place has cropped up these subletting aggreements, where the sellers rent a 10x10 space month to month at a rate of anywhere from a $100 to $450 per area depnding on the prominence of the actual store's location and the location of the space within the store.

The shop owners provides the selling and administration services (paying the sales taxes, maintaining sales records by vendor, providing a way to accept credit cards, advertising,etc.) then charges a 5% administration / equipment charge when the items sells, but the creator (or provider) of the the items is required by the contract to stop in at least once a week to clean and straighten (sometimes inventory) their display area and to provide any display cases and security measure their products may need beyond just the floor space. From what I've seen this seems to work great for those selling vintage and antiques or large ticket art like paintings and sculptures, but the subletters that specialize in smaller craft items, clothing, and gift items come and go so fast that I've given up even going in to look at them as customer. Many of the the small crafters I know that have tried these sublet stores left after a month or so with a bad taste over the whole arrangement.

There are only a few sellers that I know of that have dealt with the same store front owners for extended periods of time (6 months or more or every tourist season for the past 5 yrs.). Most of them have at least 1 piece in the showroom that if it sells will cover their "rent" for 2-3 months, also they have a good mix of impulse items.

My suggestion would be to try a mix of both to see if the area's demographics supports one method over the other and how the subletters or consignor's feel about the situtation.

[Flowears]

I'd like to know if you are open to artists out of State also and how much your fees are.
Convo me if you are interested in my flowers!
Stefy

[Former_Member]

I was asked by a friend of mine whom just opened a shop December 7, 2014 if I would want to help her out by putting some of my up cycled furniture in her store. She is tasking for me to pay 15 percent of my sales, charging me 1/2 of her rent for the space (she feels my items takes up at least 1/2 of the space ) even though it is being used to help fill her shop, and display her items. She is also charging me an additional 10 percent of any of my sales that is being charged, for the use of the credit card machine. My husband thinks that it should be a percentage OR rent...not both. Any thoughts or advice? I really need your help.... We haven't signed any contracts. I also help man the shop w/o pay.

[GoTo]

Consignment is tricky, especially with an unproven venue.
Business with friends is tricky, it can put a real burden on the friendship.
Don't let the exciting idea of having your work in a shop & the chance to work with your friend interfere with your ability to make good business decisions.

I guess you can get a feel for where I'm starting from, and I follow with thinking it pretty ballsy to ask for half the rent when SHE's asked you to help her fill up some of the space to get the ball rolling in her business and then wants you to provide fixtures for the space (that she'll be using to display her other items for sale) that she'd otherwise have to pay money to purchase...

The display pieces are, in my guess, unlikely to sell because customers will not see them as items for sale, but rather as just fixtures in the store--even if they are marked for sale with prices. And there will be wear and tear on the items decreasing their value while they are used as displays.

I don't know why she'd need an additional 10% for credit card processing (tell her to say hello to Paypal @ 30 cents/transaction + 2.9%, or SquareUp @ 2.75%, both of which can be used with a smart phone or some tablets with internet service and have no monthly account fees using a free gadget the processing company supplies)--that should be part of her overhead that the 15% goes to, though 15% is rather low as consignment pricing goes.

Consignment is usually closer to 40%, so add 10% + 15% and you've got 25% (unless she adds the 10% CC processing fee before she collects 15% commission or vice versa, and that'll inch a little higher--do the math, ask how it will be calculated so you are fully informed) which is still on the low end UNLESS she's using you to foot half her monthly rental bill. And you man the shop without pay? Um, no.

If I'm paying half the rent, I'd want to be half-owner, on the lease, and getting half the profits (I'm NOT at all suggesting going into business with this woman).

If I man the shop a day or two a week I'm either an employee or I'm getting discount on the consignment--like only being charged 15% commission (not commission + rent, and not the same 40% commission as everyone else who is not working there for free).

I would try to back out of it all as gracefully as possible myself--"decided to concentrate my efforts on my garden this spring" or something, and just let it all slide by, even if you never plan to plant a flower, spending less time at the shop each week.

If you do decide to consign in her shop, be sure all the details are spelled out in print & follow consignment laws for your state. Do not let the friendship interfere with good business protection for yourself & your goods... if she pushes back against reasonable preparations, you have your real answer about whether you should participate on any level or not.

Make sure your work isn't the backdrop for what she sells--it's either a featured item for sale or you can pull it from the shop (the ability to pull items should be in the contract).

Make sure you know who is responsible for lost or damaged items (should be in the contract). You should be able rotate your stock if things aren't moving (should be in the contract).

Make sure you know when you'll be paid & how--first of every month? fifteenth? Check mailed? Picked up? (should be in the contract).

Make sure you know who's chunk of the transaction store promotions come out of (she's having a sale in the store--will you expect less or will it come from her cut? ...should be in the contract).

Keep a monthly or quarterly document that you both sign/initial that states what she has of your work, what the selling price should be and/or what the price you expect to be paid is, the date it was added to the store, what has sold, when you will be paid for the goods sold and how much you'll get.


What kind of rate is she offering other folks putting items on consignment in her shop?

Some reading on the topic:

http://www.nolo.com/legal-encyclopedia/consigning-arts-crafts-30281.html

https://www.etsy.com/blog/en/2007/the-ins-and-outs-of-consignment/


Do a google search for consignment, download a few contracts that shops have posted on the web and see what they say, compare it to the offer she's putting out there (and to actual consignment laws).

[GoTo]

I guess that was more feedback than you wanted...