How does consignment work?

Imagine walking into your favorite new shop, you spot a jacket you love, and buy it. But something you may not be aware of is that jacket you love doesn't actually belong to the shop you bought it from. The shop is just selling it for them.

We call this consignment when one person gives their stuff to a consignment shop to sell for them. If it sells, the store takes a cut. If it doesn’t, the unsold inventory goes back to the owner.

Now, here's where this gets really interesting. The secondhand market in the US is exploding. By 2027, it’s expected to be worth 70 Billion dollars. That’s growing nine times faster than traditional retail. Nine times! 

While not all consignment is second-hand, this boom is pushing consignment into the spotlight because it’s one of the easiest ways to sell pre-owned items people are hungry for.

That means a massive opportunity both for shoppers, because it’s cheaper and more sustainable, and for business owners and entrepreneurs like yourselves, because it’s a whole new way to make money.

So today, we’re going to talk about how consignment works, why it’s on the rise, and what you need to know if you want to use it for yourself.

Consignment meaning and how the model works

Consignment is when a shop sells products for someone else. The person who owns the products is called the consignor, and the shop is called the consignee.

The consignor gives their items to the shop, and the shop takes care of storing them, showing them to customers, and selling them.

When something sells, the shop keeps a percentage of the sale or sometimes charges a fixed fee.

The consignment process from intake to payout

Consignment is a clever business model that lets both the consignor and the store owner win.

In this business arrangement, one party sells goods on behalf of another party without buying the inventory upfront. That’s the beauty of the consignment model: everyone shares the rewards when items sell, and no one takes all the risk.

Here’s how the typical consignment process works in most consignment shops or consignment stores:

1. Bring in your items: Drop off your clothes, accessories, or other treasures at the consignment shop or thrift store.
2. Agree on a consignment arrangement: Not all consignment shops work the same, so you’ll sign consignment agreements outlining the split, the consignment period, and how unsold inventory is handled.
3. Display and market your items: The consignment store or online marketplace shows your items to customers. Many consignment shops have loyal buyers ready for consignment deals.
4. Track sales during the consignment period: Most consignment stores keep tabs on consignment inventory to see what items sell and what stays on the racks.

How does the money work?

Okay, so what's the split? Well, most consignment shops take between 40% and 60% of the sale price. Each shop sets its own rules, though. Usually, a big, well-known shop will take a bigger cut. This is because they're likely to have a higher footfall and your items will sell faster.

Typically, you receive your share within 30 days of the sale.

Who consignment works best for

Consignment works really well for items that are unique, niche, or second-hand (a thrift shop, for instance). Some popular products include:

• Clothing and shoes
• Sports equipment and gear
• Toys and baby items
• Antiques and collectibles
• Furniture
• Musical instruments
• Art
• Jewelry

Basically, if it’s something people value and want, it can do well on consignment.

Benefits of consignment

Consignment is a win-win for both sides. Here’s why:

For consignors (the people who own the stuff)

• No shop? No problem: You don’t need a store or an online shop. The consignment store handles all of that.
• Marketing made easy: The shop already has customers, so you don’t need to spend time or money trying to get buyers. Their footfall is your footfall.
• Logistics handled: In the consignment arrangement the consignees will store, ship, and sometimes even pick up your items (but not all consignment shops do this, FYI). All you have to do is sit back and wait for the sale.

For consignees (the shop owners)

• Better cash flow: You don’t have to buy inventory upfront. If it doesn’t sell, send it back. You only pay once the item sells.
• Grow your fan base. Stock the right items, build a reputation for cool finds, and watch loyal customers keep coming back.

Consignment challenges

Consignment can be a total style win, but even the chicest business comes with a few wrinkles. Here’s what to strut carefully around:

For consignors (the owners)

• High fees: You might make less than selling directly, since shops take a cut.
• Delayed payment: Don’t expect instant cash. Some shops pay on a schedule (like every month or quarter).
• Less customer info: You won’t always get the scoop on who’s buying your consignment inventory, which can cramp your next collection’s glow-up.

For consignees (the shops)

• Inventory depends on others: Your stock comes from consignors, so supply can be unpredictable.
• Inventory responsibility: You’ll need space to store, track, and protect items you don’t technically own. If, for any reason, something is damaged in your store, you'll owe the consigner.

Real-world consignment success stories

Let’s take a look at some brands that have absolutely nailed the consignment selling business model:

Art galleries

They're essentially the OG consignment pros. Artists hand over their masterpieces to galleries, who show them off, market them, and handle the consignment sales. The gallery takes a cut, but the artist keeps ownership until the big sale.

Rebag

Rebag is giving luxury consignment a glow-up. Think designer handbags, shoes, and accessories, but make it flexible. Advanced payouts, item trades, and a buyback program mean shoppers can swap or return items for store credit, keeping the fashion circle turning.

The RealReal

This online platform is a consignment model powerhouse for authenticated luxury goods. Designer clothing, jewelry, watches, home décor - you name it, they sell it. We're talking Gucci, Prada, Botega Venata, JACQUEMUS, all on one online store. The RealReal handles everything, from pricing to sales, making high-end consignment as easy as clicking “Add to Cart.”

eBay consignment

Yes, eBay isn’t just for bidding wars on random gadgets or concert tickets. Their consignment service takes select items (like luxury handbags), authenticates them, lists them, sells them, and ships them. So the retailer sells the items and sellers get a cut of the profits while avoiding all the hassle of DIY selling.

Fancy yourself the next Rebag or eBay founder? Our blog on how to start a consignment shop will help you learn all the tips and tricks you need to make this dream a reality.

How a retail POS system can benefit your consignment shop

So you've decided this is the route you want to go when opening a retail store. It really is a great way to eliminate the risk of buying inventory upfront. But to really make your shop shine, you'll also need a modern, cloud-based retail POS system. These can:

• Track your consignment inventory easily. Most POS systems have exceptional retail inventory management features. You'll know exactly which sequined party dress sold last week or which vintage bag is coming back from its vacation on the shelf. No more guessing or mysteriously disappearing items, your POS has eyes everywhere. This is super important for consignment deals because you need to be able to show consignors exactly what’s happening with their items.
• Handle consignment sales: Split payments automatically between you and your consignor. So when that gorgeous leather jacket flies off the rack, everyone gets their cut without awkward spreadsheets or late-night math panic.
• Manage multiple consignment agreements: Whether you’re juggling three consignors or thirty, your POS keeps all the consignment periods, revenue splits, and terms neatly organized.
• Better reporting for smarter decisions: See which items are your Beyoncé-level hits and which pieces are chilling on the rack like they’re on a permanent coffee break. Then make the next buying or pricing move like a true retail superstar.
• Smooth customer experience: Quick checkout with integrated payment processing, digital receipts, easy returns—it’s like giving your shoppers a VIP pass. They leave happy, you look amazing, and they keep coming back for more.

TIP: If you’re new to the POS world, check out our resources on inventory management, like:

• How to manage inventory for small business 
• How to do an inventory cycle count

Final thoughts

That's it. Your complete 411 on all things consignment.

Whether you’re a store owner, or just daydreaming about your own boutique, remember that consignment can be a stylish way to make commerce a little more fun, a little more sustainable, and a lot more fabulous.

Because at the end of the day, who doesn’t love a win-win deal… especially one that looks this good?

If you’re on the hunt for the best POS system for consignment stores, definitely check out our guide. It’ll tell you why the Epos Now all-in-one solution should absolutely be your go-to and spill the tea on every feature you could use to scale your business.