Consignment
Consignment is a business arrangement where a supplier provides goods to a store or seller, but the store only pays for the items after they are sold.
In Filipino MSME terms: ito yung “kuha muna, bayad kapag nabenta.”
The supplier still owns the goods until they are sold, reducing the retailer’s risk and upfront capital requirements.
Why Consignment Matters
For Filipino MSMEs, consignment is valuable because it:
- Reduces capital needed — no need to buy inventory upfront
- Minimizes risk — you only pay for what you sell
- Allows product testing without financial pressure
- Improves cash flow — bayad lang kapag may benta
- Supports small suppliers who want exposure
Consignment is common in sari‑sari stores, boutiques, specialty shops, and even online marketplaces.
How Consignment Works
- The supplier delivers goods to the retailer.
- The retailer displays and sells the goods.
- The retailer pays the supplier only for sold items.
- Unsold items may be returned after an agreed period.
- Both parties track inventory through a consignment agreement.
Example / Context
Example 1 (Sari‑Sari Store):
A supplier leaves soft drinks or snacks on consignment. The store pays only for what is sold each week.
Example 2 (Boutique):
Local designers place clothes or accessories in a shop. The boutique earns a percentage per sale.
Example 3 (Online Seller):
A seller lists products from a supplier and pays only after receiving customer payment.
Example 4 (Bakery):
A bakery supplies bread to a small café on consignment. Unsold bread is returned at the end of the day.
Related Terms
FAQs
1. Is consignment risky?
For retailers, risk is low because you only pay for sold items. For suppliers, risk is higher, so agreements must be clear.
2. How do suppliers earn from consignment?
They receive payment only for items sold, usually based on agreed wholesale or split pricing.
3. Can consignment be used for online selling?
Yes. Many online sellers use consignment to avoid holding large inventory.
4. What should be included in a consignment agreement?
Pricing, payment terms, return rules, inventory tracking, and responsibilities of both parties.