Consignment stock is merchandise that stands in the store but belongs to the supplier until it sells. The store does not pay up front; it settles after the sale and keeps its commission. What does not sell goes back. That is the whole difference from ordinary buying - and it moves the stock risk off the shop floor and back to the maker.
Where the term comes from
The German term comes from commercial law. Under § 383 of the Handelsgesetzbuch, a Kommissionär is someone who, as a business, takes on buying or selling goods for another party's account - the Kommittent - in their own name. Both features sit in that one sentence: own name, someone else's account. The store appears outward as the seller, while economically the transaction belongs to the supplier.
In everyday use, consignment and commission are treated as the same thing. Strictly, consignment describes where the goods are stored and commission the legal relationship, but both paint the same picture: goods sit with the retailer and are not the retailer's.
What changes in practice
- No buying: the money that would otherwise sit in stock as tied-up capital stays in the bank
- No markdown risk: what does not move goes back instead of into the sale
- A different negotiation: you talk about the commission, not about purchase prices and minimum orders
- Different bookkeeping: goods that have not sold produce no incoming invoice
Where it gets laborious
Consignment is not free of effort. Three places cost time regularly. First the stocktake: goods that are not yours still have to be counted and shown separately. Second the settlement: every supplier wants to know what sold, and the more suppliers, the more statements. Third the VAT.
German VAT law addresses commission explicitly. § 3 (3) UStG treats a commission arrangement as a supply between Kommittent and Kommissionär, with the Kommissionär counting as the customer in a sales commission. One sale becomes two supplies. How that is booked in a given case depends on the contract and the facts.
How a physical marketplace differs
In the marketplace model, ownership also stays with the maker until the sale - so far it looks like consignment. The difference is in the sale itself: the store does not sell in its own name, it brokers. The customer buys directly from the brand at the till and gets a receipt as always; nothing changes for her.
For the store, the bookkeeping changes, because these goods never become its own purchase and sale. What remains is a commission statement - and it runs through the point of sale, not through a spreadsheet per supplier. That is the difference between two brands on the floor and thirty-three.
The supplier. Ownership passes only on the sale - in a classic commission arrangement to the retailer and, in the same moment, on to the customer.
Economically the supplier, because no money arrives. Practically it is a matter of contract: who pays the return, from when may goods go back, who is liable for damage on the floor. Those three points belong in every agreement.
In everyday use, yes. Consignment stresses the storage location, commission the legal relationship under § 383 HGB. For retail practice both mean the same: goods are there and are not yet the retailer's.
After the sale, usually on a fixed rhythm. The retailer reports what sold and keeps the agreed commission. Run that through a point of sale rather than through lists and most of the effort disappears.
It is worth it where choice is missing and capital is tight - which is exactly the small-format case. It becomes interesting from a corner or a metre of space, not from two individual products: the effort per supplier stays the same however little stands there.
