#145: The Future Of Online Consignment

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Claus Lauter: Hello, and welcome to another episode of the E-Commerce Coffee Break podcast. We are talking lot about Shopify WooCommerce, all the things that are ruling the e-commerce scene for quite a while, but there's other ways on how to sell your products, and there's also sort of traditional ways on how you can do this, and this is catching up quickly right now when it comes to the interweb.

So today we. Talk about how e-commerce brands can maximize the revenue potential, , with consignment. So Jon Staab on the show today, , he will give us a bit of, , an overview of what consignment means and what, seller and, consigning can, , expect from going online. Hi John, how are you today?

I'm great. Your software developer turned, c e o of a small company, and you help with consignment and resale shops to succeed. Give me a bit of a background. How does consignment work? [00:02:00] How does it mix with the world of e-commerce? Just that we get an overview there.

Jon Staab: The very basics of consignment is that, , it basically changes your supply chain around where rather than purchasing from, , an individual supplier or a couple of wholesalers or something like that, , you kind of make it social.

So you, talk to your friends, you talk to your community, and you essentially source your inventory, , from individual people. , oftentimes this takes the form of turning your customers into your consign. , which in turn kind of creates , a little bit of a circular economy. , consignment is most common in obviously secondhand goods, but it extends to other industries as well.

A lot of the time, , consignment results , in really good synergies, in that , circular marketplace. This usually happens, , in brick and mortar situations, but increasingly over time it's coming to e-commerce as well. And I think that's a really interesting, , story too.

Claus Lauter: A hundred percent agree. Consignment, again, as I said, is, , secondhand, , people who are producing things on their own, trying to sell that and don't want to go through the process of setting up their own store. And brick and mortar store helps with that. as I said, this is slowly moving [00:03:00] into the online space there.

, let me know how that works, , what's happening.

Jon Staab: Yeah, so I'm sure you've heard of other solutions like, , Poshmark, Macari, Etsy. , all that kind of stuff. A lot of those online platforms support consignment. You know, one of the most common ones is eBay and it's kind of inside out consignment where you sell something online and then you get paid for it and the platform takes a cut.

So where that's kind of going over time is, , that platform effect. That's a huge moat, right? , as an individual brand, it's gonna be very hard to compete against Poshmark because they have just so much reach and , it's actually fairly complex to run a consignment shop online. , but where things are slowly going is their platforms emerging.

Consign cloud, my company does a little bit of that. We're kind of like looking at that. And then there's other things out there that make consignment online feasible for individual brands to kind of bring that platform effect in.

Claus Lauter: Okay. Gimme a bit of a background on what are the unique challenges that a consignment store has and what they have to deal with.

Jon Staab: Yeah, I would say the biggest challenge of consignment is really just, , [00:04:00] the complexity and the nuance of interfacing with a whole bunch of suppliers. Consigns are usually not professionals. but most people just want to get rid of their stuff, and so you're not dealing with people who really know what to do with like a purchase order or something like that.

, you're dealing with people who want you to square cash you, , some money after you sell their stuff. Oftentimes Consigns won't show up to pick up their items. And then of course, if you're working online, you've got the shipping side of things, , to go back and forth. So you might choose to do just in time, , shipping, in which case orders might be canceled more often.

Or you might choose to , take possession of the inventory in the first place, in which case if it doesn't sell, now you have a bunch of extra inventory you have to get rid. so communication is like the primary thing. , consign Cloud, , we solve that partly with some automatic emails that go out to your consigns and also like a consign portal, but it's a, very high touch process, , and requires, , a lot of extra attention.

So it's not the right fit for

Claus Lauter: everyone, for sure. And talk me to a, workflow or flow that, , you have in consignment from [00:05:00] step A to Z. How, how does that work?

Jon Staab: Yeah, so basically you first find your consignors, and that can be, just something on your website or you might , upsell your customer into being a consignor.

, and then once you have that interest, , you have a couple of things you kind of want to do upfront. , one of them is. Have that consignor sign a contract that kind of lays out the terms. This is the percent that we're gonna give you. This is how long things are gonna be on consignment.

This is what we're gonna do when we're done with them, whether we return 'em to you or just donate them. Once that stuff is kind of set up, you take a look at their inventory. , in brick and mortar. Again, this is a lot easier. You've got it at the back counter and you can take a look at it and you can take your time online.

That can be a lot more tricky. Moving this to more of an e-commerce context, I would say what you would want to do is probably have them send their inventory to you, , not including your contract that you're gonna return it, , so that you can basically take possession of the inventory, , and then.

Issue a lower, split so it's more convenient for them, more convenient for you. You cut out a lot of that administrative work, and then [00:06:00] once you've taken possession of it, of that inventory, in consignment is still technically the possession, , the property of your consign. And so that changes things with accounting, , how much inventory you have in your store.

, the upside is that it helps with cash flow in a lot of cases. , I learned recently, actually, apparently jewelry stores do this a lot. Jewelry stores take their jewelry on consignment, , because jewelry is such a high value thing, it helps with their cash flow. , I've always wondered, how do they stock that store with millions of dollars worth of jewels?

Well, it's through the magic of consignment. , since you're taking other people's property, you wanna have that fully document. Mentioned that before, but you also want to have insurance on it. , so that's kind of like all the boxes you want to check. You wanna make sure your accountant is familiar with consignment, cuz it's a little bit of a niche thing.

, but from that point on, It's really pretty straightforward. , you sell that inventory, , as you normally would. , you wanna make sure you have permission to set the price and, , show the inventory off. , but you just list it on your store through whatever sales channels you normally have. And then when it sells, , you wanna central place to keep track of who can sign that and [00:07:00] then have that notify you.

, and then from there you can take a look at, , all the inventory that's sold, all your account balances, and that kind of thing. And then you want to do a payout step, that payout step, , is ideally gonna be automated. , ach, h or PayPal are good options there. A lot of my job is getting people to take their hands, their tight fists off of their checkbook, cuz people really still like to , write checks for their payouts for whatever reason.

, that's less true in the UK and the in Australia bank transfers are much more of the standard there. But whatever your mechanism might be, you wanna pay those on some kind of policy. So it might be you pay daily, , and that's only if you have a really automated workflow. , it more common is to pay on the first and 15th of the month or after a certain amount of time has elapsed since that sale has occurred.

That way you can process returns without, , ending up underwater on your inventory.

Claus Lauter: Now that already shows that there is a lot of moving parts in running a consignment store, for sure, that you need to track out. Now I understand Consignment cloud helps with all the work that is involved there.

[00:08:00] Question is, how do you connect to other systems? Like, , how do you connect to, for instance, like Shopify? How does that work?

Jon Staab: We hadn't even thought about that until a couple of years ago. , kind of the traditional consignment software is here's your system of record and you just do everything in it.

And like you just mentioned, there are so many moving parts, even just on the consignment side of things. So where Consign Cloud is kind of going is we wanna focus our development efforts on taking care. , your consignors and the communication payouts and tracking that balance and all that kind of thing.

And then farm everything out to the people who really are good at it. , so right now we have just a few integrations. We have one with checkbook.io for payments, , and then we have a Shopify integration as, and then we just released a square integration as well. So you have access to their e-commerce and their point of sale.

, another thing that we're doing right now is wholesale. , I don't know if your audience has heard of them. , they're a pretty new company, and what they do is , they allow you to set up a bunch of lots, , where you can, , get rid of inventory really quickly.

We're also hoping to work with cross-posting tools and all [00:09:00] that kind of thing. So there's all these different sales channels. Sales channels have just proliferated in the last 10 years. It's, , sort of amazing actually, you know, You've got social selling, you've got , your store, you've got third party platforms, , interfacing with as many of those as possible, , without losing your mind, , is a big part of e-commerce , nowadays.

If a platform has an api, we just interface with that. , hopefully we'll get a listing in our app store. We have one on Shopify, , from there we just kind of push things back and forth. Listen to updates on Shopify's. really take a lot of the, , manual , data entry out of the process.

Claus Lauter: Now I find it quite interesting because, I mean, that gives a lot of power and a lot of opportunity to a small brick and mortar store that has done consignment in the local area. And now one of a sudden with this connection to Shopify, for instance, or Square, , they have basically the whole world that they can sell these products to and always need to keep in mind.

This is probably unique products. , there's no, huge stock. So it's a once off, you buy it, it's out of, the stock. , going a little bit deeper into this, , from the technology side, how does it work? , what's homework that a consignment store owner needs [00:10:00] to do to get started?

Jon Staab: It's really not too much. You wanna have a business plan, obviously, , and know what your costs [00:11:00] are and, , how you're gonna make , your profit. , but once you kind of have those numbers set up, it's really, really easy to get started. Nowadays, , They're a huge force multiplier for small businesses.

Your audience is familiar with Shopify. Getting started with consign cloud is just as easy. , we have a, two week free trial and we even have a free version. So you just kinda log in there and then click around. And, before you know it, you end up with , your inventory on your website or on a third party platform.

, and then you need to be prepared to actually, uh, fulfill those orders. .

Claus Lauter: , how much work is involved from, , the person giving the products to the consignment store? Or is that they just handed over and that's it? Or do they go online and check what has been sold? How does that work?

From the original

Jon Staab: seller? , it depends, , in a brick and. Context, obviously , that's been very easy. , moving over into the e-commerce side of things, one thing, one project that we're working on right now is basically consignor item entry. So, and the way that we have that envisioned, this hasn't been built yet, but it's, on our list.

basically you got your Consignor portal and you have a [00:12:00] consignor. , they may might go to your website and find the link to the consignor portal, whatever it might be. They might have an account with you already, or they might, , just sign up through the Consignor portal. once they're into , they can basically list their inventory, , using and create basically a catalog.

And so what that does is it turns the consignor into, a real supplier, a real vendor, , and then they submit that catalog to your store and you might open it up. It might have one item, it might have. 300, a thousand items. And then you can check the boxes and you can say, we want these, , 12 items and, , we're gonna negotiate with you on price.

So we're gonna change the price, , of this one to something else. We're gonna change the split on this to something else. We're gonna charge you a surcharge for processing, that kind of thing. And then they then submit that, and that becomes a purchase order. , that goes back to the consignor's portal.

And of course they're getting email notifications and push notifications through all this. , the consignor can bring that up and they can say, oh, , they, , change the terms on this. , I'll accept that. And then basically sign digitally, , close that up, and then, , they'll be able to print a shipping label.

, and we'll [00:13:00] have a digital receipt for that. And then , they'll package those items up, put the shipping label on. , and send it off. And at that point, the inventory has changed hands. You'll wanna track, that shipment actually arrived and all that kind of thing. Once that's done, that's kind of the process, , as we've idealized it.

But I don't think that exists out there in the wild right now.

Claus Lauter: Okay. I find it really exciting, , to hear that, what I find really complex is all the moving parts that you're , in there now, consignment cloud helps make it much easier. Tell me a little bit about the features that come with your solution.

, what's included.

Jon Staab: We've got some automated emails that go out, , when an item is received. , so entered into inventory, you can send something out, then you can send, , an email out when an item sells.

, and then also when an item's ready to be returned to the consign. The process for an e-commerce brand working remotely with their consigns, , for returning inventory. Isn't something we've really like thought through yet, all that much. But in a brick and mortar situation, you would call that person in and say, you've got two weeks to show up and pick up your inventory.

Otherwise, , we're keeping it , we're throwing it away as the case may [00:14:00] be depends. , that's the email notifications. , we've also got the portal and that's like a standalone thing. You can embed that on your Shopify store. , and that's just a, really nice, simple interface, , that doesn't share too much.

A lot of the time people don't really want to say how much they're actually listing something for, that has the option of hiding the price or showing it depending on what you wanna do. , other than that, we've got some reporting, your standard stuff, , sales inventory value, , some retail metrics.

I think retail metrics , are underappreciated by a lot of small business owners. , a lot of consignment, , shops , are kind of a passion project, so they're not too concerned about, , squeezing everlast dollar out of things. , but as a software developer, I, think it's fascinating , to find out what your turn ratio is, and how to optimize your inventory mix and all that kind of thing.

So we give you some basic tools for that. , it's something that's still, , growing all the time. We're working on a integration with, , a cross-listing tool that'll allow you to just get access to all those different marketplaces for now. That goes through Shopify, cuz Shopify has a lot of those integrations already. , other than that, you know, our user experience is really good. , one interesting part of the consignment [00:15:00] industry is that, it's a B2B industry, right? , we're selling two businesses. but a lot of the time , because these are passion projects, , our customers , they act more like consumers.

They judge the software based on gut feeling rather than, a spreadsheet of features. And requirements. So that means that our software has to be really easy to use and easy to learn. , cuz these are people, you know, often retired, , that we talk to. , they need it to be, easy.

So I see that as a huge feature. I really hate software, business software that's, painful to use. so I'm really glad that we're in this market , and we've been able to make something , that's enjoyable in.

Claus Lauter: Okay. I can imagine that a lot of people start, as I said, pensioners, , as a side hustle, or generally use it as a side hustle and then it grows.

And those tools that yours, I mean, always gets easier. Do you see industries or verticals where consignment works very well?

Jon Staab: Yeah. Yeah, that's really interesting. , we've been kinda struggling with our marketing efforts actually because of that. , people don't think of themselves as consignment unless they're a thrift store.

And thrift stores just, , aren't the best, , [00:16:00] option for a software platform because their margins are so low. It's kind of a, little bit of a chicken and egg problem, but, , what we've found is, the most common verticals are obviously gonna be women's and women's clothing. , baby clothing, maternity.

, there's some men's clothing in there as well. , there's a lot of art, , I guess museums, collectives, , that use consignment pretty frequently. , there's another business model called an antique mall where you basically rent out booths it's kind of somewhere between consignment and retail, , where you rent out little spaces where people , can hang out and list their stuff in a physical location.

, other verticals that are really common is luxury and furniture. So places where you have, , a pretty significant, , capital expenditure in order to acquire the inventory. The higher that amount is, the more that consignment makes sense. So, I mentioned jewelry earlier. We have a lot of customers who.

Sell luxury handbags. They're used, but they're gently used because , they're taken, , good care of and then they don't, wanna spend, you know, hundreds of thousands of dollars, , just to have inventory to list. So consignment makes a lot of sense there. Another place is bridal, wedding dresses.

, same [00:17:00] kind of.

Claus Lauter: Makes total sense. Now, you're doing this already for a while. Do you have some golden nuggets that you would, , give to someone who's thinking about starting a consignment store?

Jon Staab: Yeah. Yeah. Golden nuggets. Interesting. I would say start small. Consignment is the kind of thing that you can start as a hobby.

and it really depends on what your goals are. , if you're looking to just get going, I would say don't start with consignment. Actually, consignment , is a very relationship oriented, business. If you wanna sell on behalf of your friends, if you wanna do a lot of, , social media, , selling consignment is a great option.

If you wanna hang out with your customers and your consigns, create a community, , consignment is very conducive to that. , because of that synergy, your customers become your consigns and vice versa, and you create, a little bond, , a community, a set of shared values. So that's what consignment is good for.

If you want to , get going out of the. , and start making money. , build a big business quickly. , don't do consignment, at least not to start with. Consignment is useful as for established businesses like that. If you want to, experiment with new inventory, get access to more interesting [00:18:00] inventory.

It's really good for handy crafts, , where you can't just buy, , a pallet full of, this essential oils from this person who lives in Mongolia. You have to kind of experiment to it with it and play with it. So yeah, consignment is a tool.

, there's , no one consignment business model.

Claus Lauter: Okay. Now I think that your solution gives them a little bit more freedom than going on Etsy, which has rules and regulations and policies and all of that, and you can for sure, , work much more flexible with tools like yours. Now, gimme a bit of an idea on the pricing.

Obviously, it's not completely for free. How does your pricing work?

Jon Staab: Yeah, we're trying to figure that out still. Where we basically have landed is we start at one 19 a month. , and that's just a monthly fee. There's no contract or anything. And then based on how many of our features you use, , just add-ons like multi-user.

The Shopify integration square integration, , we'll bump that up to 1 49 and then 1 79. Very few of our customers are on 1 79. , most people land in the bottom two. And if you wanna get started, , you can have all of that for free for two weeks to give it a try. , and then we also have a free version.[00:19:00]

And the free version is basically, , the just absolute minimum for kind of those hobbyists who want to get started, who don't mind doing a little extra data processing who maybe make 20 to a hundred sales a month. , that goes up to a hundred accounts or a thousand, , active items at a time.

So it's designed. For people who are playing around with it as a hobby who might turn it into a business in a year or two. , we wanna catch those people and help 'em out

it's relationship oriented. , it's local first and an, even in an e-commerce sense, that circular marketplace creates that sense of shared values. It's the way business should be done, even if it's a little bit more of a hassle.

Claus Lauter: I totally agree. , I had an interview, , short while ago where we were talking about social selling and , selling into your local community, and I think that's one of the trends that we will see for this year.

, that instead of doing China drop shipping, which is sort of dying to a certain degree, , the people might look more closer to their own environment and if they wanna sell there and. One final question that I have before we come to the end of the coffee break is what's kind of the learning curve?

How [00:20:00] much time people to invest to get everything into the system to and to get up and running.

Jon Staab: You'd wanna budget at least two weeks, , in most cases, , for people who are starting a business , that ends in tears , of one kind or another, just because, , people don't realize how much work goes into starting a business.

, but I've seen people get started with consign Cloud in under a day. You know, they'll book a demo with me, we'll walk through it. They'll be listing things and selling. The next day. Time intensive task is just getting all your hardware, figuring out, , printing labels and, , point of sale hardware and stuff like that.

But if you're an e-commerce business, I mean, you can be up and running in, , under 10 minutes.

Claus Lauter: Final question. Where can people find more about you?

Jon Staab: Yeah, you can find us@consigncloud.com. , we've also got Facebook and Instagram accounts, so you can check us out there, follow us. We're working on some video tutorials on YouTube as well, so if you want to get a sense of how the software works, that's a good way to go.

Claus Lauter: Cool. I will put the links in the show notes, then you just one click away. John, thanks so much. That was a really good overview about a business. , System or a business model that a lot of people do not know about. And I think it's definitely [00:21:00] something that, , people should try out and maybe just as a side hustle to start with.

And your software definitely helps with that. Thanks so much. Yeah,

Jon Staab: thanks for having me. It was a good time.

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