Consignor Share Options for Maximizing Store Profit
Likely most business plans for start-up consignment stores start with an accounting of monthly business expenses and an estimation of income based upon some fixed percentage of sales to be paid to consignors (owners of items consigned).
Sounds logical but the percentage to be paid to consignors might be better determined by focusing on an economic concept referred to as 'the point of diminishing return', or, "At what point does adding one more percentile to the store's share result in a reduction in a reduction in store profit.
Using fertilizer as an example, at what point does adding one more unit of fertilizer result in a reduction in yield per unit of fertilizer?
In the consignment world, of course consignors would flock to a store offering a 90% payout (which some stores might pay on high-end items and to relatives, friends and charitable organizations). So, at 90% payout, can the shop be profitable?
If the payout is dropped to 80%, how much will store income increase (with monthly expenses and all else remaining the same), then, at what % do consignors start turning away?
Today's 'high tech consignment software programs' provide flexibility in setting the consignor percentage, so while there might be a fixed 'default' percentage paid on most items to most consignors, with Best Consignment Shop Software a different percentage can be assigned to each consignor and to each item, so if someone's $2000 bedroom set is sold for $1400, the store might do better with 30% ($420), giving 70% ($980) to the consignor, encouraging the consignor to consign more items. Dare say that a 50% ($700) payout won't pack the same incentive punch.
BCSS also allows stores to 'reason' with consignors in that a software feature allows the store to deduct expenses 'off the top' before applying share percentages, the rationale being that expenses (advertising, rent, utilities, etc.) related to the endeavor of selling others' wares should be shared between consignor and store.
Another special feature allows the store to deduct a set percentage from credit-card sales prior to settling with consignors, in effect shifting the cost of the convenience of credit-card payment to those being convenience - the consignors. Of course the counter argument is that the store is also benefiting from this payment method, not having to keep as much cash on hand, no losing money in change-due errors, and perhaps having an added measure of protection against employee theft.
The most recent addition to BCSS is a method of rewarding consignors with a bonus percentage for settling for store credit. The bonus can be based upon the consignor share or the amount of the sale.
An upcoming feature will be Reward Points - credit that shoppers will accumulate with each purchase which can be used to make purchases.
Best Consignment Shop Software features added options to payouts which provides more flexibility in the store's plan for sharing sales proceeds with its patrons.
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