Consignment means holding stock you do not own and paying the supplier after it sells. Wholesale means buying the stock, owning it, and keeping the full margin. The choice is really about where risk and cash sit: consignment costs you nothing up front and earns you a commission; wholesale costs you money now and earns you the whole margin, provided the goods sell. Most stores end up running both, which is fine as long as the products are cleanly separated.
The difference in one line each
- Consignment. No cash out, no inventory risk, a payout obligation on every sale, and a commission rather than a margin. The supplier carries the risk of the goods not selling.
- Wholesale. Cash out up front, inventory risk on you, no ongoing payout mechanics, and the full margin. You carry the risk.
Everything else follows from who is carrying the unsold stock.
Cash flow
The most concrete difference and usually the deciding one for a small store.
With wholesale you pay for stock, it sits on a shelf, and you recover the money as it sells — weeks or months later, with the gap funded by you. Stocking a new supplier costs real money before it earns any.
With consignment there is no gap. You pay after the sale, out of money you have already collected. That is why consignment is how most independent shops carry local makers: it lets you offer range without financing it.
The catch is on the other side. A consignment payout is a liability from the moment the sale happens, so the cash in your account is not all yours. Stores that forget this spend against money they owe, which is a genuinely dangerous habit — and the reason the reporting has to separate your share from the vendor's, covered in vendor payout reports.
Margin
Wholesale usually pays better per unit when things sell.
A typical wholesale margin might be 50% — buy at 50, sell at 100. A typical consignment split might leave you 40% of the same sale. On goods that reliably sell, wholesale wins.
The comparison changes once you account for what does not sell. A wholesale item that never moves is a total loss of what you paid; a consignment item that never moves costs you shelf space and nothing else. The right comparison is not margin per sale but margin across everything you stocked, including what you did not sell.
For proven sellers, wholesale. For anything speculative — a new maker, an untested category, a seasonal experiment — consignment is usually better even at a worse headline split.
Control
A difference people underrate until it bites.
Wholesale stock is yours. You can discount it, bundle it, move it, or clear it at a loss without asking anybody.
Consignment stock is not. Discounting someone else's goods changes what they earn, which is why the agreement has to say whether the vendor shares a promotion. A store running a sitewide sale on consigned goods without that clause is making a decision on the supplier's behalf and with their money.
The same applies to clearance. You cannot mark down consigned stock to move it unless the agreement lets you, which is exactly when you most want to.
Operational cost
Wholesale is administratively simpler once the goods are in. One purchase, one payment, done. After that it is ordinary inventory.
Consignment has a monthly cycle forever: attribute the sales, apply commissions, handle refunds, produce statements, run the payout, answer questions. That cost scales with vendor count rather than sales, and it is the reason the spreadsheet stops working somewhere around twenty vendors.
So the honest comparison includes your own time. Consignment is cheaper in cash and more expensive in admin.
Accounting
They are treated differently and the difference is not cosmetic.
Wholesale stock is inventory you own — an asset, becoming cost of goods sold when it sells. Straightforward.
Consignment stock is not your asset. It sits in your shop and belongs to someone else, and when it sells the gross is not all your revenue: part is a liability to the vendor until paid. Reporting has to separate gross sales, your share, the vendor share and refunds by vendor, and the tax treatment depends on who is seller of record.
That last part varies by jurisdiction and by how the agreement is written, which is a conversation for an accountant before the first payout rather than after the first tax year.
What suppliers think about it
The choice is not only yours, and understanding the other side makes the negotiation shorter.
Consignment costs a supplier real money even though no cash changes hands. Their stock is sitting in your shop rather than somewhere it might sell, they are financing it, and they carry the risk of it coming back unsold and shopworn. A maker with more demand than production capacity will usually decline consignment, and they are right to.
Which means consignment is easiest to get from suppliers who need distribution more than cash: new makers, people with stock they cannot shift, anyone wanting to be seen in your shop. That is not a criticism — those suppliers are often exactly who you want — but it does shape the range consignment gets you.
Two things make you a supplier's preferred consignment partner, and neither costs much:
- Paying on schedule, every time. Makers talk to each other, and a shop that pays late is known.
- Telling them what is selling. A supplier who can see their own numbers will restock the right things and prioritise you over a shop that goes quiet for a month.
If you want the range consignment normally cannot reach, the offer that works is a wholesale order for the proven lines and consignment for the new ones. That is a better deal for both sides than arguing about which model to apply to everything.
Which to offer a given supplier
A rough decision rule:
- Consignment when the product is unproven, the supplier is new to you, the item is high-value and slow-moving, or you want range you cannot afford to buy.
- Wholesale when the product reliably sells, you want control over pricing and promotion, the unit economics work at wholesale margin, or the supplier will not do consignment.
- Start consignment, move to wholesale for anything that proves itself. This is the pattern most stores converge on, and suppliers generally welcome it — wholesale pays them sooner and with less risk.
That last route is worth planning for rather than stumbling into. A supplier who has been on consignment for a year has a sales history that tells you exactly what to buy.
Running both
Most stores do, and it works as long as one thing is true: the consigned products are cleanly identifiable.
Two practical rules:
- A supplier on both terms is two vendor records, not one. Commission and ownership differ, and holding both against one record produces rules with exceptions — and exceptions are what get applied wrongly.
- Only consigned products should reach the payout system. A wholesale product that slips in generates a payout for goods you already bought, which is money out twice.
Automatic attribution is what keeps that boundary clean without anybody remembering.
Where to go next
If you are going with consignment, the setup guide covers the agreement, intake and unsold stock. If vendors will hold and ship their own goods, that is a marketplace rather than consignment — see paying vendors on a marketplace.
