Decoding the Difference Between Consignment and Sale

When running an e-commerce business, you will come across several terms related to supply chain management, which are often used interchangeably. For instance, ‘consignment’ and ‘sale’.

However, they represent different transactional agreements. Thus, in order to avoid confusion, it is essential that you know the difference between consignment and sale. 

Let’s dive deeper.    

Consignment: Overview and How It Works

Consignment refers to a commercial agreement in which sellers offer their products to retailers or wholesalers for sale to customers. This trade agreement usually takes place between a consignor, an entity that owns and dispatches the goods, and a consignee, the business or agent responsible for selling them. 

Now, the products sold to customers are listed as sale, and the consignor gets a certain percentage based on the predefined contract terms. In case of damaged products or if the consignee is unable to sell the entire stock within a specific time period, the consignor reclaims the goods. 

Thus, the consignee basically acts as a middleman to facilitate the sale of goods.  

Sale: Overview and How it Works

A sale is a commercial agreement in which two entities exchange goods for money. In this transaction, one party offers a good or service at a particular price, and the other agrees to it. 

The main aim of a sales contract is to exchange goods or services with customers for a price. After the sale transaction is completed, the ownership of goods is transferred from the seller to the buyer.    

Key Differences Between Consignment and Sale

Check out the key points of difference between consignment and sale in the table below:

When to Use a Consignment Transaction Agreement? 

Given the unique benefits of outsourcing sales, businesses should opt for a consignment transaction agreement in the following situations: 

• When they want to minimise risk
• When they want to effectively expand their market reach
• When they want to maintain control over product pricing and outsource the marketing and sales procedures

When to Use a Sale Transaction Agreement? 

Given the directness and simplicity of sales transactions, they are suitable for the following situations:

• When the business wants immediate payment in exchange for goods
• When the business wants to transfer ownership and risk to the buyer
• When the business wants to quickly clear its inventory

Difference Between Consignment and Sale: Key Takeaways 

Here is a recap of the key differences between consignment and sale:

• In a consignment transaction, sellers offer their goods to wholesalers and retailers for sale to customers. In a sale transaction, the seller directly sells to the customer. 
• If the goods remain unsold or are damaged, the seller must reclaim them in a consignment transaction. However, the seller is responsible for all unsold and damaged goods in a sale transaction. 
• For consignment transactions, the risk remains with the consignor until the consignee sells the product. Meanwhile, in sale transactions, the risk is immediately transferred to the buyer after completing the sale.      

Now that you understand the key differences between consignment and sale, you can choose a transaction agreement that suits your business goals. However, you need a reliable logistics partner to facilitate seamless deliveries to wholesalers or customers. 

Try out Porter! 

We offer logistics services in 20 cities across India, enabling you to transport a wide array of goods, such as agricultural products, FMCG, construction materials, e-commerce merchandise, and more. 

Additionally, we provide hassle-free local and intercity courier services encompassing personal gifts and items, e-commerce shipping, and urgent same-day deliveries. 

Download the Porter app today and handle all your business logistics like a champ!