I still remember the day I walked into a high-end boutique in SoHo with a pristine Marc Jacobs handbag tucked under my arm. I was broke, rent was due in three days, and I was fully expecting to walk out with $200 in cash. I marched up to the counter, placed the bag down, and gave the owner my best sales smile.
She looked at it, nodded, and handed me a clipboard. "We’ll list it for $450. You get 50% when it sells. Here’s your contract."
My heart sank. I didn't get cash. I got a piece of paper and a promise. That was my crash course in the reality of the resale world. Unlike a pawn shop or a "Buy-Sell-Trade" store like Buffalo Exchange, consignment is a partnership. It is a game of patience where you retain ownership of your item until a stranger decides to buy it.
If you are looking at your closet (or your warehouse) and asking how does consignment work, you are essentially asking about the art of lending your stuff to a store. Whether you are an individual trying to clear out luxury goods or a business looking to offload excess stock, the mechanics are the same: no sale, no pay.
What is a Consignment Sale? (The Core Concept)
To understand how does consignment selling work, you have to separate "possession" from "ownership." When you sell a shirt to a thrift store for cash, you transfer ownership immediately. They take the risk. If they never sell it, that’s their problem.
In a consignment sale, you are transferring possession but keeping ownership.
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The Consignor: You (the owner).
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The Consignee: The shop (the seller).
Here's where it gets interesting... Because the shop hasn't paid a dime for your item yet, they are often willing to list items that regular stores wouldn't touch. They have zero financial risk. This is why you see $5,000 paintings in consignment shops; the shop owner didn't have to spend $5,000 to acquire it. They are just the venue.
My Honest Failure: In 2018, I consigned a vintage mid-century chair. The shop priced it at $800. I was thrilled. But I didn't read the fine print about "markdowns." Every 30 days, the price dropped 20%. By the time it sold four months later, it went for $300. After the shop took their 50% cut, I walked away with $150 for a chair I thought was worth a grand.
How Does a Consignment Shop Work? (The Lifecycle)
If you are wondering how does a consignment shop work from the inside, it is a logistical relay race. I’ve worked with dozens of shops, and the workflow is almost always identical.
1. The Intake and Authentication
You bring your goods on consignment. The shop inspects them.
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Condition: Is it clean? (Most shops require clothes to be laundered or dry-cleaned).
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Authenticity: If it’s luxury, they will use tools like Entrupy or Real Authentication to verify it.
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Seasonality: A shop won’t take a wool coat in July.
2. The Pricing Strategy
This is the biggest point of friction. Who sets the price?
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Shop Control: Most shops dictate the price based on their data.
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Consignor Control: High-end shops might let you set a "Reserve Price" (the lowest you will accept).
3. The "Floor Time"
Your item goes on the shelf. This is the inventory consignment period.
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Most contracts are for 60 or 90 days.
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If it doesn't sell by day 90, you usually have two choices: pick it up, or let the shop donate it to charity (and take the tax write-off).
The Economics: Splits and Fees
When asking what is a consignment shop really selling, the answer is "shelf space." They charge you rent in the form of commission.
The Standard Splits:
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Furniture/Art: 50/50.
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Clothing: 40/60 (You get 40%).
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High-End Jewelry/Watches: 70/30 or 80/20 (You keep more).
(Parenthetical aside: It always hurts to see a 60% commission fee. But you have to remember: they are paying for the rent, the electricity, the employees, and the credit card processing fees. You are paying for the convenience of not having to meet a stranger from Facebook Marketplace in a parking lot.)
Modern Consignment: The "Reverse Logistics" Revolution
Now the tricky part... consignment isn't just for old ladies selling tea sets anymore. It has evolved into a massive B2B industry.
Get Paid to Process Returns from Your Home with Closo
Traditional consignment means you own the item and give it to a shop. The new wave, led by platforms like Closo, flips this.
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The Concept: Major retailers have millions of returns they can't restock. They need local hubs to process them.
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Your Role: Instead of just selling your own old stuff, you act as a processing node. You intake inventory consignment from brands, inspect it, and prepare it for resale.
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The Pay: You earn money for the processing labor and the eventual resale split. It transforms "consignment" from a passive hobby into an active supply chain role.
I use Closo to handle this inventory flow – saves me about 3 hours weekly in sourcing time – because the goods come to me rather than me hunting for them at thrift stores.
The Online Consignment Boom (e-Consignment)
How does consignment selling work on the internet? Sites like The RealReal, ThredUp, and Vestiaire Collective have digitized the process.
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The RealReal: They send a van to your house, take your Gucci, and do literally everything. Photography, listing, shipping.
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ThredUp: You fill a "Clean Out Kit" bag.
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Warning: This is a volume game. I sent a bag of Banana Republic clothes to ThredUp and got a payout of $3.42. It is strictly for convenience, not profit.
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Comparison: Local Shop vs. Online Giant
Inventory Consignment for Professional Resellers
If you are a serious reseller, you eventually run out of money to buy stock. This is where inventory consignmentbecomes a superpower.
Exclusive Inventory to Resell in Your Own Store with Closo
One of the biggest bottlenecks in scaling a resale business is cash flow. You can't sell what you can't afford to buy.
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The Solution: Partnering with a logistics provider like Closo allows you to receive goods on consignment from major retailers.
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How it works: You receive a pallet of returns or overstock. You don't pay for it upfront. You list it. When it sells, the split is calculated automatically.
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The Benefit: You have infinite inventory with zero capital risk.
Why Sellers Choose Closo
Why Sellers Choose Closo comes down to risk mitigation.
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No Upfront Cost: You aren't gambling $5,000 on a mystery pallet.
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Quality Control: You are part of the ecosystem, not just a dumpster diver.
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Automation: The software tracks the "consignment split" for you, so you don't need a degree in accounting to figure out what you owe the supplier.
The Risks: What Happens If It Doesn't Sell?
You need to know the exit strategy. What is a consignment agreement's termination clause?
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The "Expire" Date: As mentioned, after 90 days, the item is "expired."
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The Reclamation: You usually have 7 days to pick it up. If you forget, it becomes the property of the shop.
Opinion Statement: I believe the "expired item" policy is where many shops make their real money. They wait for you to forget about your $100 coat, the contract expires, and then they sell it for 100% profit. Set a reminder in your phone for Day 89.
People always ask me...
"Is consignment better than selling on eBay?"
Common question I see. It depends on your time vs. money preference.
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eBay: You do the work (photos, listing, shipping). You keep 87% of the sale (minus fees).
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Consignment: You do zero work. You keep 40% of the sale. If you have a full-time job and just want the stuff gone, consignment is better. If you are hustling for cash, eBay is better.
"Who pays for cleaning if the item is dirty?"
People always ask me this. You do. Consignment shops are not dry cleaners. If you bring in a stained dress, they will hand it right back to you. If they accept it and realize later it needs cleaning, they will deduct the cleaning fee from your final payout.
"What happens if the shop loses my item?"
This is the nightmare scenario.
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The Contract: Look for the "Liability" clause. Most shops carry insurance for fire or theft, but not for "accidental damage" by customers.
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My Experience: I once had a shop "lose" a pair of sunglasses. Because I had my signed inventory sheet, they cut me a check for the estimated payout value. Always keep your intake receipt!
Conclusion
So, how does consignment work? It works by trading potential profit for guaranteed convenience. It is the ultimate "set it and forget it" sales channel.
Whether you are dropping off a single handbag at a local boutique or using advanced tools to manage exclusive inventory to resell in your own store with Closo, the principle remains the same: leverage someone else's platform to sell your goods.
If you have high-value items gathering dust, don't let them sit. Find a partner, sign the contract, and let the market do the work. Just remember to read the fine print on those markdowns.
If you are ready to turn your closet into cash, check out our guide on The Best Luxury Consignment Sites Ranked. And if you are looking to scale your own resale business using the consignment model, read our deep dive on How to Source Inventory with Zero Upfront Cost using the Closo Seller Hub.
FAQ
Here's something everyone wants to know: What is the typical consignment percentage?
The industry standard split is 40% to the consignor (owner) and 60% to the shop. However, this varies by item category. High-end luxury items (like Hermès bags) often command a 70% or 80% split for the owner, while bulky furniture or lower-end clothing might be a 50/50 split.
Common question I see: Does consignment mean you own the item?
No. In a consignment shop, the original owner (consignor) retains legal title to the item until it is sold to a customer. The shop (consignee) merely has possession of the goods. This means if the shop goes bankrupt, you technically have the right to go retrieve your unsold items.
People always ask me: How long do items stay on consignment?
The typical consignment period is 60 to 90 days.Most contracts include a markdown schedule, where the price drops by 20% after 30 days and 50% after 60 days. If the item remains unsold after the contract period ends, the owner must retrieve it or it is donated.
