PRA 2nd Quarter Newsletter 2013 April-June 2013 | Page 5

range and low price assortments e.g. basic plastic housewares where the absolute $ value could be considered
insufficient to support the costs associated to use
“outright buying”.

Darrell Wisbey
With 30 years of retail experience
Darrell have built a reputation for
being a leader who interprets the
market accurately, defines strategic
direction and delivers success
by motivating, developing and
inspiring teams to achieve continual
improvement.

O

Consignment is not the answer to lack of
retail skills.

riginally consignment agreements
were driven out of necessity typically
for reasons such as lack of cash and
poor retail skills. With risk high the
retailer would turn to being a landlord
in exchange for a guaranteed income.

Consignment can be an insurance to protect
against risk.
Retail has always been a “risk” business with the two key
concerns being:
1. How much stock to buy and do I have the money to
pay for it?
2. Will it sell and if it does can it produce enough margin
to deliver a bottom line profit?
Over time retailing has developed in format, operational
complexity and now exists in an ever increasing
competitive market. If the retailer does not have the
developed retail skills and operating disciplines then
consignment is the easy answer to avoid the dangers
associated with outright purchase.

Consignment is valuable when used for the
“right reasons”.
Consignment is a value format when used for the “right
reasons” and with the “right vendors” e.g.:
1. High end brand and price products with high stock
value and high sell-thru risk and requiring a specialist
service team.
2. Fashion volatile ranges with high
sales risk and potential for
high markdown costs
3.

Wide

When a retailer uses consignment to compensate for
lack of retail skills they are willingly giving up control of
their business and this translates into lost sales and profit
opportunities. The question they should ask themselves
is why do vendors so willingly enter into consignment
agreements? The answer is simply they know they can
make more profit by assuming the role of the retailer.
An even greater danger is that the customer is not at
the forefront of all the retailing decisions. The critical
consignment dangers are:
1. Since consignment income is guaranteed, the retailer
may adopt an “out of sight ,out of mind” attitude. There
is less control on range, stock, price, profit or customer
service standards.
2. Consignment staff are only interested in “pushing”
their own stock to generate their commission- based
income. Despite wearing the store’s uniform there is no
interest in a competitor’s product.
3. Consignment staff will tend “push” the highest price
item to achieve a sale and earn a commission.
4. Stock is often set to fixed quantities resulting in
overstocks on slow sellers and out of stocks on best
sellers. Very often there is no stock adjustment and the
stock imbalances are repeated.
5. Consignment displays are “by supplier” and tend to
ignore the rules of logical and sequential store layouts
making shopping less convenient for the customer.
6. Customers are confused when seeing staff in store
uniform standing at one fixture unwilling to offer
assistance to a customer at an adjacent fixture and the
reason is “it’s not my stock”.
7. Vendor staff, who barely have product knowledge on
their own product, have no product knowledge on the
competitor’s product so cannot offer quality customer
service.
Consignment in itself is not wrong but what has to
be ensured is that the retailer remains in control of
the essential “deliverables”, product, presentation and
customer service.

What about your Customer?
The customer presumes rightly so that all service staff
wearing the retailer’s uniform work for represent the
retailer’s brand and service standards. Poor service
standards and out of
stocks caused

by the consignment relationship do not reflect on the
consignor but CAN DAMAGE THE RETAILERS
BRAND!
The main outcomes of poor consignment performance
are:
a. Sales-focused Service Assistants (commissionchasing) do not build a relationship with the customer
because they are too interested in sales and not interested
in customer service.
The reason - the Consignor does not invest in training
staff in customer service techniques and the retailer
does not check and enforce an acceptable standard of
customer service.
b. Not having the “right stock” in the “right quantity” on
the shelf at the “right time” results in a negative customer
shopping experiences and total disappointment when
given the excuse “wala”.
The reason – there is a lack of communication and/
or system discipline within the consignor’s stock
management and a lack of awareness and management
control by the retailer.
c. Lack of Service Assistant product knowledge results
in failure to advise the customer accurately to reinforce
which is the “right product” to meet their purchase
needs. The customer can be confused, disappointed and
even angry that there is no quality product knowledge
available and this can result in the customer going to the
competitor (lost market-share).
The reason – Consignors fail to train their people in the
area of product knowledge and are simply focused on
sales. Retailers should require their consignor- supplied
Service Assistants to be trained to have acceptable
product knowledge as a prerequisite for the role.
The result from all of the above is a disappointed
customer. Remember : it costs a lot less to keep an
existing customer happy than it does to win them back if
you lose their loyalty.

The Solution is Easy!
The retailer must always be in command of the product
offer, the presentation standard and the standard of
customer service and the easiest way to achieve this is
by:
a. Setting a st [?\????\??Y\??\??X?H[?[??\?B?]H???Y???H??Y\??\??X?H\??\?[?????Y[??Z[?Y[?8?'?\??Y\??\??X?H??[??'K?????\]Z\?[?????Y??????YH?\??X?H\??\?[???]?H8?'??X????Y?x?'H?[?\?]YY]?B??\??Y\??YY??H?]Z[\???[[??YH[?H\??\??\?Y?Y[Y[???H???Y?????YHH??X?\??[??\?[?][??[?\???\??[?????[?YY?Y?HL
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