What does consignment mean?

Consignment in finance refers to an arrangement in which a seller (consignor) delivers goods to a buyer (consignee) who then sells the goods on behalf of the consignor. The consignee sells the goods to customers and collects payment, and then remits the proceeds from the sale to the consignor after deducting a commission or fee for their services. In this arrangement, the consignor retains ownership of the goods until they are sold, and the consignee acts as an agent for the consignor. This means that the consignor is responsible for the risk of loss or damage to the goods until they are sold. The consignee may also be responsible for handling the storage, marketing, and promotion of the consigned goods. Consignment can be beneficial for both the consignor and the consignee. For the consignor, it allows them to expand their reach and sell their goods through a network or channel that they may not have access to otherwise. For the consignee, it provides an opportunity to earn a commission or fee for selling the consigned goods without having to invest in inventory or take on the risk of purchasing the goods upfront. Overall, consignment in finance is a mutually beneficial arrangement that allows for the sale of goods on behalf of the consignor while minimizing risk and financial investment for the consignee.