Selling Instruments on Consignment, I'm Confused

[ryano]

So I was wondering if someone could explain this to me. I feel like I must be missing something. Many music shops sell instruments (including basses) on consignment. They usually charge a percentage of the sales price. So if I bring in an instrument and it lists for 500 bucks and the store charges 20%, then they get 100 bucks and I get the remaining 400 when/if the instrument sells. Cool.

Here is where I get confused. Lets say I bring in an instrument that we list for 5000 dollars. The store gets 1000 bucks and I get the remaining 4000 after the sale. What exactly does the store do to derserve the 900 difference between the two sales. They put both instruments in their shop and let people try em out and answer questions about them.

Seems like there should be a max for the store's cut at some point, say 2 or 300 bucks. I just don't understand why you pay 900 more to the store just because the instrument is more expensive. What exactly does the additional 900 dollars get you?

Maybe it's me. Can someone straighten me out?

--ryano

[guy n. cognito]

Originally Posted by ryano

So I was wondering if someone could explain this to me. I feel like I must be missing something. Many music shops sell instruments (including basses) on consignment. They usually charge a percentage of the sales price. So if I bring in an instrument and it lists for 500 bucks and the store charges 20%, then they get 100 bucks and I get the remaining 400 when/if the instrument sells. Cool.

Here is where I get confused. Lets say I bring in an instrument that we list for 5000 dollars. The store gets 1000 bucks and I get the remaining 4000 after the sale. What exactly does the store do to derserve the 900 difference between the two sales. They put both instruments in their shop and let people try em out and answer questions about them.

Seems like there should be a max for the store's cut at some point, say 2 or 300 bucks. I just don't understand why you pay 900 more to the store just because the instrument is more expensive. What exactly does the additional 900 dollars get you?

Maybe it's me. Can someone straighten me out?

--ryano

Well, a $5000 bass is like to sit on the shelf much longer than a $500 bass. In essence, your bass is taking up space that could be used to sell another bass.

Hmm...yeah, that's the ticket.

[Pilgrim]

Originally Posted by ryano

Here is where I get confused. Lets say I bring in an instrument that we list for 5000 dollars. The store gets 1000 bucks and I get the remaining 4000 after the sale. What exactly does the store do to derserve the 900 difference between the two sales. They put both instruments in their shop and let people try em out and answer questions about them.

There's a good reason.

You're doing nothing. They do all the work. They also have to pay for the building, insurance, staff, utilities, and all their other expenses.

If you want the other thousand, you're welcome to sell it yourself. Then YOU are paying all those expenses, not them.

[ryano]

Originally Posted by Pilgrim

There's a good reason.

You're doing nothing. They do all the work. They also have to pay for the building, insurance, staff, utilities, and all their other expenses.

If you want the other thousand, you're welcome to sell it yourself. Then YOU are paying all those expenses, not them.

I guess you lost me here. Are you saying the more expensive instrument costs them 900 dollars more in:

"Building, insurance, staff, utilities, and all their other expenses"

I may be mistaken but it seems those costs are fixed no matter the value of the instrument, well, except maybe insurance. Not sure how that works.

I agree with you selling myself seems to be the way to go.

[mike_v_s]

My local shop just charges $15 or $30, depending on the size. He'll let it sit for quite a while before he asks for another "rental" payment.

Mike

[ryano]

Originally Posted by mike_v_s

My local shop just charges $15 or $30, depending on the size. He'll let it sit for quite a while before he asks for another "rental" payment.

Mike

That's a great deal. The whole "rental" idea makes more sense to me. Seems like that would be the way to go. Charge someone a monthly fee to show their instrument. The fee would be based on the amount of space the instrument takes up in the shop.

I like it!

[uaudio]

Having to find a box and take your instrument to the post office? Huge hassle. Definitely worth the hundreds of dollars you lose by having it consigned.

Any item you could EVER sell on consignment would get a higher price on eBay (net of fees), or TalkBass. Friends don't let friends sell things on consignment.

[ryano]

Originally Posted by uaudio

Any item you could EVER sell on consignment would get a higher price on eBay (net of fees), or TalkBass. Friends don't let friends sell things on consignment.

LOL!

I think I've read one too many shipping horror stories.

Funny I started this thread after looking at alternatives to posting a bass in the talkbass classifieds. Seems like there is no substitute. Time to get over my fear of shipping, thanks for the wake up call :-).

[Pilgrim]

Originally Posted by ryano

I guess you lost me here. Are you saying the more expensive instrument costs them 900 dollars more in:

"Building, insurance, staff, utilities, and all their other expenses"

I may be mistaken but it seems those costs are fixed no matter the value of the instrument, well, except maybe insurance. Not sure how that works.

I agree with you selling myself seems to be the way to go.

No, I'm not telling you that it costs them $900. What I am telling you is that they are doing all the work - and they deserve to get paid for it. Don't imagine for a moment that they can stay in business selling $20 guitar cables. They NEED to sell bigger ticket items, and that means they need to sell items every day on which they make hundreds of dollars.

That's simply what they need to pay those fixed costs you refer to!! Small ticket items don't keep them in business.

I have been in sales, and I am absolutely on their side. I can see that they might set a smaller percentage for more expensive consignment items, but that doesn't mean they have to.

I sold cars, and you can't stay in business selling cheapo econoboxes. You need to sell big cars, pickups and stuff where there is a $2000 or $5000 profit per unit, or you go out of business. It's a fact of life - you either have to do incredible volume in low ticket stuff, or you better make a LOT of money on a few items every day.

Clearly you get a get a better deal if you sell it yourself. Go right ahead - that's what I'd do...it's the smart way to go! But in that case YOU are doing the work, and YOU make the profit. If they do the work, don't bitch when they make the profit.

[Geddyfleaharris]

That's the business world. A lot of businesses are based on percentages. Simplest, easiest way to do a lot of things. What about the bass that they sell for $100 and get $20. You know they have spent more than $20 of staff time showing the bass, writing up the bill of sale and writing up the consignment deal with you. Percentages.

[ryano]

Originally Posted by Pilgrim

Clearly you get a get a better deal if you sell it yourself. Go right ahead - that's what I'd do...it's the smart way to go! But in that case YOU are doing the work, and YOU make the profit. If they do the work, don't bitch when they make the profit.

I totally agree with that. If they do the work they deserve to make the profit. I guess the point I'm trying to make is that they are charging you different amounts for the exact same service. At 20% they get 20 bucks for a 100 dollar instrument and 2000 dollars for a 10,000 dollar instrument yet the service they provide is identical.

At a certain point they are gouging the seller.

No worries, I'll heed your advice and do the work myself.

[uaudio]

To revisit this, by the same logic they should only make the same $200 or $300 on a brand new MIM Fender vs. an Alembic.

If they make $3000 profit on a $10,000 Alembic, is that gouging in a way that $300 on a $1000 Fender isn't? I guess I don't understand...its capitalism, no?

[bassmonkeee]

Why should anyone have to justify it, or explain it? It's a fairly simple concept, really. They could tell you that you have to bring them a kitten every day they have your bass on the wall if they wanted to.

You either accept their terms for consignment, or you don't. If you don't think their terms are acceptable, you don't leave an instrument on consignment with them.

They're not gouging anyone. Only a moron would think they have the right to dictate the terms for someone else to do all the work and have the retail showroom.

[The Golden Boy]

I don't understand why you don't have an issue with 20% on a $500 item but do have an issue with the same percentage on a $5000 item.

It's been a while since I've done anything with consignment stuff- but IIRC it was a fixed fee, like $100, rather than a percentage of the item.

[jive1]

Originally Posted by ryano

I totally agree with that. If they do the work they deserve to make the profit. I guess the point I'm trying to make is that they are charging you different amounts for the exact same service. At 20% they get 20 bucks for a 100 dollar instrument and 2000 dollars for a 10,000 dollar instrument yet the service they provide is identical.

At a certain point they are gouging the seller.

No worries, I'll heed your advice and do the work myself.

But it is not the same service, because you are dealing with different instruments and different buyers. The buyer of a $10,000 instrument will have higher expectations for the instrument, thus it will need to the maintained and set up properly for the sale. They will also ask more questions, request more photos, etc. than they would for buying a $100 bass. There's also more after sale support, and the $10,000 takes longer to sell, and that causes it to take up space longer. Then there's the effort to advertise the product, ship it, etc to include as well. And if there is shipping problem, or a dissatisfied customer, the store deals with it and sometimes the profit isn't enough to cover the hassle.

Also, you take into account the store's reputation and what that's worth. The consignment fees are in essence not only paying for the store's service, but it's reputation as well. Some folks are leery of buying from strangers online, but they trust a store that's been in business for years and advertises. People have more trust buying a $10,000 Fodera from a reputable bass store than XusernameX. They have a number to call, and a place to check out the instrument. The store displaying an instrument, also takes risks for the instrument when people demo it. Thus another reason why a more expensive instrument costs more for consignment.

Also, from the store's perspective the consignment item competes against products they already have in stock. For example, if an $1,000 item nets them a $100 profit while requiring less sales effort, why would they want to sell a $10,000 item for the same profit margin when it requires a greater sales effort? Just not worth it for the store.

In this day and age, you should sell it yourself. It's a simple equation. If the difference between what you sell it yourself for and what you trade-in/consign it for is worth not dealing with the hassle of selling the item, then consign or trade in. For many folks, it's well worth it. If the difference is worth selling it yourself, then sell it yourself.

[Brad Johnson]

I've sold basses myself and on consignment and had success each way. If it's something I want to move relatively fast, putting it in a store with lots of traffic at an attractive price can make that happen. If I'm waiting for more money, I sell it myself. Either way I come out ahead.

Here's how I do consignments... I figure out what "I" need from the sale and the store adds whatever they need to that. That means that I could take a bass I want $1000 for and they could sell it for $1200 or $2000, either way I get $1000. I don't care.

A more expensive item can be harder to sell. That's why it can cost more to sell it.