Operations, Sales & Marketing, V10I2

Wholesale or Consignment?

(Photo courtesy of Alexander Stein from Pixabay)

What is your shed sales model—wholesale or consignment?

I have been tossing this article around in my mind for a little while now and I thought why not bring some awareness to these two types of selling buildings on your lot? 

I am most familiar with the wholesale model. With this, you as a shed dealer would purchase your inventory at a base cost and then markup according to your surrounding market. 

Most manufacturers will have a suggested retail price that gives you a guideline to start your pricing, but remember that if you do your homework and shop your competition you can sometimes increase those percentages and ultimately make yourself more money. 

I believe in giving the customers a fair price for a building, so using your judgment when marking up your buildings is solely based on you. 

Now, onto the second and more common way of providing buildings to sell on your lot—consignment. This takes the burden of funding those buildings out of your hands and lets you focus solely on the product landing on your lot. 

This model only allows you to make on average 10-12 percent, which can take a toll on you as are struggling to sell enough buildings to make payroll/rent/expenses. 

Now you must look to the future and see which direction suits you in your location. 

I wrote an article previously about choosing the right location to put a shed lot, and this ties hand in hand with that. If your lot is not well traveled by a major road, and you sell one to three sheds a month, you should stick to the consignment model. 

If you’re selling 10 to 30 sheds a month, then I would recommend that you investigate going into the wholesale model as your return on investment will repay itself very quickly. 

The average sale on a shed is approximately $6,000. With that in mind, your $600-720 consignment would be turned into $1,500-1,800 on average. As you can see this adds up quickly, and you are paid better for your hard work. 

Your next question is “How am I going to be able to come up with the capital to pay for these buildings outright?” This is something that usually does not happen overnight. As with anything, it is an investment of time, money, and planning. 

If you have been able to sell enough sheds on the consignment model, then you must set aside a certain amount of money from each sale to be able to purchase one or two loads of sheds to start this process. 

Sometimes, manufacturers will work with you to be able to purchase some sheds on a load outright while still maintaining your consignment deal. This helps the cash flow for the manufacturer, but they do not make as much money off the buildings that are bought outright. Honestly, you may run into different reactions when moving in this direction. 

I believe that as you see the return on your investment in these buildings you will agree with me that wholesale is the ultimate way to go. 

Talking to your local bank is another option to see about funding the wholesale model or perhaps your finance company may work with you to make this a reality. 

As always, I look forward to hearing from you, the reader.

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