What is Consignment?
Before understanding the difference between consignor vs. consignee, it’s important to understand what consignment is. Consignment is the process by which a person gives over something to the care of another party, retaining full ownership until the property is sold. It is often done during auctions, shipping, transferring goods, or any time that something is put up for sale not by the owner but by a third party who will make the property available to a buyer.
Understanding Consignor vs. Consignee
Now that the idea of consignment is clear, the matter of consignor vs. consignee can be discussed. A consignor is an individual or party that brings a good to be sold on their behalf by another party, which is called the consignee.
The consignee acts as a sort of middleman, which is the individual that buys or retains the goods and passes them along to a third party or the final buyer. Regardless of whether the item is being sold and purchased or simply transferred from one party to the other through the consignee, ownership remains in the hands of the consignor until the deal is finalized, either through payment by or delivery to the final buyer.
The consignor may also be referred to as the shipper, obtaining shipping or transfer documents for the goods they are selling to the consignee. The consignor keeps the title/ownership of the property until it is transferred to or sold to the final party.
Example of a Consignor/Consignee Relationship
To understand the consignor/consignee relationship better, consider the following example. A family is looking to sell its collection of valuable items. They make an arrangement with an auction house to sell the items. Here, the family is the consignor, and the auction house is the consignee. The auction house markets the items, but the family retains ownership of them until a third party purchases the items.
Once payment’s been made – from the third-party buyer to the auction house – the money is turned over to the consignor, minus a fee for the consignee for hosting the items and facilitating the sale. Ownership is then transferred to the buyer.
It is important to understand the differences between consignor vs. consignee. Such differences make the buyer-seller relationship work and allow a consignor’s goods or property to be successfully transferred or sold to another party.
CFI offers the Financial Modeling & Valuation Analyst (FMVA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following resources will be helpful: