What Is Consignment Stock? A Guide for UK Sellers

What consignment stock means

Consignment stock is inventory a retailer holds and sells but does not own until it is sold. The supplier delivers goods to the retailer, and legal title stays with the supplier the entire time the stock sits on the shelf. The retailer only pays for a unit once a customer buys it, and anything left unsold can normally be returned.

You will also see it called consigned stock or consignment inventory, and the act of placing it is sometimes called consignment stocking. The two parties have specific names:

• The consignor — the supplier or owner of the goods. They keep ownership and carry the risk until a sale happens.
• The consignee — the retailer or agent who holds, displays and sells the goods on the consignor's behalf.

The defining feature is the split between possession and ownership. The retailer possesses the goods; the supplier owns them. That single fact drives everything else — the cash flow, the risk, and the accounting.

How a consignment arrangement works

A typical arrangement runs in five steps:

1. Agreement. Supplier and retailer sign a consignment agreement covering the wholesale price, the retailer's commission or margin, who pays for delivery, how often stock is reconciled, and how unsold goods are returned.
2. Delivery. The supplier ships the stock to the retailer. No purchase happens — ownership does not change hands. The retailer records the goods as held on consignment, not as their own inventory.
3. Sale. A customer buys a unit. At that moment ownership passes from supplier to retailer to customer, effectively simultaneously.
4. Settlement. On an agreed cycle — often monthly — the retailer reports what sold and pays the supplier the agreed price for those units, keeping their margin.
5. Return or top-up. Unsold stock is either returned to the supplier or restocked, and fresh stock is delivered to replace what sold.

The whole model lives or dies on accurate stock records. If the retailer cannot say precisely how many consigned units sold versus how many are still on the shelf, settlement becomes guesswork and trust breaks down.

Pros and cons for the retailer

For the retailer (the consignee), consignment is mostly about risk and cash:

The headline win is simple: you get stock on the shelf without paying for it, and you never carry the risk of it not selling. The hidden cost is the tracking. Because consigned units must be kept separate from stock you own, sloppy records lead to disputed settlements and, worse, to selling the same unit twice across channels.

Pros and cons for the supplier

For the supplier (the consignor), the trade is reversed — they take on the risk in exchange for reach:

• Upside: shelf space and visibility they might not otherwise win, a lower barrier to getting a cautious retailer to stock them, and often a higher effective price than a hard wholesale discount.
• Downside: their cash stays locked in stock sitting in someone else's shop, they carry the obsolescence risk, and they depend entirely on the retailer's honesty and record-keeping to know what has actually sold.

For a supplier, consignment is a bet that visibility drives enough sales to justify financing the retailer's shelves. It works best for products that sell steadily once seen, and badly for slow, bulky or perishable goods where the capital sits idle and the write-off risk is high.

Accounting treatment

The rule under both UK GAAP and IFRS is that inventory belongs on the balance sheet of whoever carries the risks and rewards of ownership — not simply wherever the goods physically sit.

• On the supplier's books: unsold consignment stock stays recorded as their inventory, even though it is in the retailer's premises. They recognise revenue only when the retailer sells a unit to an end customer.
• On the retailer's books: nothing is recorded as inventory while the goods are held on consignment. When a unit sells, the retailer records both a purchase (their cost) and a sale (the customer price), keeping the margin between them.

VAT generally follows the sale, not the delivery: the tax point usually arises when the retailer sells the goods on, not when they arrive on consignment — though the exact treatment depends on the agreement, so check with your accountant. The practical upshot is that both sides need a clean, shared record of exactly which units have sold in each period. Getting this right also feeds directly into how you value what you hold — see our guide to stock valuation methods.

When consignment makes sense for a UK seller

Consignment is a tool, not a default. It tends to be the right model when:

• You're a retailer testing an unproven range. New brand, uncertain demand, tight cash — consignment lets you trial it without the downside of dead stock.
• You're a supplier fighting for shelf space. If retailers won't buy your line outright, offering it on consignment lowers their risk enough to say yes.
• The product sells steadily once seen. Consignment rewards visibility. Steady, predictable sell-through is what makes the supplier's financing worthwhile.

It tends to be the wrong model for perishable or fast-obsoleting goods (the supplier's write-off risk is brutal), for very high-value items (too much idle capital), and for any relationship where stock records can't be trusted.

Whichever side of the deal you're on, the make-or-break detail is the same: you must track consigned stock separately from stock you own. Mixing the two is how retailers oversell across channels and how suppliers lose track of what they're owed. Salync keeps one accurate stock figure synced across eBay, Shopify, Amazon and the UK marketplaces, and lets you flag consigned units apart from your own — so a settlement report is a lookup, not an argument, and listing consignment stock everywhere never turns into selling a unit you don't have. Free for up to 50 SKUs.