What is a Consignor?

A consignor is the owner of goods, which it has sent to a consignee to be sold to a third party. The consignor designation commonly arises when a producer of goods does not have a sales function, and so transfers the goods to another party that has the capability to sell them on behalf of the consignor.

What is a Consignee?

A consignee is the recipient of goods shipped to it by a consignor. The consignee is responsible for selling the goods to a third party, after which the consignee pays the consignor and retains a commission.

Example of a Consignor - Consignee Arrangement

As an example of a consignor-consignee relationship, Sarah’s Handmade Crafts (the consignor) is a small business specializing in handmade pottery and home décor items. Sarah owns the products and wants to expand her sales without setting up her own retail store. HomeStyle Boutique (the consignee) is a local store that sells unique and artisanal home goods. The boutique agrees to display and sell Sarah's pottery in their store.

Sarah delivers her pottery to HomeStyle Boutique (the consignee). The ownership of the pottery remains with Sarah until a piece is sold. When a customer buys an item, HomeStyle Boutique takes a pre-agreed percentage of the sale as their commission and remits the remaining amount to Sarah. If any items are unsold, HomeStyle Boutique returns them to Sarah.

This is a typical consignment arrangement where the consignor (Sarah) provides products for sale while the consignee (HomeStyle Boutique) facilitates the sales process.

Comparing a Consignor and Consignee

The consignment process involves sending goods from a consignor to a consignee. The consignee is tasked with then selling the goods to an independent third party. Until the ultimate sale occurs, the consignor continues to retain ownership of the goods. For example, an artist has an arrangement with a gallery to sell his paintings. The artist is the consignor and the gallery is the consignee. When the gallery sells a painting, ownership transfers from the artist to the buyer of the painting. The buyer pays the gallery for the painting, the gallery extracts its commission, and then forwards the remaining amount to the artist. This results in the following differences between the two entities:

Shipping documents. The consignor is the shipper, and the consignee is the recipient.
Ownership. The consignor is the initial owner of the goods, while the consignee may simply be an agent, not actually taking ownership of the goods. This means the consignor keeps a record of consigned inventory on its books until the goods are ultimately sold to a third party.
Payment. The consignor retains title to the goods until payment is received from the consignee.