Consignment Contracts: 5 Must-Have Clauses for Jewelry Brands
Protect your jewelry brand on consignment. Learn critical contract clauses, identify red flags, and know when to walk away to secure your profit and stock.
Caratzon Team·4 min read
Stop losing money on consignment deals because your agreements are weak. Consignment can provide market access, but without ironclad contracts, it becomes a liability. This guide equips you with the tactical playbook to secure your brand's assets and profit.
Consignment vs. Wholesale: Know the Risk
Understand this fundamental distinction: with wholesale, the retailer purchases your inventory outright, assuming all sales risk. With consignment, you retain ownership of every piece until it sells. You carry 100% of the inventory risk, the insurance burden, and the administrative overhead until that item leaves their store. Your payment is contingent on a sale, not on stock delivery.
5 Essential Consignment Agreement Clauses
Every consignment agreement you sign, or draft, must contain these non-negotiable protections:
- Payment Schedule & Payout Terms: Clearly state your commission percentage (e.g., 60% of retail price), how often you will be paid (e.g., net 15 days, monthly), and the method of payment. Demand detailed sales reports with each payout. No vague "when sales happen" clauses.
- Unsold Return Terms: Define the consignment period (e.g., 90 days, 6 months). Specify the condition required for returns (must be original, saleable condition) and who covers return shipping costs. Automatically renew? Only with your written consent.
- Markdown Authorization: This is non-negotiable. The retailer must obtain your explicit written permission for any discount, promotion, or markdown. Never allow blanket authorization for price reductions. Your brand's perceived value depends on this.
- Loss, Damage, & Theft Liability: The retailer is 100% responsible for your inventory's security and condition while in their possession. The agreement must state that they assume full financial liability for any loss, damage, or theft at current retail value. Request proof of their insurance coverage for consigned goods. If they refuse this, walk away.
- Display Standards & Security: Outline how your jewelry will be displayed (e.g., dedicated display case, lighting, security measures like locked cases or alarms). Ensure their display methods uphold your brand's premium image and prevent easy theft.
Identify Red Flags in Retailer-Drafted Agreements
Retailers often present agreements skewed in their favor. Watch for these red flags:
- Vague language: "Reasonable efforts" instead of specific actions or timelines.
- Automatic markdowns: Any clause allowing discounts without your written approval.
- Exclusion of liability: Retailers attempting to disclaim responsibility for loss or damage.
- Excessively long consignment periods: Locking up your capital for a year or more without performance reviews.
- One-sided termination clauses: Allowing them to terminate without notice, but requiring extensive notice from you.
For a deeper dive into protecting your business assets, reference our guide: Legal Essentials for Independent Jewelry Designers (/academy/legal-essentials-jewelry-designers).
When to Negotiate vs. Walk Away
- Negotiate: Payment terms (e.g., shifting from net 30 to net 15), specific display elements, initial consignment period length. These are often flexible points.
- Walk Away: If a retailer refuses to accept liability for loss/theft, demands automatic markdown authority, or won't provide specific payout schedules or detailed sales reports. These directly impact your financial viability and brand control.
Stop manually creating PDFs for buyers and use Caratzon to generate a "Digital Dossier" instantly. Review your current consignment agreements today, and draft a stronger template using these guidelines.