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Taking Risks

Posted: January 15th, 2011 | Author: | Filed under: art | Comments Off on Taking Risks

Part of running a business is taking risks and making calculated gambles. Once in a while, you get burned.

Late last May, I was contacted by Queen City Emporium in Springfield, Missouri, to see if I would like to consign my items in their shop. Consignment is when you place merchandise in a store and they pay you when it sells. Typically, the store keeps 30–40% of the sales price, and you receive the rest. Although many sellers will not consider such an arrangement, consignment can be a very good way to get your items out there without a lot of fuss, as the store absorbs the cost of promoting the merchandise and making the sale — no time spent marketing, going to shows, packing and mailing individual orders, etc., on the part of the seller. I have several consignment arrangements in place, and, until now, they have all worked very well for everyone involved.

I am especially cautious about consignment arrangements with shops that aren’t within easy driving distance of my home, so I took some time and did a little research. I Googled them and their shop and saw nothing that looked out of the ordinary. I checked Google Street View to be sure that the shop and the area were actually as described. I searched for websites of other sellers they had listed to see if anyone was complaining about them, and found nothing of the sort. The contract they sent seemed typical of other consignment contracts I’ve entered into. Not seeing any major red flags, I sent them twelve necklaces with a total retail value of $452 the first week of July.

Consignment contracts spell out reporting and payment schedules and details (e.g., previous month’s sales paid by check on the 10th of the month or some such), among other things, and when the sales reporting date had come & gone, I contacted them for information. I was told that they were a little behind in getting the reports out, but they were working on it, but never received the promised report. Then I got busy with other things and just let it slide. In October, I contacted them again and was given a similar story, with a similar result. Just before Christmas, I made a note to follow up after the holidays and ask for my items to be returned. I was preparing to do just that yesterday when a (now closed) forum thread in the Etsy forums caught my eye. (Head to the Etsy forums and do a title search on “Queen City Emporium” for a big eye opener, if you so desire.)

It seems that I am not the only one in this situation. As of this moment, there are known to be at least 35 sellers who have sent more than $25,000 in merchandise to Queen City Emporium and have not been able to get current, consistent sales reports or payments out of them. Several of the affected sellers are contacting others known to have merchandise on consignment there based on lists provided on the shop’s website and blog, but I would have never known there were others in this situation had I not accidentally stumbled on the forum thread, since I’m not listed as a vendor on their site.

I was fairly lucky in this situation. Because I had no history or in-person contact with Queen City Emporium, I sent only a dozen pieces, rather than the 20–30 I normally supply for consignment. Because I use a pricing formula that is made to accommodate wholesale and consignment, my materials cost is only a fraction of the retail value; those who price closer to materials cost are out a lot more than I am. Because I itemize, I can write off the materials cost — although not the lost time — as a loss on my taxes. And because I make sales through a number of venues (shows, Etsy, others shops and galleries), this loss is a smallish blip on my yearly sales.

Yesterday I filed a complaint with the Missouri attorney general’s office, as have many of the other known affected sellers. Today I am writing my merchandise return demand letter, although, based on others’ experiences, I am not confident that my merchandise will be returned in saleable condition, if at all. Today I am also putting into place some new policies and safeguards to limit my future exposure to this kind of scam.

Consignment will continue to be part of my business plan, but I am going to be focusing much more on wholesale arrangements, especially for out-of-area shops. A distant shop that wants me to consign is going to have to meet much more rigorous standards and pass a more thorough investigation before I’ll be willing to consider it, and if an arrangement is made, I will be limiting my exposure to loss until the relationship is well established. And, recognizing that I should have been following up on this situation more closely and more forcefully, I have made some adjustments to my procedures to ensure that missing sales reports and payments won’t be allowed to slide.

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