Consignment in Distribution: Definition, Process, and Benefits

What Is Consignment in Distribution?

In distribution and retail, consignment refers to a business arrangement where a supplier (or consignor) provides goods to a retailer or distributor (the consignee) without transferring ownership until the items are sold. The consignee pays the supplier only after selling the products, not at the time of delivery.

This model allows retailers to offer a wider range of products without tying up working capital in inventory. For suppliers and CPG brands, consignment reduces friction in getting products on store shelves and helps expand market reach faster.

In a consignment arrangement, ownership remains with the supplier until a sale occurs. This is key for accounting and risk management, as it affects how inventory is tracked and valued. Distributors using consignment agreements benefit from flexibility, lower cash outlays, and improved sell-through visibility.

Consignment is increasingly popular among CPG brands, foodservice distributors, and retail partners seeking agility in a volatile demand environment. According to Deloitte, consignment models support stronger supply chain resilience by aligning inventory levels with real market demand.

How Consignment Works in Practice

In practice, the consignment process begins when the consignor sends goods to a retailer or distributor under a consignment agreement. The retailer stores, displays, and sells the goods, but payment occurs only after each sale is made.

Here’s how the typical workflow unfolds:

1. Agreement Setup – The supplier and retailer agree on pricing, duration, and return terms.

2. Inventory Delivery – Products are delivered to the retailer’s location but remain under the supplier’s ownership.

3. Sales Tracking – Each sale is recorded and reported back to the supplier, often via integrated POS or ERP systems.

4. Reconciliation & Payment – The retailer pays the supplier only for items sold during the agreed period.

5. Restocking or Returns – Unsold goods may be returned, restocked, or rotated based on the terms of the consignment agreement.

For example, a beverage brand may place its new drinks in convenience stores on consignment. The stores display the beverages and record sales daily, while the brand monitors inventory levels through connected software. This arrangement minimizes the retailer’s risk while helping the brand collect real-time sales data.

Modern distributors often manage consignment using order management software or inventory automation tools that synchronize stock visibility between suppliers and retailers. These tools track ownership, shelf performance, and reorder points automatically — improving accuracy and reducing manual errors.

Key Benefits for Teams and Operations

Consignment brings measurable benefits to suppliers, distributors, and retailers alike.

For Suppliers and CPG Brands

• Faster Market Entry: New products reach store shelves without long procurement delays.

• Better Sell-Through Data: Real-time insights into what sells, where, and when.

• Reduced Risk of Overstock: Suppliers retain ownership and can reallocate slow-moving goods efficiently.

For Retailers and Distributors

• Lower Upfront Costs: Retailers pay only after sales, freeing up working capital.

• Broader Product Selection: Enables testing of new brands without full purchase commitments.

• Improved Collaboration: Strengthens supplier relationships through shared risk and transparent performance metrics.

In practice, teams also gain from improved inventory turnover, cash flow management, and sales accountability. With digital reporting, both sides can analyze performance by SKU, location, or timeframe, driving smarter replenishment decisions.

According to McKinsey, companies leveraging consignment or vendor-managed inventory (VMI) models reduce stockouts by up to 30% while improving on-shelf availability — key metrics for competitive retail execution.

How SimplyDepo Supports Consignment Management

SimplyDepo helps distributors and brands streamline consignment workflows with tools designed for visibility, accuracy, and collaboration.

Through its Order Management System (OMS), SimplyDepo allows suppliers and field teams to:

• Track consigned inventory across multiple retail accounts

• Automate restocking and invoicing after confirmed sales

• Sync data between sales reps, warehouses, and retail locations in real time

Additionally, the Route Management and Field Sales modules empower reps to check consigned stock levels during visits, capture proof of delivery, and trigger replenishment requests instantly.

By centralizing these processes, SimplyDepo reduces manual reconciliation, prevents missed payments, and ensures everyone — from brand to retailer — works from the same accurate data source.

For CPG and wholesale teams adopting a consignment model, SimplyDepo offers the flexibility to manage ownership, inventory flow, and sales performance seamlessly within one connected platform.