What is Consignment Stock?
Consignment stock is stock which is legally owned by one party (the Consignor) but held in the warehouse of another party (the Consignee) for retail & distribution purposes.
An example of a business which operates in this way is Amazon FBA. This is where Amazon sellers ship their stock into Amazon Warehouses for storage & distribution by Amazon themselves.
Advantages of Consignment Stock
The Amazon Seller avoids the costs and logistics or warehousing & distribution.
Amazon avoids tying up large sums of cash by having to buy huge quantities of stock.
Disadvantages of Consignment Stock
The Amazon Seller has to wait for payment on their product until Amazon is paid by the customer and then releases the funds back to them.
Amazon can end up carrying huge stock, which it is responsible for insuring, storing and keeping safe.