The main difference between consignment and sale is, in the case of consignment ownership doesn’t change with the sale of goods to the other person but in the case of a sale, the ownership of goods change with the sale of goods to the other person. It means in the case of consignment the ownership doesn’t change means if a person sells his goods to another person then his ownership will remain with him but in the case of sale the ownership change with the sale of goods to the other person. If a manufacturer sells his goods to a supplier then his ownership won’t change but if that supplier sells goods to the retailers then his ownership of goods will go to the retailers. To understand the difference between consignment and sale in detail at first we have to know more about these two. So let’s understand what is consignment and what is a sale in detail.
What is a consignment?
Consignment means where the ownership of goods remains unchanged, means ownership of goods don’t change with the sell of goods then that term is considered as a consignment. In consignment, goods sell on the behalf of a third party who even get a commission for that goods to the retailers. And in consignment, there is a relationship between the agent and the retailers, so the principal of consignment is the retailer agent-principal. Some terms are commonly used while discussing consignment. And those terms are consigner, consignee, consignment and performance invoice.
These are the most common words used while discussing consignment. And if we take a look at these terms then, consignee means the head of the manufacturer who manufactures goods and sent to their agent. If the manufacturer gives their goods to sell it in the market on the behalf of the agent. Then the manufacturer will be referred to as consigner. And consignee means the agent who takes the goods and sells them for the manufacturer and gets commission for that.
This commission depends upon the goods. Now the term introduced is consignment. Consignment means the replacement of goods. When the manufacturer gives his goods to the agent for the sale and this replacement of goods from one person to another then this term will consider as a consignment. And at last, the main term is Pro-forma Invoice. Pro-forma invoice gives the details of all goods transactions at some terms. These are some terms that have been followed and then the agent gives the details of goods transactions to the manufacturer after getting his commission.
These are the common term that will use while detailing the consignment. But if management wants brief information about goods then the term which uses for that is account sales. Account sales give brief information about the goods. And this brief information help get to know the management more about the goods. Let’s understand it with an example more clearly.
A company manufacture goods and that company wants to sell his goods but for selling that many goods the manufacturer will appoint agent which will get a commission for selling goods. But the manufacturer is only selling his goods on behalf of the agent. Ownership of those goods will remain with the management.
Types of consignment
1. Inward consignment
2. Outward consignment.
1. Inward consignment
When the goods use to sell in the country with the help of an agent then that term will be considered as an inward consignment. Inward consignment is mainly used when goods are selling from one state to another state or in local areas then that is called inward consignment.
And this inward consignment deals with the domestic purpose. In most cases inward consignment is done to full fill the need of the consumer. If we take one example to understand it then, a company sells its goods on behalf of its agent to Maharashtra for their consumption. Now the goods sold to a state will be considered as an inward consignment.
2. Outward consignment
When the goods use to sell outside the country with the help of an agent then that term will be considered as an outward consignment. Outward consignment is mainly used when goods are selling from one country to another country then that is called outward consignment. And this outward consignment deals with the international purpose of use. In most cases outward consignment is done to full fill the need of the consumer.
Features of consignment
• In consignment possession of goods is done with the consignee not the ownership of goods. It means the management of the company only share his goods to sell in the market, they don’t sell the ownership of goods with the agents.
• The consigner is responsible for all the risk, expenditure, damage. Consignee has free from all these responsibilities.
• Profit or loss goes to the consigner. In case if the selling of goods gets to profit in that case profit will go to the consigner and if selling gets loss in that case company will have to accept that loss. Consignee has no role in it. He is only for selling the goods in the market.
• Relation of the consignee with the company is only to sell the goods.
Objectives of consignment
• The consignment aims to attract people towards the product of the company.
• If a company launch a new product then consignment helps to know the people about that new product.
• Consignment helps to earn huge revenue from the goods.
• If a company wants to expand its business then the consignment helps the company to grow up more rapidly.
• Consignment also helps to increase the sale of goods.
What is the sale?
The sale means when goods are sold to another person then the ownership of goods has gone with that. Now there will be a new owner of the goods who have bought those goods. In sale, there is no third party or any agent who sell the goods. The owner of the goods sell their goods to retailers and then that retailer becomes the new owner of the goods.
This is how it works. Means its ownership is completely transferred from one person to another. There is no fixed owner of goods. And if that retailer sold those goods to the customer then the ownership of goods go to that customer. It means it is regular transfer ownership of goods.
Features of sale
• In case of sale minimum of two parties are required to conduct this process.
• In the category of sale only movable property comes under it.
• Transfer of goods occurs.
• In consignment, the ownership of goods doesn’t change with the sale of goods while in case of sale the ownership of goods changes with the sale of goods.
• In a sale, there is no third party to sell the goods while in consignment there is a third party that is considered as an agent has involved in selling the goods.
• Consignment uses for many purposes like earning high revenue, increasing the sale of goods and also getting high profit but there are no such things that occur in the sale. Sale is only to sell the product to the customer.
• In consignment, the parties involved are consigners and consignees whereas in sale the parties involved are only buyers and sellers.
• In case if buyers have to return their products to sellers then they will have to take permission for returning the product in the sale while in consignment consignee can return the unsold products to the consigner without any permission.
These are the main differences between consignment and sale which make different to each other wherein consignment ownership doesn’t change while selling the product but in case of sale the ownership of goods has changed if the sellers sell his products to the buyer.