What is the difference between consignment, wholesale, and VMI? Consignment, wholesale, and VMI place stock with a retailer in different ways. On consignment (vendor owned inventory), you keep title until a unit sells and get paid after the sale. In wholesale, the retailer buys and owns the stock, then reorders. In VMI, the retailer usually still owns and pays, but you decide when to replenish.
When a store will carry your line but won't buy a full opening order, the question is how you place the stock: who owns it on the shelf, when you get paid, and who decides the next delivery. This guide starts with consignment, then compares it with standard wholesale and vendor managed inventory (VMI). For a deeper look at VMI, including scan-based trading, see vendor managed inventory for small brands.
Consignment: you own what's on their shelf
In a consignment placement, your product sits in the store, but you remain the owner until a customer buys it. You are the consignor; the retailer is the consignee. After a sale, the store remits the agreed amount and keeps the rest as its margin or commission.
Shopify's consignment inventory guide puts the trade plainly: the retailer spends less up front, and the supplier waits longer to get paid. Unsold units are handled under the agreement and often come back to you at the end of the term.
You'll also hear this called vendor owned inventory. Microsoft's Dynamics 365 consignment docs describe it as stock "a vendor owns but stores at your site," recorded as on-hand quantity without a purchase on the retailer's books until ownership changes.
Why brands offer it
A boutique that won't risk a first purchase on an unknown line may still give you a shelf if it only pays when something sells. Shopify notes that consignment can be a way to place product in stores before moving into wholesale. Keep it a short trial: a handful of SKUs, a named store, a fixed end date, and a written review.
What it costs you
Cash is tied up in goods you've already made or bought, now sitting on someone else's shelf.
You carry the risk of units that don't sell, and you often take them back.
You depend on the store's reporting to know what sold and what you're owed.
Someone has to count, reconcile, invoice, and handle returns.
Vista Advising sums up the cash problem: "Every unsold piece on consignment is cash you already spent." If you need that money for the next production run, more consignment stockists only tighten that constraint.
Selling wholesale to independent stores? Set up your brand on Ordrly. Core is $0/month. Retailers join free.
What to put in the placement agreement
Don't ship on a handshake. Shopify recommends writing the agreement before the retailer receives any products. Cover the SKUs and quantities, the revenue split or payout, when the store pays you after a sale, how long the placement lasts, who pays freight each way, how both sides track what arrived, sold, was discounted, damaged, or went missing, who is responsible for loss or theft and who carries insurance, whether the retailer can mark goods down without your approval, and what happens to unsold units at the end of the term.
Reconcile on a schedule. Shopify's tracking frame works even on a spreadsheet: what came in, what sold, what changed, and what's left. Compare those four numbers each month, or at the end of the term, and settle differences in writing. Keep the first placement small enough that a slow store doesn't stall your production cash.
Standard wholesale: the retailer buys the stock
In standard wholesale, the retailer purchases the goods, takes title, and owns what's on the shelf. You get paid on the agreed terms, whether or not those units have sold yet. The store decides when to reorder, and unsold stock is ordinarily the store's problem unless you agreed to something else.
Payment can be before or at shipment, or later on net terms. Net terms ease the retailer's cash timing without moving ownership back to you, but they create payment risk, which is why many brands start new accounts on prepay and move proven accounts to terms. Ordrly offers net terms under its own trade finance for eligible brands, so extending terms doesn't have to mean running credit and collections by hand. If the tighter problem is funding the gap while you wait to be paid, see our guide to wholesale cash flow solutions.
A middle path: paid wholesale with a limited return
If the store's objection is trial risk, you don't have to jump to consignment. Vista Advising's default for makers is an upfront wholesale purchase with a time-limited buy-back credit: eligible unsold pieces can come back as credit toward new stock, with a deadline, condition, and freight rules agreed in advance. You get paid at the start and share only a bounded slice of the experiment.
From the retailer's side, that sits next to sale-or-return and small test orders. Our guide to returning unsold wholesale products walks through those options and what to agree on before the first order.
Where VMI fits, and where it doesn't
Vendor managed inventory changes who decides the next delivery, not who owns the stock. In a standard VMI arrangement, the retailer still takes title on delivery and pays on normal invoice terms. You monitor shared stock and sales data and replenish against agreed minimum and maximum levels.
Invendor's VMI vs consignment explainer makes the split clear: VMI is about who manages and replenishes stock; consignment is about who owns it and when you're billed. You can run VMI with or without consignment. The hybrid — sometimes called consigned VMI, or vendor-owned VMI — is real, and Oracle's JD Edwards outbound inventory docs support both customer-owned and supplier-owned VMI.
For a small brand, formal VMI is usually a later step: steady sellers, a trusted account, reliable counts, and a written min/max. It does not, by itself, solve "I'm not sure it will sell" or "I don't want to buy this much up front." The VMI guide for small brands covers when VMI is a fit and how to run it on a small scale.
Ordrly does not offer VMI or consignment today. VMI is on the public roadmap, and so is starting the next purchase order from a connected retailer's register sales. Neither is live.
Consignment vs wholesale vs VMI
Question | Consignment (vendor owned inventory) | Standard wholesale | VMI |
|---|---|---|---|
Who owns stock on the shelf? | You, until each unit sells | The retailer, after purchase | The retailer, typically from delivery |
When do you get paid? | After the customer buys, on the settlement cycle | On the invoice terms (prepay or net) | On normal invoice terms |
Who decides the next delivery? | Usually the retailer, unless you add VMI | The retailer | You, against agreed min/max levels |
Who carries unsold-stock risk? | You | The retailer (unless you offered a return or credit) | The retailer, unless the agreement says otherwise |
Main admin load | Sales reports, counts, settlements, returns | Orders, invoices, and reorders | Data sharing, min/max reviews, replenishment |
Best use for a small brand | A short, limited trial with a hesitant new account | Ongoing placements once sell-through is proven | Proven, steady SKUs with a trusted account |
How a small brand should place the stock
Start from the job the placement has to do, then pick the model that does that job with the least cash tied up.
You're trying to get a first shelf with a store that won't buy yet
Consignment can be the right tool if you treat it as a trial, not a distribution strategy. Limit the SKUs, set an end date, write the agreement, and decide in advance what sell-through would make you convert the account to wholesale — or pull the stock.
The store will buy, but wants a safety net
Prefer paid wholesale with a small opening order, or a time-limited buy-back credit, over consigning the same units. You get paid up front, and the trial risk is bounded.
The store already sells the line and just runs out
That's a replenishment problem, not an ownership problem. Don't "fix" it with consignment. Make reordering easy and reserve formal VMI for later, once you have trusted data.
You can't afford to finance their shelf
Say no to open-ended consignment, even if the store is a desirable account. Wholesale keeps your cash funding production instead of someone else's display.
When to convert consignment to wholesale
Give every consignment placement a review date. Look at units sold, what's still sitting, how reliably the store reported, and whether the settlement work was worth it. If the product sold through, ask for a wholesale reorder of the proven SKUs. If it barely sold, pull the stock and don't automatically refill the same shelf on the same terms.
Want a live wholesale catalog, net terms, and forecast-based low-stock alerts in one place? Create a brand account on Ordrly Core for $0/month. Retailers can create a free account.
Where Ordrly fits today
Ordrly is built for the wholesale relationship: catalog, orders, dealer management, and reorders. It does not run consignment settlements, and VMI isn't live yet. What is live:
Forecast-based low-stock alerts. Connected retailers get an email when your products are heading toward a stockout, with a link to reorder. You see the same list with a recommended quantity.
Live wholesale ordering. Retailers order at your live wholesale price and stock, and you can start an order for them.
Net terms with the order. For eligible brands, Ordrly's own trade finance handles underwriting, AR, and collections.
A public brand page so retailers can find and connect with you on Ordrly's brand directory.
FAQ
What is the difference between consignment, wholesale, and VMI?
On consignment, also called vendor owned inventory, you keep title until a unit sells and get paid after the sale. In standard wholesale, the retailer buys and owns the stock, then decides when to reorder. In VMI, the retailer typically still owns and pays for the stock, but you decide when to replenish it.
What is vendor owned inventory?
Vendor owned inventory is stock that sits at the retailer's location but is still owned by the supplier. In independent retail it's usually consignment: title stays with the brand until a unit sells, and the store is billed after the sale.
Is VMI the same as consignment?
No. VMI is about who replenishes; consignment is about who owns the stock until it sells. They can be combined, but a standard VMI arrangement has the retailer owning and paying for stock on delivery.
Should a small brand put stock on consignment?
Sometimes, as a limited trial with a written agreement, not as the default for every account. If the store will buy with a smaller order or a buy-back credit, prefer that.
Can you combine VMI and consignment?
Yes. That's consigned VMI, or vendor-owned VMI: you still own the stock until it sells, and you also decide replenishment. It's uncommon as a first placement with a small independent store.
Does Ordrly offer consignment or VMI?
No. VMI is on the roadmap and isn't live. Ordrly doesn't run consignment. Today, brands get forecast-based low-stock alerts, live wholesale ordering, and net terms offered by Ordrly under its own trade finance for eligible brands. Core is $0/month. Retailers use Ordrly free.
Place the stock, then get the reorder
Consignment, wholesale, and VMI each move a different part of the placement: ownership, payment timing, or who triggers the next delivery. For most small brands, the durable path is a tight trial if you need one, then wholesale orders, with a reliable way to get the next order before the shelf goes empty.
Brands: Join Ordrly as a brand. Core is $0/month, with the same software on every plan.
Retailers: Create your free retailer account to order and reorder from the brands you carry in one place.