Consignment or Wholesale: Which Ties Up Less Cash
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The consignment question is usually argued as a trust question and decided as a cash question. Both terms move the same bottle; they differ in when the money comes back and who carries the risk while it waits. A five-ounce case costs $5.99 for 12 bottles, so a 40-case consignment shelf is $239.60 of glass sitting in someone else's store. Wholesale moves that cost onto an invoice. The difference is measurable in cases and days, which makes it a decision rather than a preference.
Count the cash before the margin
Both channels sell the same product at different prices, so the margin comparison is easy and usually misleading. Margin answers what a case earns. Cash answers whether the brand can fund the next batch, and a small brand runs out of the second long before it runs out of the first.
Start with what a case costs to build. Five-ounce glass is $5.99 a case. Twelve caps at $0.08 each add $0.96, and a pack of 250 bands at $9.50 adds under four cents a bottle. Sauce, label and labor sit on top, and every one of those costs is paid before a store sells anything.
That is the number to put on the consignment side of the sheet: cost per case, multiplied by cases placed, multiplied by the number of stores. It is not a bad number, it is a number that has to be financed.
On the wholesale side, the same case cost appears but it is recovered at invoicing. The brand still pays for glass up front, but the gap between paying and being paid is a payment term rather than a consignment period.
Model the consignment shelf
A consignment arrangement typically means the brand places product, the store sells it, and the brand is paid on what sells. The arithmetic is a float: cash leaves on bottling day and returns in tranches as units move.
Build the model from cases and stores. Twenty stores at two cases each is 40 cases. At $5.99 a case for five-ounce glass plus $0.96 of caps, that is about $278 of packaging, and twice that once sauce and labor are included. If each store sells one case a month, the brand is financing a rolling 40-case float permanently.
The float gets cheaper with volume, which is the one clear advantage of a bigger consignment program. Five-ounce cases drop to $5.25 at 72 cases, $4.99 at 234 cases and $4.55 at 468 cases. Buying at the second tier saves 74 cents a case, or $29.60 across the 40-case float.
That saving is real but small against the risk. The larger number in the consignment model is the inventory that does not sell, because unsold consigned product is cash that may come back as bottles rather than money.
Model the wholesale order
Wholesale is simpler to model because the transaction has a date. A store or distributor orders cases, the brand invoices, and payment arrives on the agreed term. The product stops being the brand's inventory at the point of sale.
The first order is usually small, which keeps the arithmetic honest. Twenty stores at one case each of ten-ounce bottles is 20 cases at $7.80, or $156 of glass, and the same 20 stores at one case of five-ounce is $119.80. Those are the numbers a wholesale push actually requires, and they are half the consignment float above.
Wholesale also carries a freight decision that consignment sometimes hides. Orders weighing 150 pounds or more may not qualify for UPS parcel shipping, so a multi-store wholesale order may need a freight quote while a store-by-store consignment drop does not.
The trade is clear: wholesale recovers cash sooner and costs more per unit to serve, because the store buys at a wholesale price that leaves room for its own margin. Consignment recovers cash later and keeps the retail margin, if the product sells.
Price the delay in days
The two channels differ by a number of days, and that number can be calculated. On wholesale, the delay is the payment term. On consignment, the delay is the sell-through period plus the payment cycle.
Estimate both. If a wholesale invoice is paid 30 days after delivery and a consignment check arrives 60 days after placement, the difference is 30 days of float per case. At 40 cases of five-ounce glass plus caps, 30 extra days of float is about $278 held a month longer, every month, for as long as the program runs.
Then add the unsold remainder. A consignment program that sells 70% of placed stock returns 30% of the float as product, which either gets sold elsewhere or written off. That 30% is the part of the model most likely to be left out of a plan.
Multiply by the annual cycle to make the number visible. A 40-case float held an extra month, twelve times a year, is the equivalent of financing 40 cases permanently, and that is before any write-off.
Cap the exposure at a case count
Whichever channel is chosen, write a maximum. A consignment program without a case cap becomes an inventory loan to every store that asks, and the requests arrive in proportion to how easy the terms are.
Set the cap in cases rather than dollars, because cases are what leave the building. Forty cases is a reasonable starting ceiling for a small brand, and it should be revisited after the first sell-through report rather than quarterly by habit.
Tie the cap to a review date and a restock rule. A store that sells through its first case in a month earns a second; a store that has not sold a case in 90 days returns the stock. Both rules are operational, and both protect the float.
Add the recurring costs that do not scale with the cap. A 100-item GS1 Company Prefix renews at $150 a year, and a pallet of ten-ounce bottles is 240 cases, so a 40-case program is a sixth of a pallet and needs a second program to reach a full one.
Choose on the number, not the story
The comparison reduces to three figures per case: what it costs, when the money returns, and how much of it returns as money rather than product. Put those three on one line for each channel and the decision usually makes itself.
Contribution margin is the sale price per unit minus variable cost per unit, divided by the sale price per unit. A wholesale case at $30.00 with $8.76 of packaging contributes about 71%; a consignment case sold at retail contributes more per unit and much later. The higher percentage is not worth a float the brand cannot fund.
Use the margin to decide which channel deserves the limited stock, and use the cash model to decide how much stock to commit. A brand with 60 cases of capacity should not place 40 on consignment and 20 on wholesale; it should decide which 40 cases earn the next 40.
Revisit the split after a full sell-through cycle. The answer changes as the brand gets cheaper glass at volume and as stores prove they can move product, and a split set once and never reviewed is the expensive version of a decision.
Five-ounce case price at each published break
Catalog case price for 12 five-ounce woozy bottles, which sets the cost of every case held in a consignment float.
| Item | Value | Unit |
|---|---|---|
| Case of 12 | 5.99 | $ |
| 72-233 cases | 5.25 | $ |
| 234-467 cases | 4.99 | $ |
| 468+ cases | 4.55 | $ |
FAQ
Which channel returns cash sooner?
Wholesale, because the sale and the invoice share a date. Consignment waits for sell-through, so the same case can be cash for a month or more longer.
What does a consigned case cost the brand?
A five-ounce case is $5.99 of glass plus $0.96 of caps, before sauce and labor. Forty cases is roughly $278 of packaging.
Does buying more glass help either channel?
Yes, and it helps the consignment float most. Five-ounce cases fall to $5.25 at 72 cases and $4.99 at 234, which lowers the cost of every case held in a store.