Consignment and Scan-Based Trading: Which Model Fits Your Business

Consignment and Scan-Based Trading: Which Model Fits Your Business

As retailers evolve to stay competitive in an increasingly data-driven and cost-sensitive environment, many are rethinking how they stock products. Two inventory models, Consignment and Scan-Based Trading (SBT), offer flexible alternatives to traditional wholesale purchasing. While both shift inventory risk away from retailers and offer suppliers better shelf access, the differences in execution, technology, and payment structures are significant. In this article, I explore each method, highlight their differences, and help retailers and suppliers determine which model suits their business best.

What Is Consignment in Retail?

Consignment is a traditional inventory model in which the supplier (consignor) retains ownership of the goods until they are sold by the retailer (consignee). Retailers display and sell the merchandise and only pay the supplier for items that are actually sold. Unsold goods can often be returned, reducing the store’s financial risk.

How It Works:

1. The Supplier delivers goods to the store without charging the retailer upfront.
2. Retailer places the items on shelves and attempt to sell them.
3. After a specified period, the retailer reports sales to the supplier and make payments.
4. Unsold products may be returned or replaced.

Best Suited For:

• Boutiques and local stores
• Art, fashion, seasonal, and handmade goods
• Retailers with limited capital or who want to test new products

What Is Scan-Based Trading (SBT)?

Scan-Based Trading is a more modern, tech-enabled model in which suppliers retain ownership of the product until it is scanned at the retailer’s point-of-sale (POS). The scan triggers payments automatically, and inventory is tracked in real time.

How It Works:

1. Supplier places inventory at the store and retains ownership.
2. Items are sold and scanned through the retailer’s POS system.
3. Scan data is transmitted to the supplier.
4. Supplier invoices and gets paid based on actual sales.

Best Suited For:

• High-volume retailers (grocery stores, mass merchants)
• Fast-moving consumer goods (FMCG)
• Suppliers and retailers with integrated POS and inventory systems

Key Differences between Consignment and Scan-Based

Advantages for Retailers

Consignment

• No upfront capital is required for inventory
• Flexibility to test new or niche products
• Lower risk of overstocking
• Ideal for seasonal or experimental items

Scan-Based Trading

• Real-time inventory visibility
• Automated replenishment triggers
• Reduced shrinkage through tighter control
• Faster product turns and improved data accuracy

Advantages for Suppliers

Consignment

• Easier to gain retail shelf space
• Opportunity to introduce new brands with lower risk for retailers
• Builds long-term partnerships with smaller retailers

SBT

• Immediate sales insights and faster cash flow
• Improved collaboration with retailers
• More accurate demand planning
• Access to large chains and nationwide exposure

Which Model Is Right for Your Business?

Choosing between consignment and scan-based trading depends on your business model, resources, and goals.

You may also consider hybrid models, using consignment for certain items and SBT for high-volume SKUs, especially if your systems allow for flexible inventory tracking.

Conclusion

Both consignment and scan-based trading offer innovative ways to reduce risk and improve retail inventory management. Whichever model you choose, the key is alignment between your technology, product type, and partner expectations. With the right approach, retailers and suppliers can benefit from smarter, leaner inventory strategies. Laceup has solutions for both models, integrated with their DSD and WMS. If you want to learn more about our solutions, contact us.

I hope this article on Consignment and Scan-Based has been helpful to you. I will continue to post information related to  management, distribution practices and trends, and the economy in general. Our channel has a lot of relevant information. Check out this video on Consignment vs Par Level.

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