Consignment vs outright purchase in Thai modern trade

Short answer: Under consignment, the brand owns the goods until they sell, the store pays only for what sells, and unsold goods usually come back. Under outright purchase, the store buys the goods and carries the risk of unsold stock, and the brand is paid sooner. What matters isn't just which model it is, but who absorbs expired goods, who absorbs damage, and when the money arrives, because those three decide how much cash the brand has left for marketing.

This usually comes up when a store or distributor suggests "let's start on consignment." It sounds low-risk, but for a new brand it's as much a cash decision as a channel decision.

The core difference

Subpayanunt sums it up: consignment is light on the store but heavy on the brand's cash flow; outright purchase is the reverse.

What to read in the contract either way

1. Expired or near-expiry goods: who absorbs them, and from what date.
2. Damage in store or in transit: who absorbs it.
3. Return period and method: who pays return freight.
4. Payment cycle: how many days after sale or delivery.
5. Other deductions: listing fees, rebates or markdowns, which are deducted separately from the consignment or outright question.

Subpayanunt warns that some consignment contracts push the full risk of expiry or damage back onto the brand without it being clearly agreed at the start.

How it affects marketing

• Consignment: cash arrives late, and anything that doesn't sell comes back as a cost. Marketing after listing matters a great deal; without budget for that period, goods may sit until they're returned.
• Outright purchase: cash arrives sooner, but if the store can't sell through, the next order shrinks or the store asks for help clearing stock. The problem still lands on the brand, just later.

Both end in the same place: what shoppers buy off the shelf. Plan post-listing budget before you sign.

Work out the cash first

Hypothetical example: if you ship THB 300,000 of goods on consignment and payment comes only after they sell, on the store's payment cycle, the brand has to fund production, freight and early marketing in the meantime. The figure only illustrates the method; use your own numbers and the payment cycle in your contract.

The question to answer: if the store's payment arrives one cycle later than expected, can the brand still keep marketing?

Limits

• This explains general modern trade principles and doesn't state any retailer's terms; actual terms are in each supplier's trade terms
• Figures in the example are hypothetical
• Tax and accounting treatment differ between the two models; ask an accountant

FAQ

Which should a new brand choose? Subpayanunt suggests brands without an in-store sales record often start on consignment and negotiate a move to outright purchase once sell-through has been steady for at least 2 to 3 months.

Can strong online sales help us negotiate? Subpayanunt notes that strong online sales data can serve as evidence of demand to negotiate outright purchase from the start.

If we go through a distributor, do we still need to care? Yes. Terms between the store and the distributor are often passed down to the brand. Ask the distributor which model they have with the store and which parts reach you.

With consignment at 7-Eleven, who carries unsold stock? Under consignment the brand owns the goods until they sell, so unsold stock usually comes back as the brand’s cost. Read the return, near-expiry and return-freight terms in the contract.

When does a consignment supplier get paid? After the goods sell, on the payment cycle in the contract. Plan cash for the period the stock sits on the shelf.

Do listing fees and rebates depend on consignment or outright purchase? From what we have seen, they generally do not depend on the model you choose. Listing fees, rebates and markdowns are trade-term costs deducted separately, but you should also check the terms in your contract.

Sources

• Subpayanunt: consignment vs outright purchase for new brands: https://www.subpayanunt.com/post/consignment-vs-wholesale-new-brands
• Listing fees, GP, rebates and markdowns explained: https://www.flowupth.com/en/insights/modern-trade-fees-explained
• Sell-in vs sell-out: https://www.flowupth.com/en/insights/sell-in-vs-sell-out

Related guide: Getting Into 7-Eleven Thailand: How to Find an FMCG Distributor and Negotiate a Master Distributor Deal

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