[Robert Stack -like narration and synthesized mood music optional.]
Consignment is an integral part of the coin business. The process of consignment is as old as the coin business itself. Born of necessity, it can, in both theory and practice, offer a win-win situation for both seller and dealer. And sometimes, things can go sour.
Unlike a straight sale, where the seller gives a numismatic item to a dealer and receives cash, check, or trade, consignment differs in the timing of the transaction. Instead of receiving immediate payment, a consignor receives payment only if and when the item sells. In other words, the seller gets paid when the dealer gets paid.
The advantages of this setup to dealers are obvious. With consignment, the dealer can minimize the outflow of limited funds. Cash not used for the purchase of consignments can be used for other items, thereby expanding inventory. If an item fails to sell, it can be returned to the consignor; the dealer isn't stuck with capital tied up in unsaleable merchandise.
Consignment can also work for the seller. Since risk for the dealer is greatly reduced, sellers can usually expect to get more than with a straight sale. Until the item is sold, the consignor retains title. This allows the seller to recall an item should a change of mind occur. Consignment allows a seller to retain anonymity, and important security precaution for some. It also creates a division between seller and buyer, something often desirable when people sell their own property. In addition, a particularly strong seller may be able to dictate other things, such as who will or will not be shown certain items for sale, the grades of the items for sale, and what kinds of layaway terms will be offered.
With all this going for it, what could go wrong with consignment?
As with any property, clear title could be a problem. The most insidious instances of title irregularities involve stolen merchandise offered for sale. An unwitting dealer could easily run afoul of the law by taking stolen items on consignment, if it can be proved the dealer had control of the goods (i.e., possession. Did the dealer put the item on a list, take it around to shows, etc.?). A vanished consignor could leave the dealer with little recourse.
As alluded to earlier, a weak dealer could be susceptible to a very strong seller, allowing the seller to dictate grade and/or selling price. Any claims that the dealer was "forced" to offer an overgraded and/or overpriced consignment are little solace to the buyer who ends up on the short end of the deal. Dealers should be aware it is their reputation that is on the line, not the consignor's. Most of the time, the buyer doesn't even know the identity of the consignor. It is a very weak dealer indeed, who allows a consignor to dictate grade.
Consignment could also turn out to be a bad deal for sellers. Envision this hypothetical scenario: Consignor gives item X to dealer to sell, for which consignor will receive amount Y. Dealer then sells item X to buyer for amount Z. Dealer then fails to pay consignor. Buyer has the property, dealer has the money, and seller has his/her hand out.
Well, you say, "Take 'em to court."
Great idea, if the consignor can get through the process of filing a suit, serving the dealer/defendant, waiting for a court date, appearing in court to argue a case, and then winning a judgment. The consignor may yet collect - if the defendant has a job with wages to be conveniently garnished. But what if the dealer is self employed? Who then do you notify of a garnishment? What if the dealer has no other assets (at least none that the courts can identify and locate)?
The consignor may begin to resemble Neville Chamberlain waving his piece of paper on the courthouse steps, "Peace in our time - this judgment is mine!"
Normally, consignments are handled in a professional business-like manner. Before blindly consigning coins for sale, sellers should be aware of with whom they are dealing. Payment terms should be clearly understood by all parties. All consignment deals should be in writing, with copies given to each party. Prospective consignors would be wise to realize that any time one's property is beyond one's control, it's also beyond one's possession.