Consignment Agreements for NZ Fashion Boutiques

Selling clothes on consignment in NZ can be a smart way for boutiques to refresh their racks and for local designers to reach customers without a wholesale order. Problems usually start when the parties assume the arrangement is obvious: the boutique thinks it can discount slow-moving stock, the designer expects payment straight after a sale, or nobody knows who pays when a garment is stained, stolen or returned.

A clear fashion consignment contract helps both sides decide what happens before stock goes on the rail, while it is in store, and after the selling period ends. For boutique owners, it protects margin, space and customer relationships. For designers, it protects ownership, cash flow and brand presentation.

The key is to write practical terms that match how fashion retail actually works: seasonal ranges, size runs, samples, try-ons, staff styling, exchanges, markdowns, pop-ups and online sales.

Fashion Consignment Checklist For New Zealand Boutiques

A retail consignment agreement in NZ should say who owns the garments, how sales are tracked, when the designer is paid, and what happens to unsold or damaged stock. The document does not need to be filled with legal jargon, but it should be detailed enough for a store manager, designer and bookkeeper to follow without guessing.

In a typical consignment arrangement, the designer or brand supplies stock to the boutique, but ownership stays with the designer until an item is sold to a customer. The boutique displays and sells the items, then keeps an agreed commission or margin and pays the balance to the designer. That sounds simple, but fashion retail adds a lot of moving parts.

A boutique consignment agreement should usually cover:

• The parties: the legal names of the boutique and designer, their NZBN if they have one, and the contact person for operational issues.
• The stock: style names, SKUs, colours, sizes, quantities, recommended retail prices and any unique identifiers for samples or one-off pieces.
• Ownership: confirmation that the designer owns the garments until a customer sale occurs, unless the parties agree otherwise.
• Risk: who is responsible for loss, theft, stains, try-on damage, courier damage, staff mistakes and customer returns.
• Commission: the boutique's percentage or fixed fee, whether GST is included or added, and whether payment processing fees are deducted.
• Payment timing: when sales are reported, when the designer invoices if required, and when payment is due.
• Markdowns: whether the boutique can discount stock, when seasonal markdowns are allowed, and how discounting affects the designer's payout.
• Unsold stock: how long the consignment period lasts, when stock is collected, who pays return freight and what happens if stock is abandoned.
• Presentation: brand guidelines, hanger requirements, swing tags, packaging, care labels, garment condition and merchandising standards.
• Records: point-of-sale reporting, stocktakes, reconciliation, access to sale records and how discrepancies are resolved.
• Customer issues: who deals with Consumer Guarantees Act 1993 remedies, exchanges, refunds and product faults.
• Exit rights: when either party can end the arrangement early and what happens to stock and outstanding payments.

The agreement should also fit the way the boutique sells. A store that sells only from a physical rack needs different detail from a boutique that also lists consigned items on Instagram, runs online checkout, attends markets or lends clothing for shoots. If the boutique may sell through multiple channels, the designer should know where the garments may appear, what terms of sale apply, and how sales will be allocated.

Founders often ask whether an email chain is enough. It can record some commercial terms, but it often misses the hard questions. A dedicated fashion consignment contract is especially useful where the stock value is high, the relationship is ongoing, the garments are delicate, or the designer is supplying multiple stores.

Who Owns The Garments And Who Bears The Risk

Ownership and risk are different issues, and a good consignment agreement deals with both. The designer may still own the garments, but the boutique may be responsible for taking reasonable care of them while they are in store.

For a local designer, ownership is usually the central reason for using consignment rather than wholesale. If the boutique bought stock wholesale, the boutique would generally own it and carry the risk of not selling it. Under consignment, the designer keeps ownership until a customer buys the item, and the boutique earns its agreed share only when a sale occurs.

The agreement should make this clear. It can state that title to each garment remains with the designer until the garment is sold to a customer in the ordinary course of business. It should also say when title passes to the customer and what amount becomes payable to the designer at that point.

Risk needs separate wording because boutique stores create real-life damage risks. Garments can be marked by makeup, pulled by jewellery, stretched on hangers, lost in the fitting room, mixed up in a returns pile or damaged during steaming. A designer may not want to carry those risks once the stock is under the boutique's control.

Common risk approaches include:

• Boutique responsible once received: the boutique bears the risk of loss or damage from the time it signs for or accepts the stock.
• Designer responsible for inherent faults: the designer remains responsible for manufacturing faults, incorrect labels or defects that existed before delivery.
• Shared risk for ordinary handling: the parties agree a practical process for minor wear from try-ons, while making the boutique responsible for significant damage or negligence.
• Courier risk allocated by direction: the party arranging freight bears the risk until delivery, or the parties agree that risk passes when the courier confirms delivery.

A stock intake process makes these clauses much easier to apply. When garments arrive, the boutique should check quantity, size, colour and condition against a delivery sheet. Photos can help for expensive pieces, bridalwear, leather goods, knitwear or hand-made garments where condition matters. The designer should be told promptly about any discrepancies, because it is much harder to investigate missing items weeks later.

Consignment can also raise a Personal Property Securities Act 1999 issue. Some commercial consignments are treated as security interests, which means the designer may consider registering an interest on the Personal Property Securities Register. This can matter if the boutique becomes insolvent or if another creditor claims an interest in the boutique's assets. For high-value or repeated consignments, designers should not assume that simply saying they own the stock will protect them against every third party claim.

Boutiques should also think about insurance. A retail policy may not automatically cover consigned stock owned by another business, or it may apply only if the policy lists that kind of property. The agreement can require the boutique to maintain insurance for consigned goods, but the boutique should check the policy rather than promising cover it does not have.

A common mistake is to write that the designer keeps ownership, then leave the boutique free from responsibility for anything that happens on the shop floor. That can feel unfair to the designer and can damage the relationship after the first lost item. A better approach is to match responsibility to control: the designer is responsible for the condition and legality of the garments supplied, while the boutique is responsible for reasonable care, secure storage, accurate handling and staff processes once the garments are accepted.

Payment, Commission And Boutique Consignment Terms

Payment terms should tell both parties exactly how money moves from customer sale to designer payout. The most workable consignment terms specify the sale price, the boutique's commission, GST treatment, deductions, reporting date and payment date.

Fashion consignments often use a commission percentage. For example, the boutique may keep 40 percent of the retail sale price and pay 60 percent to the designer. Other arrangements use a fixed boutique fee per item, a minimum payout to the designer, a commission agreement, or a tiered commission that changes during a sale period. Whatever the model, the agreement should state whether the percentage applies to the GST-inclusive price, the GST-exclusive price, or the net amount received after discounts and payment fees.

GST needs careful wording because boutique and designer GST positions may differ. If both parties are GST-registered, the agreement should align with how invoices and sales records will be issued. If one party is not registered, the contract should still say what amounts are inclusive or exclusive of GST so neither party assumes the wrong margin. This is a commercial drafting point, not a substitute for tax advice, but it is too practical to ignore.

Payment timing is where many consignment relationships become strained. Designers often rely on the income to fund production, while boutiques need time to reconcile sales, refunds and exchanges. The agreement can require the boutique to provide a monthly sales report and pay the designer within an agreed number of business days after month-end. For pop-ups or short selling events, weekly reporting may make more sense.

A useful sales report usually includes:

• date of sale;
• item name, SKU, colour and size;
• quantity sold;
• full retail price;
• discount or promotion applied;
• final sale price;
• boutique commission or fee;
• amount payable to the designer;
• returns or exchanges processed; and
• closing stock on hand.

The agreement should also say when a sale is treated as final. For example, a boutique may want to delay payout until the return or exchange window has passed, or it may pay monthly but deduct approved refunds from the next remittance. This is particularly relevant if the boutique sells online, where customers may expect a practical returns process and where returned garments must be assessed before going back on sale.

Customer-facing pricing must also comply with the Fair Trading Act 1986. The boutique should not mislead customers about price, discounts, origin, composition, availability or designer affiliation. If a garment is promoted as locally made, limited edition or made from a particular fabric, the parties should be confident that the claim is accurate. A consignment agreement can require the designer to provide accurate product information and require the boutique to use approved descriptions.

Retailers also need to manage Consumer Guarantees Act 1993 obligations. When a customer buys a garment from the boutique, the boutique is usually the customer-facing seller. If the item has a fault or is not of acceptable quality, the boutique may need to provide a remedy to the customer. The contract can then allocate responsibility between boutique and designer, especially where the issue is a manufacturing fault, incorrect care instruction, customer contract issue or damage caused in store.

Payment clauses should cover deductions clearly. A boutique may want to deduct bank fees, card processing fees, packaging costs, postage for online orders or agreed marketing contributions. Designers may resist open-ended deductions because they make payout unpredictable. If deductions are allowed, they should be listed. If they are not listed, they should not be taken without written agreement.

For a boutique owner, the test is simple: could your staff member or bookkeeper calculate the designer's payout from the contract and the POS report alone? If not, the payment terms need more detail.

Unsold Stock, Markdowns, Damaged Garments And Records

The strongest consignment relationships plan for the end of the selling period before the first garment is displayed. Seasonal fashion loses value quickly, so unsold stock, markdown authority, damage processes and records need clear rules from day one.

Unsold stock is normal. A summer linen dress may not move once autumn weather hits, and a size curve may leave only the smallest or largest sizes on the rack. The agreement should set the consignment period, such as a season, a launch month, a pop-up period or an initial trial period. It should then say what happens when that period ends.

Common options for unsold garments, including a later stock or asset sale, include:

• the designer collects the stock from the boutique by an agreed date;
• the boutique returns the stock by courier at the designer's cost;
• the parties agree a final markdown period;
• the boutique buys selected remaining items at an agreed wholesale price; or
• the agreement rolls over for another period if both parties confirm in writing.

Collection obligations matter more than many businesses expect. Boutique space is valuable, and old stock can block new collections. Designers may also need stock back for markets, photoshoots or another retailer. The agreement can set a collection deadline and say what storage fee, return freight or disposal process applies if the designer does not collect stock after notice. Disposal should be handled carefully, particularly for branded garments, because unauthorised donation, sale or destruction can create brand and ownership disputes.

Markdowns need express approval. Boutiques often run storewide sales, VIP discount nights, loyalty codes or end-of-season promotions. If consigned garments are included without agreement, the designer's margin can disappear. On the other hand, if consigned stock is never discounted, it may sit on the rail until it is commercially stale.

A practical markdown clause can state:

• whether the boutique can apply standard promotions or sale of goods terms to consigned stock;
• the maximum discount allowed without written approval;
• whether staff discounts apply;
• how bundle offers are treated;
• whether the designer's payout is calculated before or after discount; and
• whether the designer can request a markdown to clear stock.

Damaged garments need a process, not just a blame clause. The boutique should notify the designer promptly, remove the item from sale if needed, take photos and record what happened. The parties can then decide whether the item can be cleaned, repaired, sold as faulty with appropriate disclosure, returned to the designer or paid for by the boutique.

For example, if a silk top arrives with a loose seam, that points to a designer or production issue. If the same top is later stained by a customer trying it on with makeup after the boutique accepted it in good condition, the boutique may be responsible under the agreement. If the cause is unclear, the agreement can require both parties to review intake records, photos and staff notes before deciding who bears the cost.

Record-keeping is the practical backbone of a consignment arrangement. A retail consignment agreement in NZ should require a current stock list and a regular reconciliation between items delivered, items sold, items returned, items damaged and items on hand. Without that, disputes become memory contests.

Good boutique records usually include:

• signed delivery sheets or digital stock intake confirmations;
• SKU-level inventory in the POS system;
• photos for high-value or delicate garments;
• sales reports matched to payouts;
• return and exchange notes;
• damage reports;
• stocktake results; and
• written approvals for discounts, loans, transfers or online listings.

If the boutique collects customer details for receipts, online orders, waitlists, loyalty programmes or styling appointments, privacy obligations may also apply. The Privacy Act 2020 requires businesses to handle personal information appropriately, including being clear about why information is collected and keeping it secure. Designers should not receive customer personal information from the boutique unless there is a proper business reason and the customer has been told in an appropriate way.

Intellectual property should not be overlooked. The designer owns copyright in original prints, graphics and some creative materials, and may also own trade marks for the label name or logo registered through IPONZ. The boutique may need permission to use the designer's brand assets in window signage, social media posts, email campaigns and online product listings. The agreement can give limited permission for retail promotion while preventing unauthorised edits, misleading collaborations or use after the consignment ends.

For boutique owners working with emerging labels, these operational terms can feel formal at first. In practice, they make the relationship more relaxed because everyone knows the rules. Designers get transparency, boutiques get control over their retail process, and customers get a better experience when stock, pricing and returns are handled consistently.

FAQs

Do I Need A Written Consignment Agreement For A Small Fashion Range?

Yes, a written agreement is sensible even for a small capsule range or trial rack. Small consignments still raise ownership, payment, damage and markdown issues, and a short written contract is usually easier than fixing a dispute after stock has sold or gone missing.

Who Owns Clothes Sold On Consignment In NZ?

Usually, the designer or supplier owns the garments until they are sold to a customer. The agreement should say this clearly and also state who bears the risk of loss or damage while the garments are with the boutique.

Can A Boutique Discount Consigned Stock Without Asking The Designer?

Only if the consignment terms allow it. The contract should set out whether storewide sales, promo codes, staff discounts and end-of-season markdowns apply to consigned garments, and how those discounts affect the designer's payout.

Who Handles Customer Refunds For Faulty Consigned Clothing?

The boutique is usually the customer-facing seller and may need to deal with the customer under the Consumer Guarantees Act 1993. The agreement can then allocate the cost between the boutique and designer depending on whether the issue was a manufacturing fault, store damage or another cause.

Should Designers Register Their Interest In Consigned Stock?

For high-value, regular or business-critical consignments, designers should consider whether registration on the Personal Property Securities Register is appropriate. Some commercial consignments can be security interests, and registration may help protect priority if the boutique has financial trouble.

Key Takeaways

• A fashion consignment contract should separate ownership from risk, because the designer may own the stock while the boutique controls it day to day.
• Payment terms should cover commission, GST treatment, deductions, reporting dates, refunds and when a sale becomes final.
• Unsold stock rules help protect boutique space and designer cash flow, especially for seasonal collections and pop-up arrangements.
• Markdown authority should be written down so storewide promotions and sale periods do not unexpectedly reduce the designer's margin.
• Accurate records, stocktakes and damage reports are essential for avoiding disputes about missing, sold or returned garments.
• New Zealand retailers should also consider the Fair Trading Act 1986, Consumer Guarantees Act 1993, Privacy Act 2020, IPONZ trade marks and PPSR registration where relevant.

If you need help setting up boutique consignment terms, a fashion consignment contract, ownership and damage clauses, or retail sales terms for your store or label, Sprintlaw's legal team can help. Contact us on 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.