Every shed dealer faces the same question: how will you get buildings onto your lot? The two dominant sales models are wholesale and consignment, and the choice shapes your profit per sale, your cash flow, and the risk you carry. With wholesale, you purchase inventory at a base cost and mark it up according to your market. With consignment, the manufacturer keeps ownership of the buildings and pays you a commission when each one sells. The same trade-in and consignment logic that governs buying and selling used equipment in other industries applies here, so the principles transfer easily once you see the numbers. This article walks through how each model works, what the earnings look like at typical sales volumes, and how dealers fund the move from consignment to wholesale.
How the Wholesale Model Works
In the wholesale model, you act like any retailer. You buy buildings from a manufacturer at a base cost, take delivery on your lot, and sell them at a price you set. Most manufacturers publish a suggested retail price that gives you a starting point, but that number is a guideline, not a ceiling.
Your markup is where the profit lives. If you do your homework and shop your competition, you can sometimes push margins above the suggested levels and earn more on every building. At the same time, fair pricing keeps customers coming back, so the markup you choose is a judgment call that balances market rates, local demand, and your reputation.
Compare like for like when you shop competitors. A 10 by 16 shed with double doors and a metal roof may look similar to your model but carry different features, so build a spec sheet for each size you sell and compare prices at the same feature level. Dealers who do this consistently identify underpriced segments of the market and adjust before their competitors do.
Setting a Markup That Works
Start with the manufacturer’s suggested retail price, then check what competing lots charge for comparable buildings. A practical approach is to price near the market average when you are new, then raise margins as your reputation grows. Track which sizes and styles sell fastest and adjust the markup on slow movers to keep inventory turning.
- Record the base cost and suggested retail price for every building you order.
- Visit or call competing lots in your region and note their prices for similar sizes.
- Set an initial markup, then review it quarterly against your sales data.
- Test small increases on your best-selling models before adjusting the whole lot.
How the Consignment Model Works
Consignment removes the burden of funding inventory. The manufacturer ships buildings to your lot and retains ownership until each one sells. You concentrate on selling, and when a building moves, you earn a commission. This model keeps your upfront capital low, which is why many lots start here.
The trade-off is the rate. Consignment commissions typically run 10 to 12 percent of the sale price, and that margin has to cover your payroll, rent, and other expenses. If you are not selling enough buildings each month, that percentage disappears quickly into overhead. Before you partner with any supplier, check their review ratings and reputation the same way you would vet any business partner, because the manufacturer you choose determines delivery times, permit support, and product quality.
Operationally, consignment changes your paperwork. Buildings arrive on a load with an agreed display price, you track each unit in your sales system, and the manufacturer invoices you only after the sale closes. Most consignment agreements spell out who handles delivery damage, warranty claims, and returns, so read the contract before the first load lands.
What the Commission Actually Pays For
Your consignment commission is not pure profit. It funds the lot itself: rent or mortgage payments, sales staff, utilities, signs, and insurance. At 10 to 12 percent of an average sale, a dealer moving a handful of buildings a month can struggle to cover fixed costs, which is why volume matters so much in this model.
Matching the Model to Your Volume and Location
The right model depends on your location and how many buildings you move. A lot that is not well traveled by a major road and sells one to three sheds a month should probably stay on consignment, because the capital risk of owning inventory is not worth it at that volume. A lot selling 10 to 30 sheds a month is a different business entirely; at that pace, wholesale inventory repays itself quickly.
Seasonal patterns matter too. Shed sales in many regions peak in spring and summer, then slow through the winter. A consignment arrangement with a manufacturer that can swap slow models is easier to ride through a winter slump, while a wholesale lot needs enough cash reserve to carry inventory through the off-season.
Reading Your Location and Traffic
- Count your average monthly sales over the last six months, not your best month.
- Estimate the traffic past your lot and how visible your displays are from the road.
- Calculate what a 10 to 12 percent commission earned last year compared with what a wholesale markup would have earned on the same sales.
- Decide how much capital you can tie up in buildings that might sit for 60 to 90 days.
Risks Each Model Carries
Wholesale concentrates risk on the dealer. Buildings you own can sit through slow seasons, and you carry the financing cost while they wait. If a manufacturer discontinues a style you stocked, you may have to discount the leftover units to move them. Warranty and service responsibilities also shift to you in most wholesale arrangements, so factor repair and replacement costs into your markup.
Consignment shifts most of that risk back to the manufacturer. You do not carry financing costs, slow sellers can be returned or replaced more easily, and warranty work usually flows through the manufacturer. The price you pay is the thin commission, which means your success depends entirely on sales volume.
Warranty and Service Responsibilities
In wholesale, you are the first line of response when a customer has a problem. Budget for occasional repair calls, replacement parts, and the labor to handle them. In consignment, those responsibilities usually route back to the manufacturer, which is one reason the commission is lower. Read your agreement to see exactly who responds to a warranty claim before you sign.
The Math Behind Both Models
The average sale on a shed is roughly $6,000. On a consignment deal, a 10 to 12 percent commission earns you $600 to $720 per building. On a wholesale deal with a 25 to 30 percent markup, the same $6,000 sale earns $1,500 to $1,800. The gap compounds with every building you sell.
| Factor | Wholesale | Consignment |
|---|---|---|
| Inventory funding | Dealer buys buildings outright | Manufacturer owns until sale |
| Typical earnings per $6,000 sale | $1,500 to $1,800 | $600 to $720 |
| Upfront capital needed | High | Low |
| Risk if a building sits unsold | Dealer absorbs it | Manufacturer absorbs it |
| Best fit | 10 to 30 sales per month | 1 to 3 sales per month |
What the Numbers Look Like at Different Volumes
Run the numbers for a dealer selling 15 sheds a month. Consignment earnings land around $9,000 to $10,800 monthly. Wholesale earnings at the same volume reach $22,500 to $27,000. The difference funds the transition, which is why successful consignment dealers usually move toward wholesale as volume grows. At 30 sales a month, the top of the range, consignment pays $18,000 to $21,600, while wholesale earnings reach $45,000 to $54,000.
A Working Example: Five Buildings a Month
Say you sell five sheds a month at the $6,000 average. Consignment pays $3,000 to $3,600 a month; wholesale pays $7,500 to $9,000. Over a year, the spread is $54,000 to $64,800, enough to buy several loads of inventory outright and still leave working capital.
Funding the Move to Wholesale
Coming up with the capital to buy buildings outright rarely happens overnight. It is an investment of time, money, and planning. Dealers who sell well on consignment typically set aside a fixed amount from every sale into an inventory fund, then use that fund to purchase one or two loads of sheds to start the process.
Some manufacturers let you buy part of a load outright while keeping the rest on consignment. These hybrid arrangements help the manufacturer’s cash flow, though they earn less on the buildings you buy, and you may get different reactions from different suppliers. Talking to your local bank is another option. A small business loan or a line of credit can finance the first loads, and the faster markup recovery often repays the financing quickly.
Timing matters when you switch. Start the transition in your strongest sales season so the first owned loads move fast, and keep a consignment line running alongside until you are confident in your volume. Dealers who ramp gradually protect their cash flow while proving out the wholesale numbers.
Financing Options to Consider
- A dedicated inventory account funded by a fixed cut of every consignment sale.
- Hybrid deals that mix outright purchases with consignment on the same load.
- A small business loan or line of credit from your local bank.
- Manufacturer financing programs, where available, tied to volume commitments.
Wholesale is not the right answer for every lot, but the return on investment in owned inventory is hard to ignore once your sales volume supports it. Dealers who track their numbers, set aside capital, and move deliberately end up with better margins and more control over their lot.