2.2.1.3 Commission Agents
Completion requirements
Commission agents take goods on consignment and then facilitate sales in larger markets. The agent has possession of the product, but does not own it. When the sale to the larger market is completed, the agent receives the money for the goods, subtracts the costs and the commission, and gives the remainder to the producer. This process is common in agriculture. The agent transports and sells food products to a grocery store where they are sold to customers.
The services of commission merchants generally are useful for smaller producers that do not have marketing departments. Commissions are low because they deal with large volumes of products.
When using a commission agent, the producer can choose a minimum selling price (or check the current commodity price online), but usually the producer cannot choose the actual selling price of the products. It is in the commission agent's best interest, however, to obtain the highest selling price possible, because their commission is a percentage of sales.
The services of commission merchants generally are useful for smaller producers that do not have marketing departments. Commissions are low because they deal with large volumes of products.
When using a commission agent, the producer can choose a minimum selling price (or check the current commodity price online), but usually the producer cannot choose the actual selling price of the products. It is in the commission agent's best interest, however, to obtain the highest selling price possible, because their commission is a percentage of sales.