Final answer:
Consignment inventory is the term used when a company holds and attempts to sell goods on behalf of the actual owner in exchange for a fee. This allows owners to place their goods in the market without immediate costs, and sellers to expand their inventory without upfront investments.
Step-by-step explanation:
The type of inventory that refers to goods a company is holding on behalf of the actual owner and is willing to try to sell for a fee is known as consignment inventory. This form of inventory involves a consignor (owner of the goods) who gives goods to the consignee (the party selling the goods) to hold and sell. The consignee only pays the consignor for the inventory once the goods are sold. This arrangement can be beneficial for both parties as it allows consignors to get their products into the market without immediate need for space or upfront costs, while consignees can offer more products without having to invest in the cost of inventory upfront.
Consignment inventory can be found in a variety of markets, including durable and nondurable goods. Sellers may offer additional incentives, such as a money-back guarantee, to encourage sales, especially when customers cannot physically inspect the goods beforehand, such as with online sales or mail-order catalogs.
Businesses must monitor their consignment inventory closely, as the amount of inventory sitting on shelves tends to fluctuate based on consumer demand, which can affect their inventory levels and financial health.