Wholesaling vs. Discounting

Do you ‘discount’ your product pricing to arrive at your wholesale price?  I know many feel this is the best way to come up with wholesaling pricing.

But there are several reasons why this is not an effective:

  • Pricing should ALWAYS be based first on your costs to produce/make the item.
  • Your retail pricing may be too high or too low to make this a logical practice.
  • Discounting to arrive at a wholesale price will make you look like an amateur to wholesale buyers

I like the way The Arts Business Institute describes it:

The concept of wholesaling as discounting is actually backwards thinking. Rather than looking at how much you can cut your price to afford to wholesale, take a look at building your collection (and your pricing) from the ground up.

“From the ground up” is the only way to have effective pricing.  Here is the formula I suggest (Note: Cost of Goods includes Materials + Labor to make one widget):

Cost of Good X 2 = Wholesale Cost
Wholesale cost X 2 – 2.5 = Retail Cost

The Arts Business Institute, who developed a more detailed pricing formula, suggests the following:

Overhead + Materials + Labor + Profit = Wholesale Price
Wholesale Price x Markup (2.3 – 2.5 times) = Retail Price

Both are good formulas and both will work.

Now, looking at it from a different perspective:  If you figure out your pricing using one of these formulas, compare it to your current retail price.  Is your current retail price in line with this formula or is it too high, or more likely, too low?  If it is too low, you are not only underselling your product, but you are making it near impossible to grow your business into the wholesale market!The Complete Guide to Selling to Gift Shops, 240 x 385

And if you decide to ‘discount’ your products to come up with a wholesale price, guess what? …… You will lose money on EVERY sale you make to retail outlets!!

If you want to pursue more information on learning to wholesale, may I suggest you check out my most popular resource:

The Complete eGuide for Selling to Gift (and Retail) Shops

You will find LOTS of practical and basic information on how to get started in wholesaling — including a large section on pricing your products!

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