After offering hundreds of products to hundreds of retail buyers, I have come to the conclusion that developing a wholesale minimum order amount is a good business practice.
Here is why:
- With a wholesale minimum order, you can be sure that a buyer is going to have a good representation of your product in their store.
- Selling onsies or twosies at wholesale pricing can be very draining, time-consuming, and costly for the equivalent of half of retail pricing.
- Buyers view you more serious if you have a minimum required amount of product
- Your items will display and sell better to the consumer if you have a good selection (in other words, your buyer has purchased more than the barest amount possible.
- You can potentially make more money if you require a minimum order.
The sweet spot is discovering what the minimum amount should be. For instance, I took on a line of beautifully handcrafted magnets a few years back. The wholesale price point was around $3-$5 each for the magnets and the producer wanted a $200 minimum. Now, maybe in some areas, this would be a fair minimum, but for my customers, $200 was way too high.
When I contacted the producer, their response was: “Well, I thought you would like to make more money per order.” She laughed when I told her that I wanted to be able to sell her magnets first! If I remember correctly, we settled on a $75 minimum.
On the other hand, a jewelry company I represent requires a $100 minimum order. I didn’t hesitate to tell my store buyers of her minimum because her price points are much higher than the $3 magnets. Stores need to buy at least $100 of her jewelry to have just a minimal presentation of her pieces.
I love the way Wholesale in a Box describes minimum orders. Here is an except from on of their article on the subject:
How small of a barrier to buying can you make?
In some ways, this is the biggest consideration, especially if you are actively reaching out to store owners to pitch your line. When a store owner takes on a new line, it is a big risk. For an independent boutique owner, spending $200 or $500 or $1000 on a set of products that aren’t proven sellers is exciting, but can be costly if the work doesn’t move. The lower you can wisely set your minimum — in full consideration of all of the factors here — the less risk you create for the store owner. That means the barrier to them buying your products is lower.
What does a store need to sell your product well?
If you have a line of essential oil perfumes, with 7 different scents, and the store only buys a few bottles of one scent, your line likely won’t sell as well, in store, as it would if the owner had bought a few of each scent. Or perhaps you have 4 sizes of your leggings — if the store owner buys two pairs of leggings total, it’s going to make it hard for customers to find their size, and thus hard for the leggings to sell.
How are you structuring your minimum?
There’s the amount of your minimum, and then there’s the way you actually structure it. Here is a menu of different ways you can structure your order:
- Minimum opening order (dollar amount): a minimum total order, like $250. Usually repeat order minimums are lower.
- Minimum opening order quantity (units): a minimum number of items, like 25 cards.
- Per-unit minimum: a minimum of each product, like 5 of each
- Incentives for different order amounts: offering something like free shipping or a free display above a certain order amount.
- Starter packs: offering a set mix of products as an initial order, usually best when there is a variety of products that won’t sell well in isolation.
Bottom line: Take everything you can into consideration when setting a minimum order. There is a good balance between making it high enough to be effective, but low enough for the buyer to buy.l