Creating Standard Wholesale Terms

With everyone I coach, I tell them they need to set up their wholesale system before they even consider approaching their first retail buyer.  Even if you are on the fence about selling wholesale, you still might think about what you are gonna say (or do) should a retail buyer approach you at a craft fair or holiday booth and ask if you wholesale your products.Creating Standard Wholesale Terms

I’ve heard horror stories from producers who decided to just cut their retail price in half (before doing the research) to come up with a wholesale price for buyers.  BIG MISTAKE!  First, your wholesale price should never be determined as a percentage of your retail price!!  Second, you can catch yourself in a losing situation by pricing your unique products at a loss just to sell wholesale!

That is just one example.

Even after you have your pricing in line, there are other areas that you may not have considered before wholesaling.  (PS.  If you do not have a copy of my Wholesale Quick Start Guide, I suggest you sign up for my free weekly newsletter and you will receive the Guide for free!!)

Wholesale in a Box lists some good guidelines to follow when setting up and using appropriate wholesale terms:

Compromising Your Wholesale Terms Makes You Sick + Snippy

Do’s and don’ts for setting terms and deciding how to maintain them:

  • DON’T set unnecessarily rigid or strict terms in the first place.
    Don’t throw in a bunch of terms for good measure or to “seem professional.” Set terms that you think are simple and important and feel necessary. That way, when it comes time to maintain those boundaries, they feel intuitive and important to you…
  • DON’T use legalese.
    Sometimes makers write their terms in a severe, off-putting, confusing, aggressive type of language. Yes, it’s important to have clear terms. But it’s also important to state those terms in a way that is human, friendly, and approachable.
  • DO maintain your boundaries in a friendly way.
    I’m not sure why, but when people maintain a boundary, sometimes they do so in a way that sounds frustrated, snippy, stern, or condescending. Remember that no one can make you violate a business boundary without your permission — and so you can maintain your boundary and uphold your terms in a way that’s cheerful, kind, and warm. And that difference in tone may likely be the difference between losing the sale and gaining a stockist for the long term.
  • DO use your emotions as an early-warning sign.
    Anger, resentment, and fear are indications that you may need to set or strengthen a boundary. Sometimes it’s a boundary with a specific person and other times it is a general boundary between yourself and your business. If a store owner’s request makes you feel scared and frustrated, it’s likely that a warm and polite “no” is in order.

Good tips and good advice!

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Do You Charge Enough for Your Products?

New wholesalers don’t seem to charge enough for their products!  Of course, this is not true for everyone, but I see it too often (and can tell you some horror stories of dealing with producers who low-balled their product, then complained because no sales rep would take them on!)

Pricing does not need to be difficult.  If you are new to retailing or wholesaling, I suggest you check out my free e-course on the subject.  Sign up here:  “HOW TO PRICE YOUR PRODUCTS” 9-Lesson E-Course!

If you’ve wholesaled for awhile and are wondering if you need to increase your pricing, here are a few guidelines from Claire with Indie Retail to help you determine if you are underselling your products:

Charging what you’re worth

You’re hardly making a profit when you sell wholesale.

Your wholesale price is the smallest amount of money you’ll ever accept for your lovely thing.

But that doesn’t mean it’s a rock-bottom, bargain-basement, welcome-to-debtors-prison kind of price. It shouldn’t weigh your business down.

A healthy wholesale price is like a helium-filled balloon – it covers your direct costs, your overheads and your time and labour, but it also contains a significant shot of profit. That extra element is what gives your business lift….

You’re hardly making a profit when you sell retail.

Your retail price is tied to your wholesale price, so if the former’s out of whack there’s a good chance the latter is too….

You’re putting something wonderful out into the world and getting very little back. That’s not a business; it’s an expensive hobby….

You’re working all the time and still aren’t making much money.

…If you’re constantly working at maximum capacity – but still don’t have much to show for it – something has to change. The most valuable asset in your business is you. To function at your best you need rest, comfort and time to think…

Your prices are low compared to your competitors.

Closely pegging your prices to your competitors’ isn’t a great plan, but there should be some correlation….

In comparison to mass-market companies, your stuff will always look expensive – they can produce goods for much less than you ever could. But when you look at other designers, craftspeople or makers in your field, people at a comparable level who make and sell something similar, and discover they’re charging significantly more, well, maybe it’s time for you to catch up.

You’re pricing according to costs, not value.

At the end of a long day of making, when you turn to look at your work and feel a surge of pleasure and satisfaction, what’s the source of that feeling for you? Is it:

a) The deep joy of channeling your imagination, skill and experience into a unique object which shines with quality, personality and presence.

b) You saved your customer the trouble of putting it together themselves.

It’s the first one, right?

This is why your prices must reflect the value you create for your customers. You’re not simply assembling raw materials like a robot in a factory. In your hands, those materials become much more than the sum of their parts….

If your current prices are based simply on what it costs you to make your product, you’re not taking that extra value into account.

Now, before the big holiday buying push, is a good time to make sure your pricing is appropriate and you charge enough for your products!

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How Can I Increase My Profit Margin?

I hate to see professional crafters and artisans turn away from selling wholesale because they do not have enough of a profit margin to make it worthwhile to sell to retailers.?How Can I Increase My Profit Margin?

Of course, this is a valid concern, but there are a few ways to lower expenses, thus increase margins enough to sell wholesale:

Tips for Lowering Expenses

  1. Producing in larger lots.  You can save money — sometimes cutting the price significantly — when ordering materials in larger quantities.  We found this to be true when we purchased bottles for our gourmet sauces.  The pricing per jar went down over 50% when purchasing a pallet of bottles rather than a dozen cases at a time.  Of course, this only works when you have a proven seller that will resell many times over.
  2. Buying wholesale.  If you have a reseller number (sales tax exempt number), you can order larger quantities of raw materials at wholesaling pricing.  At the very least you can save sales tax, depending on the stores where you buy your materials.
  3. Use recycled packing materials.  Packing material can be rather expensive to purchase.  For years, a couple of local retail outlets saved their packing peanuts, bubble wrap and other materials for us at no charge!  We come pick them up periodically, cleaning out their backroom in the process.  Win – win for both of us!
  4. Decrease overhead.  Is a commercial office a necessary expense?  If you have an extra room in your house, you can turn it into your production room or office.  Using this option factors into your tax deductions as well as lower your costs.  We have done both, and even though our house is overflowing from our businesses, we saved the monthly rent spent on our downtown office.  Also, we no longer need to drive to work anymore!
  5. Doubling up on trips.  We deliver and pick up a large number of the products we sell.  Whenever we plan a trip to the southern part of the state, we order products from our supplies along the way to pick up rather than ship.  On the other side, we also call our customers along the route to see if they would like products delivered during our trip.  Saves us the extra time and expense of shipping and our customers love having us deliver  (even though, we charge a small delivery fee).

These are just a few ways that we have used over the years to increase our profit margins.  For more tips, check out this article from Artsy Shark.

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Effective Pricing Techniques

After the holidays is the time that many businesses re-evaluate their goals and plans for the next year.

Pricing techniques are at the top of the list for 2017 planning.   I am already getting questions from readers about appropriately pricing  for retail / wholesale sales — and the year is not over yet!  So let me talk a bit about pricing.

Typically, I recommend the following formula:

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

But often, the formula is not always an exact science for pricing all types ofproducts.  And often, the formula does not apply to certain types of handcrafted or one-of-a-kind products (see the following article:  Pricing Your Artwork).

Just today, a gal contacted me about pricing her line of personal care products after a store buyer wanted to buy 50 of one of her line.  She told me that she didn’t feel she could adhere to the above formula because it would make her retail price too high.

Here is what I suggested:

1. If you make 50 personal care items, your price per unit might be less as you are buying materials in a higher quantity and making them quicker than when you make one or two items.

2. Take a look at your product costs in general. Is there somewhere you can cut? Find bulk pricing for materials? Or develop a system to streamline your production time?

3. If your costs are $1.40 per item, it would not be unreasonable to wholesale for $2.65 and let the retailer mark up to $4.95 — but if you do that, make sure to raise your prices via websites etc. You don’t want to advertise that you are underselling your retail outlets.

4. If natural products are truly superior to most on the market, then package and promote them as high-end products.  One way to do this is to call them something other than what they are typically called — which denotes an ‘average’ product.  I also suggest you check out similar products in a department store for ideas on packaging and pricing comparisons.

5. I also recommend signing up for my free ecourse on ‘How to Price Your Products’:   http://www.selltogiftshops.com/.

Or you can purchase it complete here:  http://meylah.com/SellingtoRetailers/how-to-price-your-products

For more articles and information on pricing your products, I suggest the following article:

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Business Tips — How to Price Crafts

A series of Business Tips from the book:how-to-price-crafts

How to Price Crafts and Things You Make to Sell

by James Dillehay

As new craft sellers, we tend to under value our work and consequently under price our products.
— James Dellehay

In all the years I worked as a sales rep (frequently to new producers), under pricing products is one of the areas where new producers need help and guidance.

For example, I had one woman who made beautiful hand-crafted wooden earrings.  I loved her line and wanted to rep for her, but, first, I suggested she raise her wholesale price of $6 to something higher.  Ironically, she was willing to do this for “my customers” (those stores that I sold to), but was not willing to raise her price across the board.

Of course, I needed go on about how unethical this suggest was, and I ended up just walking away.

The bottom line was that this gal — plus many other professional crafters and producers I have represented — didn’t value herself, her time or her work and that was reflected in her pricing.

Stay tuned as we explore this issue via James Dillehay’s suggestions…

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The marketing message that win sales then are those that speak to one or more of people’s needs.  Seen in this light, the pricing question then becomes one of determining how much value people place on getting their needs met.
— James Dillehay

Having your customer’s needs met basically boils down to what do your customers want!

So how do you appeal to the needs of your customers?  Start by getting out of the ‘me’ thinking and adopting the ‘you’ mentality.  From there, design your packaging and promotional materials to address the benefits your customers will receive upon becoming the proud owner of your creation.

Once you appeal to what your customer needs and wants, pricing will become a moot point as they REALLY want what you have.

For example, in Idaho/Montana, huckleberry products are a much desired jam and syrup item as they are unique and hard to find, pick and process.  So, whereas, a strawberry product may cost only $3, the same type product in the same size bottle or jar of huckleberry could cost up to $10.  And they sell out at that price!

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In the handmade marketplace, lowering the price more often lowers the perceived value.  Raising the perceived value, however. lets you increase your prices and boosts your sales.
— James Dillehay

The perceived value of a product has more to do with how much you can charge for your items that just about anything else.

Most newbies to the craft business, inevitably, undersell their handcrafted items.  These artisans, often, don’t value their time, their products, and ultimately, themselves, so under price their unique creations.

I see this issue over and over again, and recommend these crafters check out local markets to see what price range other products like their own are marked.  In other words, do some market research before pricing the item(s).

James shares several tips to help increase the perceived value by raising the worth of what they are getting for their money, such as:

  • Tell them it’s handmade
  • Produce quality work
  • Be earth friendly
  • Include benefits in your description
  • Use eye candy packaging
  • Sell sets
  • Personalize your products ….

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Think of pricing as made up of two parts.  The first part is learning how much it costs you to make an item.  The second part is determining how much buyers are willing to pay for it.
— James Dellehay

Knowing how much it costs to make an item should be fairly easy — if you are keeping track of your costs appropriately.

To determine your costs per unit, take into account the following:

  1. Ingredients or raw materials needed for your item or product
  2. Labor to build your product from the raw materials (and if you do this yourself, make sure to figure a dollar amount for your time)
  3. Packaging or label costs for your product
  4. Special supplies and misc. cost related to making your product

The second part of the pricing formula is not as mathematical as the first part.  Typically, this can be determined by doing a market analysis — which simply means checking out what stores typically sell an similar item to your product.

There is a detailed description of this process in James book and also in a smaller e-quide I wrote, available here: How to Price Your Products

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Knowing if you can afford to sell wholesale profitably, can open new markets and bring in more income when other sales channels dip, fade, or dry up.
— James Dillehay

Unfortunately, too many producers won’t consider wholesaling their products.  Often, I find that they just don’t understand wholesaling and how it works.
First, when you wholesale, you are selling in multiples rather than selling just one or two items.  Production goes up and costs can go down when making or manufacturing in larger batches.
Second, like James says, you can wholesale during the ‘down times’ of craft fairs or other retailing venues.
Third, if you actually take in to account the amount of time and money you spend on booth fees, travel expenses, and the time or wages paid to operate the booth, your profit may be the same as wholesaling.
Think about it!

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