Wednesday, January 22, 2014

Breaking Into Wholesale, part one

Now that the New Year is upon us, it’s a great time to think about where you’d like to take your business in the next 12 months. Wholesaling can be a great revenue stream but it can also be overwhelming at first. What do I need to do before approaching stores? What’s the best way to approach stores? Are there any standard terms or practices I should know? This topic is a two-part series. Part One focuses on what you need to do to prepare for wholesaling. And Part Two will focus on how to seek out those opportunities.

To start, you need three essential items before approaching stores:
• wholesale pricing
• terms & conditions
• line sheet

Let’s break them down...

Wholesale Pricing:
There is a difference between your retail price (what you charge online and at shows) and your wholesale price (what you charge stores.) Typically your wholesale price is 50% of your retail price. This is called keystone pricing. However, if the market will bear it, you can set your retail price at 2.2 or 2.4 x your wholesale price.

Think you can’t afford to sell your product for half of the retail price? Perhaps there is a way you can streamline production or buy supplies in bulk to save on expenses. Or it may be time to raise your retail price. Many crafters undervalue their work; especially the amount of time they spend creating their work. Don’t forget to pay yourself an hourly rate in addition to what you take in as profit.

One thing to note is that you should never set your retail price online or at shows for less than what you recommend to stores. They will not appreciate it if their customer can check out your product in their shop and then buy it on your website for less. This is called showrooming.

Terms & Conditions:
The next step is to figure out your terms & conditions. Let’s start with your minimum order. When determining your minimum, decide how many items you want the shop to carry so that your work will have a good presence in the store. With my line, I like a store to have at least five different prints and two of each of those designs. So I multiply my wholesale print price by 10 and come up with my minimum opening order.

If you’re a jewelry designer you don’t want them to order just two necklaces; that makes it harder for your brand stand out amongst their other items. Ideally they would carry at least one full collection (earrings, bracelets, necklaces) or a range of several pieces so your work can be grouped together and make a nice presentation. Consider offering a free display if they order certain amount of product. The extra expense of the display is worth it because it gives you some say in how your product is merchandised.

Other things to think about are: How should the store order—via phone or email? How should they pay—credit card, check, or net 30 terms? Net 30 means that the store has 30 days to pay for their order and they do so by check. Most people offer net 30 to stores they regularly work with since they won’t have to pay the merchant fee on a credit card payment. But I would be careful about offering net 30 to a new account. They should place at least one order to earn your trust.

How long will your items take to ship once an order is placed? What’s your return policy? What should a retailer do if their order is incorrect or arrives damaged? How will you bill them for shipping? Will you offer any kind of exclusivity? One of the most popular forms is zip code exclusivity. This means that you promise not to sell the same exact item to two stores in the same zip code. You can, of course, sell different items to both stores.

You have a lot of leeway when it comes to setting your terms & conditions. Pretty much anything is fair game as long as it is spelled out up front. Which brings me to…

Line Sheets:
This is a critical document which you’ll be emailing or handing out to buyers. It consists of an image of your product, its name or item number, a short description, the wholesale price, and your suggested retail price. The end of the line sheet is typically where you list your terms & conditions as well as your contact information. You can also include an “about” page or an order form if you want.

A line sheet is very similar to a catalog but distinction that I make is that a catalog is more designed with lifestyle photography, complex layouts, or fancy type treatments. If you want to create a catalog by all means do so. But a straightforward line sheet will offer the store buyer all the information they need to decide if they want to place an order.

I recommend setting up your line sheet horizontally since it’s easier for the buyer to browse that format on their computer screen. You can create it in any program that you feel comfortable with but whichever one you use, I would save the end version as a PDF. PDFs are easy to email and they keep your formatting intact (unlike a Word document).

Depending on your skill set you may be better off having someone design your line sheet for you (while you spend the time making more product). I saw a real need from emerging designers who want to take their business to the next level but don’t have the time or desire to learn how to create a line sheet. This is why I’ve started offering custom line sheet packages on Etsy. If you think this might be a good solution for you, feel free to drop me a line with any questions.

Next week, look out for Part Two of this series.

1 comment :

  1. Great article, Dara! I would love to try to sell my jewelry wholesale, and this was super helpful in knowing how to get started. Looking forward to part two!


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