Craft Venture: pricing for wholesaling

25 cents by beth berg

Welcome to Craft Venture ““ business and marketing tips for indie online business owners.  Like me!  Im Brenda, owner of Phydeaux Designs on Etsy1000 Markets, and Phydelle Designs on Etsy.  Last week, we talked about considering what the market will bear when you are pricing your products or services, as part of our discussion about pricing ““ perhaps the most challenging part of owning your own business. and

Hopefully, you’ve read our whole series on pricing your products and/or services, and perhaps you’ve even worked on your own pricing as a result!  As you know or have learned, pricing is both very simple and incredibly complex.  Cover your costs, build in a wage, make sure you have a profit margin.

But wait!

What about wholesale pricing?

Ah yes, the dual edged sword:  wholesaling.  Has your heart gone pitter patter when you read an email from a potential wholesale customer, only to go floppity flop when you realize that wholesale prices are significantly lower than your own retail price?  Before we dig into wholesale pricing, maybe we should back up and talk about what wholesaling is?

If I owned an online or actual real live (brick and mortar) store that sells handmade and other goods, I have to buy those goods myself in order to sell them.  As a shop owner, I have a lot of my own expenses to cover, not that dissimilar from the costs we’ve previously discussed right here:  rent or lease, wages, insurance, advertising, phones, electricity.  I need to purchase my store inventory at a price significantly lower than the price I’ll sell it for.  That will allow me to pay for my expenses, as well as not lose money if I’m having a store sale, clearance special, etc.  And … make a profit!  After all, store owners also need profit margins.

This is both wonderful and perhaps less than wonderful news for you, as the maker of goods.  Wholesaling allows your products, with your name, to be seen and touched by people who might never see your online shop(s).  You can sell all over the world, in real live shops, building local reputations for yourself in locales you may not have known to exist.  The drawback is that unless your pricing already anticipates wholesale orders, you might not be able to afford wholesaling or you might barely cover only your direct expense or even lose money with wholesale orders.

Wholesale grain bag totes by one woman studio

If you have absolutely zero interest in wholesale orders, this might not apply to you!  But you might change your mind, depending on circumstances!  What if your very favorite online Big Name Retailer contacts you?

The general “rule of thumb” is that wholesale prices are 50% of your retail prices.  Yes, half of your current retail price!  Can you afford that?  This doesn’t mean you have to accept 50%, but it may mean your chances of a successful wholesale order will diminish in relation to percent discount you’re able to offer.

I’ve seen many recommendations about how to price, accounting for future wholesale requests.  Everything from very complex spreadsheets to calculate and cover your expenses, then double for your wholesale price (from which you also have to pay a wage and have some level of profit) then double your wholesale price for your own price.  I use my own pricing methodology to cover my direct and indirect expense, pay me a wage with a minimum profit margin for wholesale pricing, and variable increased pricing for my own retail (ensuring I can afford sales, etc.).

Look at your own pricing and if you want wholesale accounts, make sure you can afford the commensurate price reduction.  You may think, “Oh, it would be worth it for the account, and I can’t adjust my prices.”  Most handmade sellers who wholesale will tell you this:  wholesaling is hard work.  Many sellers work directly with wholesale accounts, including invoicing, accounts receivable, etc.  There is more communication, follow up, and a whole new level of customer service involved.  Despite your very clear and simple to use order sheet and instructions, the orders you receive will often be a bit ambiguous, requiring your time to clarify.  Direct retail selling is often much easier and less time-consuming!

What about you?  Do your prices account for wholesale discounting?  Are you ensuring a wage and profit margin, despite that price reduction?  Do you have insights, tips or tricks for wholesale pricing to share?

Image credits:  1.  25 cents by beth berg; 2.  Wholesale grain bag totes – 10 per order – by one woman studio

11 comments | Click here to reply

From the beginning I decided to price for wholesale. I’ve had a few wholesale orders, but the biggest bonus of preparing this way is that if, on the spur of the moment, I want to run a sale in my shop, I know that I can mark items down to 50% and still make a profit on them. It has also ensured that when I sell items on consignment I’m making a profit as well. It’s a lot easier figuring out the pricing at the beginning than to have to go back later and set up your wholesale prices if a lucrative deal comes along.

Dot--Winchell Clayworks

I wish I’d read about this a couple of years ago before I started my gig… The thought of selling my stuff at half what I charge now makes my heart hurt, since it’s all still small beans as it is. But this is something to work towards, I guess — and your words are very helpful. Bookmarking in my “reference” folder. Schmanks!

mchen

I think this assumes a starting point from your retail price which wouldn’t be wise. Wholesaling is a different business model altogether.

If I were to price my goods at wholesale – I would have to completely revamp the way I looked at time and material costs in order to make a profit. Wholesaling shouldn’t require you to take a loss – on the contrary – it should maximize your profits through volume sales. It may require more process and customer service, but it also doesn’t require as much direct marketing to make individual sales.

It can also help you introduce your brand more quickly to a larger audience. There are lots of inherent benefits!

Cheers!!

Lise

Lise

Thanks so much for these craft venture posts! They are very helpful. I am a sucker for any info I can get my hands on about running my crafty/vintage business.

D R E W

I wish I had read your posts months ago!!!

I JUST went through overhauling my prices, and even redoing the way I make products to make costs more conservative, so that I could afford to work with wholesalers. Just as you described, I had the thrill of being asked for wholesale services and freaked because I couldn’t provide it.

What I found was that I was actually pricing on the low side anyway and wasn’t making much profit on the retail side either. I was working overtime making product and filling orders and always FELT like I was making more money than I was (and was disappointed to find little there).

Now I have room to breathe. I can take wholesale orders if I want to. I can run a big sale if I want to. And when I’m breaking my back to get a bunch of orders in the mail, there’s money in my account when I’m done.

Thank you for these posts, I’ve learned a lot!

Natalie Jost | Olive Manna

My wholesale prices are 60% (and for some products, a little more). I wholesale with several shops in the US and a few abroad and no one has ever had an issue with it. They simply mark it up a little which typically ends up being comparable to my shop prices when you take shipping charges into consideration. This keeps me in the game if someone decides to look me up after seeing my things in person.

Equally as important as pricing for me is order size. For example, I will only wholesale my laptop sleeves in groups of 6. If someone was to order just one, it would take over an hour to make, but if they order 6, I can set up an mini-assembly line and crank out all 6 in under 4 hours thus increasing my profit and leaving the rest of the day open for other orders.

In closing, if you can afford it, be choosy about you you wholesale with. Ask for their website and general info before you give them your wholesale information. Make sure it’s a good fit aesthetically and that they understand both the value and the limits of working with a small handmade business.

Angie Davis - Byrd & Belle

I was recently approached by a sweet brick & mortar shop asking about my wholesale pricing. I created an itemized sheet but quickly realized that this was not going to be an efficient model of my items.

Everything I make is hand-lettered in one way or another so taking 50% of my retail price just would not work for me. (I know, my prices are too low as it is but this is a whole other basket of apples to discuss; my inability to price anything higher than what I could feasibly pay for of one of my items! Yes, I will need to seek a therapist for pricing my items! LOL moving on) The 50% model of wholesaling is the norm but who says handmade artist needs to work from it! So I created a bulk percentage discount model more based on quantity. If they buy this much worth of my items then they will receive this percentage off their total and so on and reaching 50% when they reach an amount that will be fair to me.

I came up with some more ideas. Perhaps I will blog about it on my blog someday! Great article Brenda! Thank you! xo, Katy

Katy

These are all such great comments and insights – thank you all!

Dot, I totally agree with you on being able to run sales and still achieve a profit!

Emily (mchen), I think wholesaling is easier for some types of products/art than others. I can’t make more than one scarf at a time – I only have two hands for the knitting needles! So I don’t achieve a lot, if any, savings for bulk orders. (I do, though, for my patterns!) I hear you on the heart hurting. 🙂

Lise, excellent points about approaching wholesaling as a whole new business model! Thank you.

Natalie, what great feedback – thank you! I think many artists and crafters, as well as vintage and supply sellers, tend to price low in order to be competitive, but then wholesaling becomes very difficult. I’m so glad you’ve already gone through a similar exercise with great results. 🙂

Angie, thank you so much for sharing your experience! I know of others who wholesale at 60/40 and even 70/30. And thanks for the invaluable suggestion about being choosy about who you do business with!

Katie (yay, so glad you commented!), you’re in a situation similar to me and many others: you have to work on your items one a time, rather than saving time with bulk orders. You’re probably able to save a little time with your packaging, but probably not that much! Bulk order discounting sounds like a great idea and is sort of the same thing in the end, just not the “traditional” 50% discount!

Thank you all again – and keep the feedback coming! 🙂

Brenda (phydeaux)

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