{storefront of Of Cabbages & Kings, from a past Modish shop tour}
We covered selling your goods on consignment yesterday if you missed it, and now it's time to talk wholesale! This is just gonna cover the basic basics for people who are just starting out, interested in selling their work in retail shops and want to know more information about what it's all about.
What is wholesale all about?
To sell wholesale means that a retail shop buys items from you in bulk at a discounted rate. Once the shop purchases the items, they own them and it is their responsibility to try to sell them or keep them if they do not sell. This means they're only going to want to purchase items that they feel cater to their target market, that are the right price point for their shop, that fit in well amongst the rest of the items they carry yet are different than anything else they already have, that their competing shops in the neighborhood don't also carry & what they have enough money to purchase at the moment!
There's a lot of variables that go into which items a boutique decides to purchase, so if you approach them and they are not interested in your goods, remember to not take it personally!
But before you start approaching shops at all, or saying "yes, I sell wholesale!" to those that may approach you, you'll need to arm yourself with a few things first:
Your wholesale pricing and your retail pricing- generally, your wholesale price will be 50% less than the suggested retail price, but that's not always the case. Your wholesale prices need to be high enough to cover your materials/labor/salary with a profit margin still. How high is that? And when you double it for a retail price, is the pricing still in line with your market and competition?
Know your minimums:
You should have a minimum order that retailers must place in order to receive your wholesale pricing. It depends on the price point of what you sell, of course- it could be $100 or $3000. If you're just starting out, it's good to keep your minimums a bit lower to encourage shops to take a chance on your items. You can also state minimum quantities of items per style if you sell reproducible goods, like a minimum of 5 earrings in a certain design. It's also okay to reduce your minimums on re-orders- if it's normally $500 you could set your re-order (when the shop orders from you again, yay!) minimum to $250, per se, to encourage the shop to place another order with you.
Setting minimums helps ensure that you taking on this wholesale account will be worth your while, and it makes the store commit to you in a way. It also helps prevents sneaky "shop owners" from purchasing goods at a 50% discount just for themselves (not like anyone would ever think of doing that, right?)
Know your terms:
With a wholesale order, you're calling the shots as a designer. You tell the shop your payment terms upfront, shipping terms, return policy... they either agree, or you don't take the account, hmm?
- Payment terms: This specifies how you are to be paid- upon order (which I'd recommend), with a deposit amount and full amount due later or even cash on delivery. There's also Net 30 or Net 60 terms which means the shop has 30 or 60 days to pay you from receipt of their order. As Jess mentioned, this can be standard for large companies and you will generally have to accept it as that's how their accounting is run. But with smaller boutiques, I'd stay away from offering Net terms at all- this is called extending credit. If you do decide to do this, you should ask for references and run a credit check first before placing the order.
- Return Policy: You define your return policy on wholesale orders just as would if you were selling directly to customers. Do you want to offer returns/exchanges? Are all sales final? It's up to you. You will need to accept returns on items that are defective though. Also make sure you have in place your policy on returns of items that are damaged in transit- will you require shipping insurance on wholesale orders?
- Shipping and Lead Time: When the shop places an order, you'll need to let them know when they can expect it to ship out. If your items are individually handmade, how long will it take you to make an order of 100 of them? 4 weeks? 6? Give them an idea of your lead time and when they can expect to receive it. You'll also want to mention how you ship your goods (via USPS? Fed/ex?) and who pays for the shipping, which is generally the shop.
- Other terms: You may also want to have a cancellation policy- if they place an order and cancel it before it ships out, will you charge them a fee? Will you work with special requests (different colors/sizes/etc) on items for wholesale orders? Is there a certain price point you do not want your goods to be priced below (if they put them on sale for $10 when you're still selling the same item for $20, it could hurt your brand image!) You need to state all your terms upfront, and the retailer, by placing an order, agrees with those terms.
If you've shown your line to a shop, they're aware of your terms and want to place an order, better have an order form ready to go! It should have all your company and contact information on it as well as a place to collect the retailer's name, address, resale or tax id#, phone number, email address, etc. You should also have a purchase order assigned to your order forms, larger companies will need that in order to place an order with you. You could also set this all up online through your website, have a page where wholesale clients can agree to the terms and then place an order for your goods at wholesale prices, for example.
Also remember, your wholesale accounts are customers too! You can think about offering incentives for re-orders perhaps to encourage them to buy more, a % off or free shipping for example. You can set-up a wholesale specific newsletter list to stay in contact with shop owners about your new lines as they come out. Use some of the ways you're familiar with in dealing directly with customers to market to your wholesale clients, maintain good relationships and hopefully sell more. (psst: Karen has a great guest post on wholesaleing through these economically tough times over on d*s)
And if you get that exciting email in your inbox from a wholesale customer approaching you about carrying your items in their shop, it's important to make sure you're dealing with a reputable place and not just a scammer trying to get a discount. I suggest you get their contact info and resale/tax id# first (yes, they should have that) before you discuss your terms/minimums/etc.
So, them's the basics of getting started selling your goods wholesale- any questions? For those of you who've been doing this for awhile, any super important things I totally missed? Let me know in the comments below!
*a little side-track* I also just want to mention, because I've been thinking about this while writing these articles: getting your items into stores isn't for everyone and isn't necessarily the next step to take with your business. I think you can absolutely be successful selling your goods on your own, direct to customers, if not sometimes more so.
You can also usually have a slightly lower price point if you sell direct only, because when you're selling wholesale/consignment, you need to make sure your retail price is high enough to take that up to 50% cut and still make a profit, while keeping your pricing consistent across all selling venues- in your own shop as well as in retail stores.
Wholesale and consignment set-ups work well for some makers, and not so well for others. Just don't feel pressured into thinking that you need to be selling your goods in shops to really have "made it." Make sure you're being true to yourself, your needs and abilities as a designer/artist and what would be most beneficial for your business. Just another thing to think about (as if you didn't have enough already. ;)
