June 13, 2022 at 7:06 pm #2761Linda ConarroeMember
Judy or Erin,
I have two questions for feedback.
1. I normally consign my goods to retailers who take 30% of the sales price and pay me 70% of items sold on a monthly basis. Is that direct to customer or B2B? Working through the ideation section, I seem to think now that it is B2C whereas earlier I described it as B2B. Thoughts?
2. Regarding B2B, I have been asked by a new potential retailer what my wholesale terms are. This is new to me. What should I be considering? My margins are very tight as it is. I think it makes sense to take my retail price and lower it by 30%. I cannot afford to go to 50%. Are there other things I should know? What are the expectations of the retailer when they purchase goods wholesale?
Very much appreciate any advice or feedback.
LindaJune 13, 2022 at 7:47 pm #2762Judy EvansKeymaster
Your current consignment percentages are very typical and if that formula works for you and the retailer, then I would suggest not reducing your price.
Some negotiating points to consider – let the retailer interested in purchasing inventory know that your product being consistently priced from one location to another is critical for you and for them.
Another factor in a consignment environment, is an agreement that the retailer is carrying insurance on the products that are still under your ownership. How are you handling insurance now?
JudyJune 16, 2022 at 4:25 pm #2770Erin MelnychukModerator
Getting an offer on wholesale is exciting, but it does come with challenges. Your idea on what constitutes a volume discount may differ from theirs. I would suggest asking them what volumes they are interested in. This will help you understand how much wiggle room you have in your margins. They may be interested in enough volume to cover the hard costs and you’d be willing to give up some amount of profit margin in order to be able to secure a great client like this.
Generally, you would consider a formula like this to arrive on a retail price: material costs + labour costs + overhead costs + retail profit margin (higher than wholesale, I think craft woodworking is usually 60%-70%).
And then for wholesale, it would differ something like this: material costs + labour costs, + wholesale profit margin (lower than retail, perhaps 30%-40%). *Omitting the overhead costs because you aren’t retailing it and carrying those costs.
While this might look scientific, it’s actually not. It’s just a starting place and then you’ll have to adjust to what you think is tolerated by the market.
I hope this helps!
e.June 22, 2022 at 6:23 am #2779Linda ConarroeMember
Thank you both for the thoughtful feedback. Excellent points to consider.
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