Wednesday, February 27, 2008

Selling Wholesale - Part II

We continue the article on Selling Wholesale - Look in our archives for Part I.

When you sell wholesale you are going to sell in quantity. You determine that quantity. It may be determined either in number of pieces or a minimum dollar amount. For example - wholesale order is a minimum of 12 pieces. This means the retailer must by 12 pieces from you at the same time. If your work is uniquely one of a kind for each piece then these 12 might be completely different. If you make earrings and bracelets you may require that the order be 12 pairs of earrings or 12 bracelets, but not mixed. If you wish to offer them mixed you might do that as well. If you can duplicate items and make several the same then you could offer the order as 12 of one design. This is all up to you as the wholesaler. You set the terms. The other example is by dollar amount - wholesale order is $100.00. The retailer may buy anything that they want from you at wholesale as long as they purchase a minimum of $100 in merchandise.

It is this bulk buying that can make it easier for the craft artist to lower the price needed for any item. Often you can make two items in the same time that you can make one. You have the same tool and work area set up time, the same equipment to set up, etc. but you now can use that one set up for two items - you have just cut your labor time by a significant amount. Sometimes you can make three or four or even six items in almost the same time as you could make one or two. Now you have decreased your labor time even more. Supplies in bulk often cost much less than supplies purchased a few at a time. You have just reduced your materials costs to fill a bulk order. See where this is going. Of course, with some things you are not going to save very much time or expense money, but whatever you can trim on your end will help you offer your work at a wholesale price that is attractive to a retailer. Also keep in mind that the time that you put into selling your work is time that may not be compensated for. By selling in quantity you are putting much less time and effort into selling a dozen items at one time than selling each of the 12 one at a time. Here it is worth your while to make that wholesale sale - even if your prices are a little lower than you would like. (Don't lose money, however. No sale is worth losing money over.)

Now that you have established good wholesale prices you are ready to make wholesale offers. I am not going to go into finding retailers to sell to here. Rather, I am going to concentrate on retailers who find you and ask if you will sell your work to them wholesale. Before we go on, understand the difference between wholesale and consignment. A wholesale sale is an outright sale - you receive the money for the goods up front, deliver the goods, and the transaction is over. A consignment arrangement is not a sale - it is the opportunity for a sale. When you sell "on consignment" the retailer takes your goods and you get no money until each item sells. You will then get a percentage of the sales price - which is generally 40 to 50%. You need to offer your work to the consignment shop at full retail and then you must be satisfied with the 60% or 50% of that price as your sale. Consignment is a whole other complex area and we will go into it in detail in a future article.

So, a retailer contacts you and says that he/she would like to buy from you wholesale. What do you do? First, you want to make sure that this wholesale offer is from a legitimate retailer with a sales venue - either a brick and mortar store, an established catalog, or an active internet sales site. You want to verify that this is not someone who is just looking to buy your work at a discount. If this is a store that is local to you visit it. If this is a catalog retailer, get a copy of the catalog. If this is an internet site, check it out. When you speak or email with this shop get as many details up front as you can. Always be polite. Never be demanding. Try to be as diplomatic as possible. Flatter them and be discrete at finding out what you need to know. If this is a brick and mortar shop and you can see it you do not need to ask anything - your proof of legitimacy is in the concrete - as long as it is a store that actually sells the things that you are wholesaling. If you sell jewelry it is unlikely that a plumbing shop is going to be selling jewelry retail. So just be cautious and you won't be scammed.

When you are satisfied that you are in a legitimate situation, present your wholesale pricing and minimums to the retailer. If this is a local shop you might answer the initial inquiry by making an appointment and going in to meet with the wholesale buyer. If not, then you are doing this by email, mail, or over the telephone.

If you are dealing with a retailer in your state and you are in a sales tax state, you are going to also present to the retailer that you require a signed copy of their business's sales tax form. This will cover your wholesale sale obligation with your state's sales tax requirements. If the store buyer has a problem with this there is something seriously wrong with this transaction. This is standard retail buying procedure. It is expected and any buyer who is unaware of this or refuses to provide this is doing something wrong. This is a warning signal to walk away!

When you present your prices also present your shipping and "handling" prices. This should not surprise the retailer either. They are seldom offered free shipping and expect to pay shipping costs as a day to day cost of business. Shipping in bulk is cheaper than shipping one item at a time. Know what it will cost to ship your items before hand including the costs of your packaging. You may be able to "sweeten" the deal by offering free shipping if you need something to close the sale. Keep in mind that what you establish on the first order may effect future orders so if you cannot afford to offer free shipping do not - or establish up front that future orders will require shipping charges.

Your retailer may ask you about reorders. Some wholesalers offer no minimums on reorders. Some offer no minimum on reorder but raise the wholesale price if less than X is ordered. This, again, is up to you the seller to determine what you will offer. For example - on one item that I wholesale I offer free shipping on quantities of six but on reorders if less than six are ordered the price is slightly higher and I add shipping charges. It is worth the retailers while to reorder six or multiples of six at one time.

When should you get paid? If the retailer is a major business - a large department store or a known business you should be safe accepting payment by check after the shipment is received. With a big business you know that they will not run away and they really cannot hide from you or your attorney (if it ever came down to that). To protect yourself always have something in writing - a sales agreement that they sign and return to you (with that sales tax form) or an email that clearly states the agreement of the sale and the name of the person who is making the arrangements for the store. Get this no matter how big the business is! Your agreement in writing is what is known as a "Letter of Credit". This is something else that real businesses are fully aware of and have no problem with.

If you are dealing with a small business - even a brick and mortar store - especially one that is out of your local area, get paid up front before your ship. Tell the business that it is your policy to be paid on all first orders (or all orders) before delivery. If they have a problem with this, find out why. Do they not trust you? Should you then not trust them? Do they not have the money right now? You are not in the business of making loans. Be sure that you are paid - and when you get the check, deposit and make sure that it clears before you send your shipment to them. You may also want to place into your written agreement that bounced checks will require a $25 fee. Your bank is going to charge you a fee if you deposit a check and it bounces. Cover yourself in advance. Stores have no hesitation to have this policy when they take your check.

What happens if you are dealing with a local brick and mortar store and they want to hand you a check when you hand deliver the items. For the most part you are going to just take the check and hand over the merchandise and take a chance. Here is another example of knowing absolutely where they are and that you and your lawyer can find them if need be. Let's hope that shops have some integrity. Most do!

So you have made your first wholesale sale! You now know what to do and the best thing is that usually you will hear from that shop again wanting more!

17 comments:

momiji said...

Extraordinarily useful advice--thanks so much!

bella-bijoujewellery said...

Very very helpfull!! Currently im trying to figure out the old sales tax form thing for canada.

Lova Revolutionary said...

Thanks for the tips! I just started thinking about wholesaling!

Sacred Herbals said...

Thanks for the great advice! It helps alot!

WellspringCreations said...

Thank you for sharing your expertise. I feel more prepared to take the plunge!

Creasol said...

This is so wonderful advice! Now I can start considering wholesale in a secure way. Thanks!

Renegades said...

Thats great advice! Thats I just got my first wholesale order and you answered all of my questions

Crafty Bee Sisters said...

We are so happy to have found your useful articles and will definitively recommend your blog. We have sold wholesale before and always got paid first. We also send the parcel with insurance and we have never had a problem with non-payers or lost parcels. We will re-adjust our prices now as we were charging less than what we should, many thanks, Monica and Jessica.

GiftRep Sandy said...

Excellent article with lots of detail that most articles miss! Having worked as a sales rep for crafters and small producers, I know how important it is to have all your systems and information set up first before you make your first wholesale sale.

Sandy Dell (GiftRepSandy)
http://sellingtogiftshops.com
www.IdahoGiftsWholesale.com

Joy said...

This is a great, informative article, so thank you kindly for writing it up for us. :) A lot of stuff I needed to know, and some stuff I didn't even think about!

Desert Soapstone said...

The letter of credit is vital. Thank you for this information. I will be marking your blog so I can refer to it frequently.

Elaine said...

Excellent! information. I have just been contacted by a retailer, so this will be my first wholesale order. This information is just what I needed to move forward with confidence.

Thanks for passing along such valuable information.

Kaja said...

Thanks a lot! This was EXACTLY what I was looking for!

Jolinne Handmade Art said...

Thank you so much for this wonderful article!
Meytal@Jolinne
www.jolinne.etsy.com

Higher Ground said...

Thanks so much! You give me confidence that I can answer these wholesale inquiries with wisdom and intelligence! I feel informed!

Thanks,

Jamal said...

Thank you very much. This was very useful and informative.

Ariel said...

Thanks this is really helpful! I've been having a hard time figuring out what is the norm - to be paid ahead of time, Net 30, or what - so this is great.