Wholesaling 101 Part 1

Thanks to all of you who were patient, as I try to think of everything and getting it together.

Starting out in wholesaling can be a difficult task. Compared to retail, your clientele changes completely. Your focus changed from the end customer to the store buyer. Your perceptions of price changes and your outlook is totally different.

Things the store buyer looks for:

Value: How do these compare to others I have in the store? What is the price difference between the two? What about packaging? How are they delivered? How is the quality of the scents?

Price:

If you started in retail, you may already have your pricing set, and expect to give them a 20% discount for wholesale. Well, that may not necessarily work. If you sell them at shows or online on regular basis, the retailer may not take to well to that. Why buy it at that store, when they can buy it from you, cheaper. However, if you are selling to stores throughout the country or out of your area, you may be able to get away with it.

Don’t except to charge the same price as Yankee Candle. Although you or others may think yours is better, you do not have enough to justify. Yankee spends millions in marketing and doing research, so you cannot expect that same level. Yankee is to candles, as Kleenex is to tissues.

Number one is to make sure you are making money for the store buyer. A store spends thousands of dollars on advertising and promotions, rent, utilities, and wages. Although the general rule is 2X cost for wholesaling, there are several factors you need to consider.

Can the store successful charge DOUBLE what I charge?

Example 1… your price is 9.00 for a 16oz candle in a standard apothecary jar. You got this because you spent $4.50 in materials. The store will charge a minimum of $18.00. Other nationally marketed candles in their store sell for $19-$22 for the same size. Is this specifically lower than the national chains…no. Will it be a value to my customers, not really because they are saving only 5%. So first off you will have to forget wholesaling this item, consider consignment, or cut your costs.

Example 2…your price is $7.50 for a 16oz candle in a standard apothecary jar. Your cost was $3.75. A store would charge $15.00. This would be a savings to a customer of 25%. This is more likely a better buy.

Example 3…your cost is $10.00 for a 16 oz candle. Your cost is $4.00 in materials. You found a unique jar that no one has and does special embellishments to it. The store charges $20. No other lines can company to this, so it is in a class of its own, and has a higher perceived value.

Some things aren’t made to wholesale. We have several products that are retail only, because we don’t make enough on them to wholesale. Start at the end and work backwards. If someone would pay $10 for this, I charge $5, my cost must be under $2.50.

Here’s a good secret….go visit local gift shops/pharmacies etc. And look for local brands and see what their retail pricing is, then you will have a good starting point.… I just did that last week for a new product and realized I was way under the market, so I upped the wholesale price.

Shipping…how do they ship? Do you deliver ship by UPS/Fedex/DHL or require to pickup? This is your choice. If you choose local accounts, delivering may be an option, but consider their receiving hours. No one wants to get a deliver on a Saturday morning, in the middle of the business day of the week.

Customer Service: Can I reach you when I’m in the store…M-F 9-4? Just something to think about. Few stores will have the time to call you on a weekend. Also do you have a system to create invoices? Do you accept C/C?

Style: As much as you think, everyone does not think your candles smell wonderful or like the style. Each business has their own look and ideas for their store. They know what will sell and what will not. DO NOT get offended by this. Many will say the smell well, but don’t like the look, or vice versa.

Performance: Most will want to try your candles first. So it is very important to test, test, and did I forget, test. If you want to be put off as a “cheap” candle, then so be it. If you want to be a high end candle, make sure you have all your ducks in a row.

Where else can I find you candles? This is a big decision factor in choosing candles. If you go to every store in town to sell your candles and you choose to sell to each other competitors, they will get quite upset. Stores want to be their unique selves. However you will have stores that want to be copycats. Try to choose you preferred place to sell your candles, if that fails, try another, and another. That does not mean you can only sell to one store in town. Example. I have 2 accounts 2 blocks away from each other. One is a typical gift store; the other is a retirement village. These are two completely different operations with a non competing customer base. Both are excellent customers and order frequently.

Do you private label? This is one you will have to decide for yourself, I personally do not private label, but have done private labeling in my store from another candle maker. It is your policy you will have to come up with. Most have a flat fee of $25-$50 for creation of the label, and an additional per label charge. You will have to decide to put any info about you on the label or not. The average store owner does not want customers knowing where they got their candle from, which is basically what the purpose of private labeling is for. Most candle makers will put “Manufactured exclusively for “Gift Store”.

Your Info: This is a very debatable question. Some stores prefer not to have any other info than your name. I have my name, city and state. I also chose not to be listed in the yellow pages. Other stores will try to steal info and carry it too to try to steal their business. I have still had stores that change my labels. However, you already got their money, so it’s their choice.

Minimums: When we first did wholesaling our minimum was $50, because at the time, any business we could get, we took. We kept that until we took on our first sales rep. She explained it to me this way….If you don’t make a presentation in your store, it will be missed. Think of Yankee….they require large hutches and a $2500 min order to sell their product cause they will sell, but they want you to carry a large enough selection for the customer to choose from. If they purchase $50 of merchandise, they will put $50 worth of effort into your line. Put $300 worth, they will put that much more in. I certainly had seen her point after the first few orders coming through. Those spending under $100 maybe ordered 2-3 times a year, those ordering $300+ were more likely to order 7-8 times a year. Which would you prefer? $250 or $2500 a year in profits. Also do you sell by the case, mix & match, etc?

Some companies having an opening order. This means maybe you need to spend $300 at first, but then $100 every time after that. This is one option you will have to decide to be comfortable with.

Payment options: Get your $$ at or before delivery!!! I still have some people who never paid me. My first mistake was trusting people. Once you have the order ready, that’s when you charge their card. Don’t ship without authorization of their credit cards, or after their check has gone through. COD is an option too. It’s asking a lot for a store owner to put 50% down, but some may do that for you, especially if you are just getting started. .

Lead Time: Make sure you can handle the orders. We lost business one year because we couldn’t meet your demand during the holidays. Stock up on popular scents as it gets close to the holidays. Most stores prefer their orders in 2 weeks. Also many have open houses and sales, so you want t o make sure they have their order first.

Samples: Have them ready to show. Make a small candle, votive, tea light to offer if they are hesitant. Some stores may like to see how they burn. If they want more than that, make them purchase them, at retail price. If you sell B&B you may want to have them try it out, giving small samples to the employees is also a plus.

Getting Customers: There are many avenues to get customers.

• Go door to door, this would include visiting them or sending mailings, very little money involved. When you go, have a sampling of your products in various scents so they can see what you are selling. Don’t expect to walk in the door, samples in hand, and get an order. Drop off some brochures and ask if you can make an appt or follow up with the buyer at a later time. And please honor the sign of no soliciting. That doesn’t mean you can’t go in and check the store out, grab a card, and then make a call. Mainly it’s for those weirdoes off the street that want to sell perfume, umbrellas, etc. Sometimes starting in a salon has been an excellent starting point, usually someone you know knows someone who has a salon.
  
• Sales Reps, they require no money up front except their cost of samples. Standard commission rate is 15%. They sell and write orders for you. Expectations can be $500 to $10000 per month, depending on your product and their selling experience. I have reps that can write me $10,000 a week at peak season, but the same write me nothing in an entire month during slow season.
  
• Catalogs, just mail them out to lots of stores, I’ve seen many places do this. Cost is up to you depending on how professional you get them done or how many you mail out.
  
• Trade Magazines. There are many trade magazines out there you can advertise in, just need to do your research. Cost can be $100-$3000, depending on what you want out of the ad.
  
• Trade Shows, this is where stores come to see wholesale vendors. This is the most expensive way, and may require up to $5000 or more up front in expenses for one show. You can make it or break it here. Our first show barely covered the expenses. Did a show last year and got snowed out, and lost money, so be prepared for that. There are order only and cash & carry shows. They are usually in larger cities throughout the country.
  

Am I going to be able to quit my FT job for this? Maybe, someday. With all my accounts, I still don’t pull a regular pay check. You have to have enough capital to get everything going. Preparing for the holiday season means you will have to spend extra money in the slow season to get ready. Don’t forget taxes, insurance (including health, risk, life), accountants, lawyers. And if you hire anyone, that means even more paperwork. As your business grows, its just more money comes in, it goes out as well. Don’t expect to get a big payoff right away, because it isn’t going to happen.

Things to think about:

Competition is fierce. If you got the best unique product around, consider it being copied within 1 year. When we started, we were the only three of us selling similar products. Just this past year, 3 more popped up and have been very aggressive at selling. This is acceptable etiquette in the business. Although know one likes it, everyone seems to do it.

The main thing is to act like a professional, but be yourself too. Store buyers loving meeting the persons who make the candles they will be buying. Many of my customers have become friends.

Stick to your policies and have them ready to read so show them. Stick to your minimum requirements too.

Create an order sheet, and hand out with a catalog.

Remember Word of mouth works in wholesaling too.

These are only my opinions and experiences. What you make out of your business is just that.

I know there is more, and I will be adding more to it as it comes along. Tessa @ Keystone Candle Supplies will also be posting this on her website www.keystonecandlesupplies.com as well as some other selling tips later in the week.