Need your opinion on this business inquiry

[ubure]

Hi there,

need your help again.

Today I got an email from a womand who has an online shop for presents etc. She is interested in several of my products but says she doesn't have any storage room so she would only order when a customers orders with her, e.g. somebody orders a clamshell she proceeds this order to me. She asks if I can give her wholesale conditions.

i wonder if something like this could work? Of course, it is one more place where my candles & stuff can be found, but wholesale conditions when she cannot even meet my MOQ?

Maybe I should offer something like consignment?

What do you think?

Thank you a lot!

[JI]

Honestly it sounds a little sketchy. The whole thing with wholesale id they get a great price bc they are buying so much. You would get the short end of the stick doing this. Consignment sounds a little better but only if yoh hold on to inventory. It is like she wants to do the business but does not want to take the risk or lay out significant money. I don't think this is good.

[ChrisR]

That's called 'drop shipping' and you do all the work and she collects the money. Run as fast as you can, it's definitely not worth it!

[Vernie1]

If she wants wholesale conditions, and doesn't have space to store the items. Under what other conditions is she looking for in regards to the sale of the product? Will you accept the payment and send her a portion of the sale, or will she get the sale and send you a portion? Since she wants wholesale pricing, will she be paying upfront for product and you ship it out? I don't know how you all will work out the terms and conditions but this sounds like it can be a bit much. If you figure out a way to work it, then try it.

[ubure]

Thank you for your opinions. Yes, that's drop shipping - I had the same thought.

I really don't know what I could offer her. She doesn't even have enough room for a box of candles? I don't want her to buy 20 pieces of each products, mix and match would be fine for me, but you are right, the work is all mine. I guess this no way to go.

have a nice evening,

ubure

[marcuset]

Sounds like more work than it's worth for your business. I'd politely pass.

[Node11]

I'm gonna play devil's advocate. I hope this comes across as conversational.

In some circumstances drop ship can work very well. The company I work for (an unrelated motorsports industry) utilizes drop ship regularly. In fact I know of at least two of our mail order competitors who carry very little inventory but sell millions of dollars worth of product from the very same distributors we use.

Many of the same principals of entering a wholesale agreement still apply. Rather than a minimum order quantity you can use a minimum buy in. Let's say you require an up front $1000 buy in for one year of wholesale prices and apply that money to their customer account as credit. This places an amount of risk on the retailers shoulders. They will need to order $1000 worth of product from you within one year to keep their wholesale status. They will need to advertise the products and sell through enough inventory to make it worth their investment. If they have used up their $1000 credit within the first year give them the grace to purchase $1000 more within the next year, and every year after, to keep their wholesale status. If they fail to do so they will lose their wholesale status and have to buy in again.

I think this model could work provided you are set up to ship orders. When your wholesale customer calls in an order with you you would first debit their account until their $1000 credit is used up. After that, send them a monthly invoice to collect payment.

This theory probably has more holes than swiss cheese but I'd like to see what others think.

Thanks for reading and happy crafting!

Edited October 19, 2013 by Node11
spelling

[ubure]

I know drop shipping works, but I guess it is more for big companies, not a home-based one. My margin of profit isn't very large and hand-made candles don't cost only centsas you all know, so what could I offer her? I guess not very much.

If I offer consignment how many percent then would you think?

Thanks again for your input,

ubure

[leisa2003]

I've done wholesale and drop shipping and I would suggest....DON'T DON'T do it!!! Its for their benefit and not yours, trust me. You are doing all the work even shipping the products to their customers and they make more money then you do.

[ubure]

Thank you all for your advice . I appreciate it a lot and can tell you I won't enter in this kind of business.

Have a smooth and agreeable evening (or day),

Inez

[Node11]

I've done wholesale and drop shipping and I would suggest....DON'T DON'T do it!!! Its for their benefit and not yours, trust me. You are doing all the work even shipping the products to their customers and they make more money then you do.

Could you explain your experience little more? I'm trying to wrap my head around it. Are most of the members here only wholesale? No retail or mail order? Maybe that's where I am missing something.

The only extra work I can see would be getting extra packages to the shipping center. Higher volume would decrease that cost. Enough volume and they will come to you.

One downside I could imagine is that you would be out the cost of packaging and a shipping label. However, the retailer would be assuming the advertising costs/website hosting fees and payment processing fees of 1%-3%.

I understand many of you are against it. That's fair. I'm just trying to understand where all the extra work is coming from and how you are losing money to the wholesale client. Help! What am I missing?

[ubure]

Well, the main point for me is that I have exactly the same work for less money. I pack each ordered item, ship it and pay her a consignment or she pays me less than a normal client would.

She has agreed, by the way, to purchasing my candles with a minimum order quantity.

Thanks again for your input.

Inez