Another question on wholesaling....

[SoapDiva]

Ok, am I insane, or does the forumula seem a little odd?

From what I understant, you would take your "cost", double it to get your wholesale, then double it again for retail. You can assume that the retailer will be doubling the wholesale price as well eh?

Here is where I get stuck:

Lets say my item costs me 1.50 to make, I wholesale it for $3.00, and I sell it retail for 6. I can also assume that the wholesaler will retail it for 6 as well.

I made 1.50 on it, but the retailer makes $3.00.

IMO, this is not a fair arrangement.

My husband suggests that I deduct my "cost" from my retail price. So, I would wholesale it for $4.50.

For this particular group I am looking at, they do not have a storefront, they have no overhead. So, personally I feel that I should offer a discount instead.

Any advice would be appreciated!

[beesweet]

It doesn't seem fair that we do all the very hard and sometimes aggravating work, while wholesale customers make twice the "profit". But in the case of actual storefronts, they are paying alot of overhead to sell our products along with shipping costs so their profit margin often winds up much lower. I have never encountered a wholesale customer who expects less than 50% off retail and many of them try to badger for more!

[so-soy]

Sucks don't it???!!!! We do the work, they get the profits!! LOL...this is why wholesale ONLY makes sense if you are selling in large quantities to them...if say its a case here and a case there, then no its not worth it to me, I could retail that case or two and make more, but if you put a minimum number of cases for them to buy, you can make it worth your while...

[SoapDiva]

Ok, makes sense then, if I were to suggest perhaps minimums. $ 200 to open an account, and 100 min for each order to get the wholesale pricing....

In the case of these ladies, they have no overhead. They operate their business from their home. They are doing home parties and want to extend their line to include B&B stuff.

IF they did have a storefront, and were going to have a large permanent display of my things, then I could see doing that then because they are putting forth more effort.

I just balk at handing over twice what I make to these ladies outright.

[barncat]

It can take me 1 week to sell $1000 in retail, yet a few hours to sell $1000 wholesale. The whole point is volume. If you feel that you aren't making enough or not worth the time, don't do it. Just cause someone asks, doesn't mean you have to.

[Candybee]

Ok, makes sense then, if I were to suggest perhaps minimums. $ 200 to open an account, and 100 min for each order to get the wholesale pricing....

In the case of these ladies, they have no overhead. They operate their business from their home. They are doing home parties and want to extend their line to include B&B stuff.

IF they did have a storefront, and were going to have a large permanent display of my things, then I could see doing that then because they are putting forth more effort.

I just balk at handing over twice what I make to these ladies outright.

I wouldn't even consider a wholesale account for them. Give them a retail quote. I would only consider a wholesaling to a company that is buying wholesale in volume such at 500, 1000, etc. Anything under I give a retail quote.

[Candybee]

Oops! I meant a retailers discount quote.

[SoapDiva]

Oops! I meant a retailers discount quote.

Can you explain how this would work? Would you offer tiered discounts? $100 in sales 10% off, 200, 15% etc?? (to make it more motivating to sell?)

[Candybee]

Yes. I do a tiered type of pricing. You can set a minimum order limit of say 100 or 200 items and/or a mimimum dollar amount of say $200. Whatever you feel will make the value of the work worth the effort and cost of supplies, etc, to you.

Once you get up to 500 items ordered then you could begin wholesale pricing. Maybe you could set another discount at 1000+ items with your best discount.

You have to sit down and spend some time figuring out the the price range you are willing to work with. Once you have that figured out, you can set your retail and wholesaling prices. HTH

[bugtussle]

Cost x 2 for wholesale!! I still think this is a goofy way to determine your cost unless you add your labor, overhead and profit to the material cost. We had a good post about this a couple mos ago. If you wholesale, make sure you pay yourself for the work & add enough to make it worth it. Carole

[SoapDiva]

Thank you guys so much, I don't feel so much like I'm wandering around in the dark!

[schmoopie]

Well, if I were you I would treat it like a wholesale account(make sure they have a tax id #, etc). Except.... offer 40% off the retail price, require a $200 minimum and put together some kind of "hostess pack" that they HAVE to buy that represents all your scents and product. This way when they have parties they can sell off their existing stock, order more and have testers.....make sure they know trying the product is mandatory.

If you set at least a $200 minimum it will push them to sell.

Plus any "party incentives" would be their responsibility. If you go much lower than 40%, no one is going to be very motivated to sell your product.

But with incentive they will push it and work harder....and if they are making money, you are making money!!

[BLSoaps]

Unless they're pre-ordering quite a bit, and all risk of selling (or not selling) is on their shoulders, you should NOT be selling to them at retail prices. There are two (IMHO) better options for you, both of which are quite similar to each other.

Option One: Treat them like most companies (Avon, Creative Memories) treat their sales reps. Most get roughly a 20-40% commission on the sales they make. There is no risk if the don't sell, and you still make a more than you would if you sold wholesale. But since they're doing the sales for you, the get a sales commission. THEY deliver the products to their customers after the sale. Most they deliver by hand, or the hostess of their parties then delivers the product for them.

Option Two: Drop Shipping. Basically, they take the orders, then turn them completely over to you. You get the final customers information, and also deal with the shipping or delivery. Advantages, you get to build your customer database (I'd require e-mail address, and make sure they know they'll be added onto your mailing list). Disadvantages - you have to ship the orders. It'll take more time. Advantages to your sellers, they don't have to mess with it. They wouldn't get nearly as large a cut though, since you're doing more work. I'd say top out at 30%. We originally were planning to do a tier system with drop shipping, but it started getting too complicated, so we ended up just setting a flat rate for them. Basically, you're a warehouse for them. Make sense?

I'm WAY behind on stuff right now, thanks to a lovely 24 hour flu thing that laid me up real good yesterday, and I'm catching up on orders to get shipped out. So I may not be able to check in here much anytime soon. If you have more questions about either of these, e-mail me at lindsay@soapersworkshop.com, and I'll be more than happy to share any info or help I can.

While it's "wrong" to assume they have no overhead, it is true that they do not have the overhead of most storefronts, website or brick-n-mortar. However, just because they aren't the typical storefront, don't assume they aren't a very ligitimate outlet for your products. Other than storefronts in Taiwan, all of my current wholesale accounts are other websites, not brick-n-mortar storefronts. Some are large enough that they have a warehouse/shipping center, others are smaller businesses who just don't have the interest in making it themselves. But I have overall minimums, and I have lot minimums (they have to order so many of one scent of one product...so they can't order singles of everything). THAT is where the true labor savings adds up. And if it doesn't sell for them (so far no complaints though!), they take the loss, not me.

I've found a lot of people have a hard time adjusting mentally to wholesaling. Yes, we're not making tons off of it, but our labor costs are significantly less. I know my time is very precious. And it's something I NEVER have enough of. I love my time on CandleTech, but I use it mostly as winding down time, honestly! Moments to breathe, recenter, and relax for a few moments. Then I'm back to work.

But I'd take a nice sized wholesale order over equivalent retail orders any day. On average, it'd probably take 10-20 retail orders to be equivalent of 1 wholesale order. Think of the savings in packing time alone. Making invoices, printing shipping labels.

Anyway, if you have questions, just holler. I've researched all selling options very thoroughly.