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Retail Discount Agreement.


SoapDiva
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Hey all!

Thanks again for all the great advice. I've been mulling over in my head about what to offer these people who approached me, and I decided to offer them a rather deep discount instead of offering wholesale pricing.

My question to you, is minimums.

Should I ask them to meet a minimum order for their first order? I'm thinking yes. Mainly because then "anyone" could come to me and say "Hey, I wanna take some of your samples to home parties, and then place orders after the fact" and just buy for their own use, or for friends. I actually know someone who already did this to me. Acted as the middle man to sell some of my product, marked up my product, then hiked the price again to a retailer. Without my permission.

What about follow up orders? Should I put a minimum on those? Or what about a time limit?

Ideas are most welcome! I meet with them tomorrow, an I'm very nervous.

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I require a minimum for first orders on wholesale, (24 candles). This way at least they have enough to create a display. On subsequent orders I have no min. as I want them to keep things restocked as often as possible. I find that most of my accounts order more than 24 each time anyway as they can save on shipping. HTH

Janette

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Thanks for your reply Janette.

The people who have approached me do not have a physical store, they are planning on taking samples of my product to home parties that they hold for their other business (making jewelry) and will place orders with me as they make sales. They have little in the way of overhead and do not plan on keeping any sort of stock. They are also local, so shipping is not an issue for them. Therefore I am not offering them a wholesale option, but a large discount (like Tupperware consultants get etc).

I have a comprehensive wholesale agreement now (thanks to this board!) with tabled minimums etc, however I am stuck with this situation because their request is so odd.

I want them to be motivated to sell my products, but I don't want them to be placing 20 dollar orders here, and 10 dollar orders there, all while getting a large discount. To me that isn't worth offering the discount to them, and after a while I'll start wondering if people are doin a little personal shopping. KWIM?

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I do understand your concern....but it is possible that they will have frequent, small orders to place if they sell the way you mentioned. I'm not sure how you can gaurd against them just ordering for themselves or friends. Maybe you will just have to go with your gut instict with them. Do you already know these people? How well? If you want to participate you may need to take the leap of faith and see how it goes. You could tell them up front that if they don't sell enough, you will want to end the deal with them. If they are legitimate, the number of orders they recieve may vary greatly from party to party. I am sure that there customers will expect to get there product in a timely manner so they may not be able to wait and piggy back orders from different parties to place one sizeable order. Not sure what to suggest for you. Maybe there are others on the board that already sell this way and will be of better help. Hope it works out for you.

Janette

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Since I feel this might help a number of people, and not just Jennifer (she's contacted me off list, like I invited her to do), I'm going to post some thoughts and ideas here (I'll be copying it over for you too, Jennifer).

IMO, they will basically become consultants for your business, like Tupperware consultants. Most companies that work through consultants require their new consultants purchase a starter pack. This does two things...

1 - It gives the consultants demo products, and usually also include catalogs, borchures, business cards, and other sales tools.

2 - And probably the more important part for you here, it weeds out those who are just looking for discounts. It makes sure they're serious. Some companies also offer a deal where you "earn" the cost of your kit back. Usually there are incentives they have to reach, and a time frame, such as XX amount of sales within 3 months of signing up.

To get some more ideas on different things you can or should offer in a sales consultant kit, do a search for other companies like this on the web. I gathered a lot of information ages ago by doing this. I even "secret shopped" a few, and had information mailed to me. Unfortunately, thanks to a computer glitched that made most of my work files disappeared, I've lost a lot of this information. But the information is out there, you just have to look.

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Another, and totally different way you could approach this is from a drop-ship frame of mind. Start off with 20-25%, and increase the discount when they reach certain sales brackets. Just keep a disclaimer in there somewhere that if they suddenly don't sell as much, then their discounts drops again. It's a little more involved in the long run (where the consulting will probably be more time consuming in the beginning while you're researching), but you might have a little more control over the discounts they receive based on their sales.

My safety precaution with my drop ship accounts, they have to have a tax ID number, and I have to have a copy on file before they can start selling for me. Granted it's not too hard or expensive to get one, but if they're just looking for discounts, I doubt they'll go through the trouble.

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I did agree with an earlier post that reorders can't really have a minimum. Not with what they're doing. If they're adding it to other products that they're pitching at parties, if they have a flop party and only have one or two orders, then it's not fair to them or their customers (now also your customers) to have to wait because of a minimum.

Hope this helps a little. Good luck! Let us know what you decide and how it goes. Don't be afraid to tell them this is something new for you, and you have some research to do still before you can commit to anything. It will be better for all of you if you do. I'd hate for you to commit to something and regret it later. But also talk very openly with them, make sure you completely understand what they're wanting to do, and the hopeful sales they're wanting to accomplish. If they're as avid party sellers as it seemed like they are, this could be an awesome and fairly steady income for you. It's amazing how much money some of these ladies can make. It's not common, more end up getting all excited, and then never going anywhere, or stall out after all their friends and family have had parties, and never expand beyond that small circle. If they can and have, this could be very lucrative.

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Since you're not willing to do wholesale, are you prepared to start charging, collecting, and reporting sales tax, since will be a retail sale?

You might want to look at it from their perspective. What's in it for them if you're not willing to sell at wholesale cost, yet require a minimum purchase, and maybe even establish time frames within which they have to order?

Since you've encountered problems in the past you may want to establish ground rules to qualify for wholesale prices--if they don't meet those, then they pay full, or slightly discounted retail, depending on the quantity purchased.

For example, say wholesale pricing is the typical 50% off retail. In order to qualify for wholesale pricing you must have a tax ID, and purchase must be $150 or more (or whatever amount you choose).

You may also add additional requirements such as the quantity per scent or quantity per size that must be purchased. Yankee requires retailers to order in 6's of their large & med. jars--mix & match. (You couldn't just order 25 jars. It would have to be 24 jars or 30 jars.) Small jars must be ordered in sets of three of the same scent, with a minimum order of 12 small jars total.

If any of those conditions are not met, they must pay retail prices. However, if a customer buys 10 or more candles, they will qualify for a 20% discount off of retail prices.

If you are concerned with what they re-sell your candles for, print the MSRP on the order form. Legally, I'm not sure you can dictate to them how much they have to sell your candles for when they have already paid for them. Most companies do not care if a re-seller gets more money for selling the product, but they do when they sell BELOW the MSRP.

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