Retailers aren’t actually trying to screw you over, honest
Wholesale and retail pricing.
I know. It’s a touchy subject but I’m going in.
Listen, if I’m not back by this time tomorrow just… Just tell my family I love them, okay?
When I wander around the forums and blogs of the craft and design world, I try to get a sense of what people are talking about, especially when it comes to working with retailers. Something I hear a lot of anxiety about are the words mark up and wholesale.
Some people think “wholesale” means cheap, discounted, commercial or unethical.
Some people think the term “mark up” is retailers’ euphemism for “I’m going to sell your product for seventeen times what I paid for it, take a quick dip in a bath of virgins’ blood then go to sleep on a mountain of fifty pound notes.”
I would love to tell you those things just aren’t true, but I can’t.
Well, apart from the bit about the virgins’ blood.
Most shopkeepers I know prefer to bathe in kittens’ tears. It really exfoliates our scaly hides and talons like nothing else.
The truth is that sometimes “wholesale” does refer to values, practices or products that probably aren’t in line with where you want your company to go. And there are retailers who have a lump of coal for a heart and a well-thumbed copy of “How To Crush People and Grind Their Bones To Make Your Bread” where their ethics should be.
That’s just life, pretty much.
Thankfully, this kind of thing isn’t common, and in most cases a smart cookie like you can spot it a mile off. So why with the crazy about these words?
Well, let’s take on wholesale first. One of the reasons for its air of peril is that most artists and designers know that wholesale prices are lower than retail prices. That can be hard to get your head around.
“What!” you might say. “This vulgar little shopkeep wants to buy my precious work, the very items I put my heart and soul into creating, and they want to PAY LESS THAN THE STANDARD PRICE FOR IT?” *THUD*
The thud was you fainting onto the parquet. Don’t worry, I’ll send the butler out to get some smelling salts.
The point is that yes, your wholesale price should be lower than the price you charge when selling your work directly to the public.
Your wholesale price should be the absolute minimum you’re happy to part with your work for.
When I say absolute minimum, I don’t mean rock-bottom, barely-covering-costs. Come on. Does that sound like something I’d say?
No, your wholesale price is made up of four parts: the direct costs of making your product, a percentage of the overheads associated with selling your product, recompense for your time and labour in making the product, and a dash extra of straight-up profit.
We’re going to go further into the nitty-gritty of this in a later post, but that’s the basic structure. When a retailer asks for your wholesale price, this is the figure what they want to see.
Remember, ALL your material and overhead costs are covered by this price, you’re being paid for your labour and there’s some extra profit built into it too. This figure should not send you on a one-way ticket to the poor-house. If it does you can’t afford to sell your work at wholesale, which means you need to go back to your calculator and start again. Or you need to put aside the idea of selling your work to shops for now.
There’s no middle ground. You can either make it work comfortably or you can’t.
This is your life we’re talking about here, so there’s no room for error. Your wholesale price should be your friend – it should have enough buoyancy to keep your business afloat, not drag you into the depths.
Okay, so that’s your wholesale price, now let’s talk about the practice of wholesaling.
The major difference between me buying your product for my shop, and me buying your product for my Mum is she’s unlikely to want fifty of your screen-printed tea-towels in a choice of colour-ways. She’s got a dishwasher, for one thing.
If I’m buying for my shop, on the other hand, I certainly DO want all those tea-towels, and probably a few more things besides. It depends very much on the product, of course, but in general retailers like to buy in bulk.
So this is where things balance out for you. You’re selling your work to a retailer for less per item, but they’re ordering larger quantities of items.
That’s the foundation of your wholesale business in a nutshell.
Wholesale isn’t scary, or dirty or unspeakably evil. In this context, it just describes a particular kind of selling arrangement.
Now we’ve got that settled, let’s allow the other boot to drop. What about mark up?
Mark up is what the shopkeeper adds to your wholesale price to get to their retail price.
In general, to get their retail price, most shopkeepers will multiply your wholesale price by two. So if your price is £10, your lovely thing will go on sale in their shop for £20.
Sometimes it’s more, sometimes it’s slightly less, but that’s what’s going to happen.
Now, before you faint again out of sheer outrage, let’s have a look at what the retailer’s mark up covers. Then you can swoon into the bronzed and muscular arms of Jeeves if you really want to. I know I do.
Let’s see: rent, electricity, card machine fees, taxes, employee’s wages, property maintenance, carrier bags, tissue paper, stickers, office supplies, water, marketing, website maintenance and hosting, licences, accountancy fees, alarm maintenance, attending trade shows, different kinds of insurance and stock purchases.
I’ve probably missed a few, but that gives you a flavour of where that £10 mark up is going.
You’ll also note that this is before any salary or wage for the shopkeeper has been taken into account. Most of us don’t sleep on piles on money – waking up with an image of the Queen embossed onto your cheek from a 2p coin just isn’t worth it.
I don’t mean to be flippant, but indie retailers are business people too. We’re not dirty, scary or unspeakably evil either. Well, not during work hours, anyway.
There’s one more thing I want to say on this, and it’s something we retailers come up against time and time again.
When you sell direct to the public, you should be selling your work at its full retail price. Not the wholesale price, not some half way point, but the full retail price.
If you don’t, you’re undercutting your stockists and expecting them to swallow it. That’s not cool.
Think your market on Etsy, Folksy, at craft fairs or on your own website won’t pay that much? You need to find a different market. After all, that’s what your stockists have to do, right?
Man, pricing is a jungle and it’s something we’re going to visit a lot.
But here’s your takeaway: wholesale definitely isn’t evil, shopkeepers usually aren’t evil and you should try very hard not to be evil too.