You know that old saying about round pegs and square holes?
If you’re already selling to shops, those retailers are clutching a particular shape of peg. And if that peg is round, the hole it’s headed for in your business should also be round.
Let me explain.
Say your minimum order is $100, and you notice that almost all your stockists routinely stick very close to $100 when they place orders. Hardly anyone orders $200 or over.
In that case, you’re likely to be well served by setting your minimum order level at $120 or $150. That nudges up the value of the orders you receive, and smoothes the way for your retailers because it dovetails with their natural preference.
They want to order a bit today and a bit next month and your terms are helping them do that, so why shouldn’t they take action right now?
If you put your minimum order up to $350, however, you might have a problem.
Your retailers want to order little and often but your terms and conditions are forcing them to order a lot. No matter how keen your stockists are, you’ve rolled a big boulder right in front of them.
What they want and what you offer don’t match up.
But this is a tricky area because the main role of your terms and conditions is to look after you. Taking care of your cash flow and making sure all of your costs are covered is essential if your business is to thrive.
So you can’t cast caution to the wind and arrange everything to suit your stockists. That wouldn’t be safe for you at all.
There may be places, however, where you can afford to move a little more in their direction.
Makers often set their carriage paid level and minimum order in the early stages of their wholesale business then get on with other things.
But if you don’t revisit them from time to time, you can end up in time warp. Your terms and conditions don’t reflect the facts of your business as it is now.
Because as soon as you’ve got stockists, you’ve got data.
No matter how much research you do, your pre-launch terms and conditions are only ever your best guess. They’re a combination of what you need to happen and how you expect (or hope) your future stockists to behave.
Now that real, live shopkeepers are buying your work, you don’t have to guess any more. You can look back over your records and see how much and how often they’re ordering. You can identify patterns and trends.
And you can use all of that information to reshape your terms and conditions into something that takes account of how your stockists like to buy.
When you do that, you immediately remove friction from your sales cycle.
Because if you know that your retailers are holding round pegs, you can get out your trusty jig-saw and make your slots round too – or at least less square.
So the first thing I’d like you to do today is figure out where your boundaries are, especially if you haven’t revisited your terms and conditions since you landed some wholesale accounts.
Work out if anything has changed.
Does your minimum order still have to be, say $300, or are you potentially able to bring it down a little?
Take into account your cash flow, the costs of making your lovely thing, the time it takes you to produce one item – all that essential stuff.
Can you make a change there?
The same goes for your carriage paid level.
Maybe you’ve come across a cheaper shipping deal since you set it, or your packaging costs have reduced. Could you theoretically lower your carriage paid level, absorb the shipping costs and still make a healthy profit?
Go through the figures carefully and find out.
Here’s another important point.
Making changes to your terms and conditions, in either direction, is a golden opportunity to get in touch with your stockists.
If your minimum order or carriage paid level is coming down, you can say “Great news! Buying my work just got even easier! Click here to place your order.”
If your minimum or carriage paid is going up, you can say “Great news! My lovely thing is in demand and my business is growing! As a result, my terms and conditions are changing. Since you’re one of my favourite stockists, I’m happy to offer you my current terms until [date in the near future.] Click here to place your order.”
There are full, fill-in-the-blanks scripts for both these situations and more in my Money + Getting Paid Scripts pack.
But let’s finish up with a few general principles.
I’m going to set out two common buying patterns and suggest strategies to match.
If your stockists like to order little and often:
It might be a good idea to:
– Work to get your minimum order and carriage paid level down.
– Send out offers and promotions to stores based on free shipping (scripts for that here.)
If your stockists like to order lots every once in a while:
It might be a good idea to:
– Nudge your minimum order and carriage paid level up.
– Offer the occasional stock amnesty where you agree to swap old items for new providing they’re in a saleable condition.
Only you can decide whether these strategies are a smart move for your particular business, but they should get some cogs turning.
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