Pricing For Wholesale And Retail
Are indie retailers monsters?
When I started teaching creative people how to sell their work to shops seven years ago, I quickly realised that two words cause a great deal of anxiety: wholesale and mark up.
Some people think “wholesale” means cheap, discounted, commercial or unethical.
Some people think “mark up” is a euphemism for “I’m going to sell your product for twenty 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’d 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 prefer to bathe in kittens’ tears. It’s much better at exfoliating our scaly hides and talons.
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 know that wholesale prices are much 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?” *THUD*
The thud was you fainting onto the parquet. Don’t worry, the butler will fetch 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.
In fact, 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, not-even-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 of straight-up profit.
This free tutorial goes into pricing in detail, 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.
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 colours.
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 other 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.
So wholesale doesn’t mean something scary, dirty or unspeakably evil. 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 arrive at their retail price.
In general, to get their retail price, most shopkeepers will multiply your wholesale price by at least two. So if your price is £10, your lovely thing will go on sale in their shop for £20.
Sometimes we multiply by more – 2.4 or 2.5, for example – but overall 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 Hargreaves 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 a 2p coin stuck to your cheek gets old really fast. Like you, indie retailers are simply business owners, trying our best to stay afloat in a choppy economy. We’re not dirty, scary or unspeakably evil either.
Well, not during work hours, anyway.
One more thing.
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 customers on Etsy, Folksy, at craft fairs or on your own website won’t pay that much? You need to find different customers who will. After all, that’s what your stockists have to do, right?
Pricing is a jungle and it’s something we talk about a lot around here.
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.
THIS ARTICLE WAS WRITTEN BY
I help creative people like you sell their work to independent retailers, without hyperventilating into a sandwich bag. I take the EEEEK! out of wholesale and replace it with AAAAH, right up until you're making the kind of money you want to make.
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