Let’s talk about how you express your wholesale prices to retailers. There’s the regular way which most suppliers use, and there’s a more unusual way called quantity pricing. Let’s talk about the main way first.
It’s very simple.
All you do is work out the wholesale price for each item and write them all down in your line sheet or catalogue. Whether the retailer is buying one item or five hundred, your wholesale price is exactly the same.
So if one mug is $5, the wholesale price for a pack of six (before VAT or any other sales tax that might apply) is $30. It’s a flat rate.
Until you say otherwise, that’s how much it costs.
The quantity method is a little more maverick.
You still need to work out your wholesale price in detail and be sure that the figure you come up with works for your business. But instead of simply sticking that price on your items and heading off to watch Schitt’s Creek, you do something slightly different.
This time, you offer a sliding scale of wholesale prices.
Let’s say a retailer wants to buy your mugs. In your catalogue you make it clear that if he buys between 1 and 12, he’ll pay a wholesale price of $5 for each one. If he wants to buy between 12 and 20 mugs, he’ll pay $4.50 for each one, and if he wants to buy more than 20, he’ll pay $3.50 for each one.
The lowest price on offer here is still your rock-solid wholesale price – you’ll never part with your work for anything less than that. What you’ve done, however, is adjust your pricing depending on the quantity purchased.
How is this good for you?
Well, it means that on smaller orders you have the potential to make significantly more than your basic wholesale price per item. You must be sure that the retailer can realistically make some profit on your work even at the highest price you charge, of course.
Second, you’re incentivising retailers to buy more of your stuff. The more they order, the less they pay per item and the more money they’ll make on each sale.
Only you can tell whether this quantitative way of pricing will work for your business, but here’s my take.
If you’re starting out in wholesale, don’t offer quantity pricing. One price across the board is much easier to understand and process – for you and potential stockists. (For more on this, read the bit about processing fluency here.)
Also, if a retailer wants to buy big quantities, there’s nothing to stop them asking for a break on the wholesale price. If you get those enquiries often, or if you end up supplying stores that routinely buy very big quantities, you can always switch your pricing structure at a later date.
Otherwise, keep things simple.
Here’s one more caveat.
I sometimes come across artists and designers who use this second system but who haven’t properly calculated their fundamental wholesale price first.
They’re usually horribly confused.
And no wonder. Taking some other starting point, like what you’re currently selling your work for on Etsy, for example, and using that as the basis for a quantitative pricing system is a recipe for utter befuddlement.
How can you be sure that all your costs are properly covered, that you’re being paid for your labour and that you’re making a profit if you don’t do the sums first?
It’s not enough to say “Well, I’m selling one of these items for $8 so I guess I’ll give you twenty items for $140. Does that sound about right?”
Don’t do this because you’ll go broke.
You have to do the sums. Properly work out the wholesale price for every item you make. I promise you’ll be glad you did.
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