In almost every conversation I've ever had with a maker about building their business the topic of wholesale inevitably comes up. Even the most seasoned professional maker will still have lots of questions or remain confused on aspects of wholesale. To enlighten us a bit, we talked member Charlie Wright who has the unique situation of having been in three major roles of the wholesale process. Charlie was a buyer for locally focused San Francisco store, she runs her own handmade biz Minor Thread, and she also manages the wholesale for stationery phenom Emily McDowell. Who better to give you a behind-the-scenes look at wholesale?
Q: You've worked in retail with makers, have wholesaled your own products and also now work with dozens of wholesalers across the country as part of your job. Can you explain sort of what the wholesale landscape is, including the roles of different people.
A: There are three basic roles that you need to know: You (the maker/designer/business owner), your customer (store buyers) and their customer (shoppers, or end-consumers.) At the handmade level, you're producing & marketing your designs, selling them to stores and in turn, the stores sell your items to their customers.
For some companies, another important part of the wholesale puzzle is representation. Speaking generally, there are two ways to get your products into stores: Working directly with store buyers, or having a sales rep sell your products on your behalf. Sales reps often represent many different lines, and have a roster of clients that they meet with. Reps generally cover a specific geographic territory. Having a sales rep is a great way to build business in a territory where you can't be there in person to service an account.
Q: You work with lots of different wholesale accounts as stores and also with reps. Can you explain what the difference in these relationships are and the pros/cons of each type of account?
A: In our company (Emily McDowell), we generally work with two types of accounts: boutique/independent retailers and major retailers/key accounts. The major difference is volume: a major retailer has many locations, and is often buying to stock stores on a regional or national level.
An independent retailer is generally buying for a single location. The pros/cons can be pretty subjective-- hey, all business is good business, right? Well, yes-- as long as you keep a few things in mind. Boutique accounts often work on tight budgets and turn-around times. But, I find that they are fiercely loyal, and will support you as much as you support them! Having our products in stores across the country means that whenever I (get the chance to) travel, I always have a new shop to visit! And following our accounts on Instagram is a fun peek into the environments that store owners are creating.
Major retailers order in large volume that needs to be delivered all at once, and almost always pay on credit terms-- meaning you get paid in 30, 45 or 60 days after they have received the product. Big orders mean big invoices, which is a total "pro"-- but outlaying cash to buy supplies, working hard to fill your orders and then waiting for that check can be stressful, to say the least. But there is something really fun about walking into a chain like Paper Source and seeing your company's products!
Q: What are your typical duties in managing these accounts? How can a "business of one" get good at this? When should they call in help?
A: On a daily basis, I work with independent retailers and our team of sales reps. I'm answering emails, fielding wholesale orders, entering orders into our accounting program, managing inventory and for now, managing the process of packing & shipping our orders. Everyday, I'm handling a lot of details, and thankfully we have a team of people that I can delegate some of the work to.
Every business owner will discover that, at some point, they need help. Help with producing products, shipping orders, managing customer service-- to give a few examples. For a lot of business owners, these are the things that slow them down and distract them from what they really need to be doing-- running the business! Sit down and make a list of every step involved and filling an order. This will help you identify what tasks you can delegate to someone else. If you're strategic, you'll find that hiring help will free you up to focus on making your business profitable.
Q: What's one thing do people often not realize about wholesaling?
A: It's all about the margins! Let's back up. How did you determine what price to sell your product for? Have you calculated the cost of your materials, and your time-- and doubled it? Tripled it? Lots of folks start out in the handmade business world by buying their materials at retail prices, and pricing their finished goods just high enough to cover the cost of buying more supplies. This can spell trouble when you start selling wholesale-- do those prices really cover your costs? Do they leave you with any profit?
I learned a huge lesson with my handmade business a few years ago when I quoted a customer a price for goods based on an outdated material cost, then gave them a discount for volume*, then had to hire help and pay for expedited shipping for materials in order to meet the customer's deadline. In the end, my $300 profit shrank to $25. I wasn't pricing my products appropriately-- lesson learned! (*Giving a discount for volume is a-ok-- just make sure that you've built room into your profit margin to accommodate that. Those major retailers that we talked about earlier? They'll often request or insist on a discount from your normal wholesale price, because they're placing large orders.
Don't be afraid to negotiate! But, also make sure that you can afford to give them special pricing.) Another consideration for your profit margin is whether or not you're planning to work with sales reps. Sales reps generally take a commission on the orders that they write, between 10-15% of the order total. Be sure to factor this in to the price of your goods. There are a lot of great resources for learning about the right way to price your products for wholesale sales, but I really recommend Megan Auman's Creative Live course, Sell Your Products To Retailers.
Editor's Note: We HIGHLY recommend this CreativeLive too. The link above is an affiliate link and if you decide to purchase we make a little bit of money that goes to supporting handmade!
Q: How have you handled situations where stores want something on a timeline or at a price that is hard for your business but being in their store could be good exposure?
A: Sometimes, you just have to say no. To put it another way: Can you afford to say "yes"? If committing to a time line or price that would leave you with little or no profit (ahem, see above...) then it's time to negotiate. Can your customer be flexible on their delivery deadline? Can the order be broken up into stages, or will your customer pay a percentage of the invoice in advance? Get creative, and try to negotiate a solution that works for both of you.
But remember: Your customer is a person, and that person is also running a business. If the deal doesn't work right now, let them know that you'd love to work with them in the future. Building a business is about building relationships, after all.
Q: What margins/splits should people expect in wholesale?
A: The keyword is keystone. Keystone means that your customer will take your wholesale price and double it, to get their retail price. More specifically, they are likely to take their "landed cost" -- the total cost of goods, including shipping and delivery charges-- and double that. Pricing is very individual, because each retailer's overhead will vary greatly. Some stores are paying Brooklyn rent-- some of them have boutiques on the ground floor of their homes (yes, really!). Back in my days as a buyer at a boutique in San Francisco, our markup was "cost+2%." This is just an example of one store owner's formula and unless you set a required retail price for your goods, your customer is free to price as she sees fit.