Selling Wholesale: Pros and Cons
This weeks blog post has been written by London Local team member Elizabeth Smallman who is the Creative Director of etsy shop Mountain and Molehill.
For many Designer Makers the dream is to sell to the likes of Selfridges, Liberty, John Lewis. Who wouldn’t want to pootle into a shop and see a gorgeous display of their own designs? It’s a selfie moment if ever there was one.
Weeelll! I have been there and can say that there are pros and cons to going wholesale. Having changed direction and restarted my business I wouldn’t say that wholesale has the same position in my ambitions that it had before.
Let’s start off with the Pros as they are simple and few:
- You can make more money by selling bulk orders.
- Increased exposure could well persuade more people to seek out your shop.
- Serious kudos if you are lucky and get into a major store.
- Somehow (unfairly) it can make you seem more professional.
Sounds GREAT! So why not?
1. Wholesale means wholesale prices.
Yes. I am stating the obvious here! Going on the average RRP divided by 2.5 equation and deducting the cost price how much have you actually got left? Is it worth it? Sometimes the answer is yes in order to get the relationship going. I sold some very successful mugs wholesale and got a whopping £1 profit. However many shops also took other products as well which made a much bigger profit for me. BUT! The bigger shops often want a bigger discount. I had order for 400 cushions from a major store but they wanted it at such a low price my profit was practically nothing. I had to grit my teeth and say no.
Nowadays I actually make everything myself rather than outsourcing it, while my cost prices are lower it takes more time to get the order ready. Upon working out the wholesale costs I had to work out whether the profit was going to pay me at least the minimum wage per hour. Yes it was but I did decide that wholesale was not going to be my major focus as I would have to work 3 times as hard to make the same money.
2. Wholesale has hidden costs.
Most shops, big and small, want free delivery and while they are happy to hit minimum orders to get this ultimately you still have to pay the courier to take it.
Packaging costs loads unless you have a LOT of storage space.
3. Wholesale may well take you into the world of warehousing.
I had an AMAZING warehouse fulfillment company. I would recommend them to anyone. BUT they need paying and this eats away at profits.
Even if you hire a storage space the cost can easily go up and up and up before you know it.
4. Big shops = red tape.
Small shops are on the whole fairly easy to deal with. They place an order and as long as it arrives they will be happy.
Big shops want it done their way. I was enormously excited to secure a nice sized order from a big London shop. Filled in their Supplier form details eager to get the order out asap so that I could get those pennies in the bank and run over for that photo moment. I got an enormous ‘Supplier Manual’ emailed to me which dictated exactly how the products had to be packaged for delivery (with fines if they were not.) Once that was done I was given a date for delivery with a timeslot which HAD to be adhered to or the delivery would be turned away. I was lucky my warehouse knew how to do all this. No idea how I would have managed on my own with my cheap little courier companies.
5. Getting paid.
Small shops are either perfect and pay up with the odd nudge or a nightmare and you just have to keep nagging and decide whether to supply to them again.
Large shops often operate on a 90 day payment policy. Yes. THREE MONTHS to get paid. Or you can agree to reduce the cost by 10% to get paid in 30 days. That’s right you can pay them to pay you.
6. Trade Shows
JUST SO BLOOMIN’ EXPENSIVE! But essential to be seen as credible….I would say that I feel that the tide is changing here and they are less vital than they once were.
One very worthwhile exercise is to tot up the pennies you earn from Retail sales and compare it to how many pennies you get from Wholesale sales. I did this when I was selling to 50 – 100 retailers and was surprised to see that actually I earned nearly a third more from Retail sales over the course of a year. At the end of the day a retail sale means all the pennies go into your pocket.
It would be easy to say ‘Don’t go near wholesale’ but I do think that there are significant advantages which are worth the problems and it is possible to do very well out of it. However I also think that Designer Makers are better off focusing more of their time on selling themselves and making wholesale orders an added bonus.
Given that this was a bit of a serious post to read I think you all deserve 25% off all Mountain & Molehill products on Etsy with the code ‘123PHEW’.