Hi all!
I am new to the forum and fairly new to the wholesale market. I have products for which I have found a manufacturer, a contact I made at a trade show. They have quoted me prices and my next step is how to arrive at a wholesale price I can market to the retailer.
I know that generally a retailer will double the wholesale price and sometimes even increase that wholesale price by as much as 2.5 times. Correct me if I am wrong on this. What should my mark-up be from the manufactured price to arrive at my wholsale price? Is there a general percentage that is acceptable within the industry? Will it always be the same or are there factors that might change this either higher or lower?
I have been able to sell the item myself on e-Bay for 172% mark-up above what the manufacturer has offered. (of course I have been making these by hand up to this point and even that 172% was not high enough to cover time) So, with this in mind, a 100% mark-up from manufactured price to arrive at wholesale seems reasonable to me but wanted to get the opinion of those who have been doing this for awhile. I thank you for any help.
Cheers!
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Pricing manufacturer's price to arrive at wholesale price.
6 posts
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I would do some analysis on what other wholesalers are selling the product. Surely, there must be some people doing the same thing which you plan to do. So maybe do some research on what other competitors are selling at and offer a a competitive price. I think this is very important. There isnt an optimium margin that you should be selling at. This is driven by the market and the competition. So I would say that you should do some research on your competition and price your wholesale products accordingly. Maybe give a bit of discount compared to the normal wholesale price so you can penetrate the market, get a loyal customer base and price it up slowly...
Hope this helps. -
I totally agree with MAmijee2, just call them as a retailer/buyer and see what is their breakdown prices according to quantities.
Also, if you know your product and market, a little change in the design can really make you stand out from the rest.
Good luck -
Just because you can make and sell a "craft type" item yourself does not mean it can be manufactured and retailed through the normal distribution process. You mention "wholesaler", so that give me the ieda you are talking about a 3 step process. You, as the manufacturer, to a wholesaler, to a retailer, who then actually sells the items to the general public.
This calls for some real consideration.
First of all, you need to start at the end. Keep in mind that ebay is not a normal market, so take that out of the equation. Although, if you are going to continue to sell there in competition with your wholesale customers, forget it.
What is the "perceived value" of your product? What would an average of 10 or 12 people be willing to pay for it? That is your retail price.
Then, you are right, the retailer will expect to be able to at least double their cost - including shipping. Many won't even consider it at 50% groos profit, or double cost. (My gross profit at retail is over 65%, if I can't "triple up" I'm not too interested.)
So, if I read you wrong and you are going to sell direct to the retailers, you have to be able to let them at least double their cost - including shipping. You don;t have to pay shipping, but the final retail calculation must include room for the farthest customer to include their freight costs and still double, or better, their total cost.
If you are going to sell through wholesalers, you must also figure in a 25 to 30 % minimum profit for them.
So, in reality, you have to look at a realistic retail price and go from there. If your retail is too high and the product can't be sold, no amount of discount or profit will matter.
One way to initially get the product out is to offer "guaranteed sales." You guarantee that you will buy back the remaining products that are not sold within 90, 180 or 365 days. Any re-order would cancel the guaranteed sale, since it would indicate the sold the first batch and are happy with the product. But the first order should go out with a guaranteed sale provision to get new accounts to stock the product. -
Hi,
Thank you for the good info. I do appreciate it. I did a search for favor bags similar to my own and found the retail price I arrived at was comparable to what I found in the retail market.
To Pete: I first introduced the item at a trade show and they never fail to attract attention. I was able to sell them directly to a few retailers at the show. Although there was interest, most did not buy simply because I could not offer the item at a low enough price to support the retail mark-up to a reasonable retail price. This is what leads me to belive what I have in mind will work for this particular item.
I am talking about a three-step process only I am the wholesaler or am I considered the manufacturer? I have a contact who works directly with a factory in China (manufacturer). They make the items and sell them directly to me (wholesaler). It is then up to me to move the product. I can either sell it myself or market to a retailer. In this case I chose to market to a retailer. Would you recommend that I find a wholesaler or distributor? Where might I begin doing research on something like that? I don't consider myself the manufacturer because I am a sole proprietorship and do not own the factory or have people going over to China to oversee the production and
From what I have learned at trade shows, the retailer frowns on the product being offered for sale directly from the manufacturer (or in my case the wholesaler) so I would discontinue e-Bay listings on those items immediately. The items do better at trade shows than they do on e-Bay anyway.
Please forgive the neophyte question but I'm not sure I follow on the 65% gross profit. If you are doubling the wholesale price how is it that you would only be earning a 65% profit and not realizing a 100% profit?
Why is the wholsaler only getting 25% to 30%? The answer to this question might be tied into my understanding of the previous question as well. It is my understanding so far that if manufacturer sells me item A at $X.00. I then mark that up by X.00 x 25% or 30% and this is what I would sell the product for to the retailer?
I like the guaranteed sales idea. I will try that.
Again, to all three who responded I really appreciate your time.
Cheers! -
Yeah the Guaranteed sales thing is indeed a good idea. Although, it would be kind of dependable on your cash flow, if you have enough money to buy back the goods that were not sold. Ussually small wholesalers try to get rid of their products really fast, so they can have a fast turnover as they do not have high margins. But if you have enough cash flow, then you can indeed offer your clients to buy back products that were not sold.
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