About that 50% . . .

So, where were we. About that 50%. . .

As I mentioned in my last post about selling wholesale to retail stores, the traditional 50% wholesale discount can feel very steep for us handmade types. Galleries, boutiques that regularly work with independent artists and designers, and on-line handmade marketplaces have a much more flexible attitude toward handmade products. They are typically willing to to lower the discount they expect you to give (40% of the retail price to the shop, 60% to you, or even 30/70). But it’s fairly uncommon that a traditional retail store will accomodate this. If they love you, and they are willing to either make less of a profit or gamble on doubling the lowest price you’re willing to let the thing go for, even though the thing will wind up being more than your customers would pay if they bought from you directly (on your web site, say), you might work it out. But if you grow to the point where you have reps working for you, I doubt they will have time to negotiate this for you. There are lots of products out there, and stores have limited space and limited resources; they are obligated to make a minimum return on their investment and risk. They are trying as hard as they can to stay in business themselves.

So — if you intend to sell your knitted baby bibs to many stores, and also sell them off of your own web site, and also at craft shows, you should know that the retail price at all of these venues should be the same. I know you will tell me that this isn’t fair/true/necessary, but I will say that, in my experience, it is, if only because it will make your life exponentially easier if you start out pricing your products in this way. If you have different prices for different people or different places, or you try to sell your bibs on-line at a price that undercuts the retail price your stores are selling them at, you will run into problems. I urge you to be realistic about your pricing, but to also value everything that you’ve brought to your product, and set a wholesale price that you are very comfortable living with. If you feel that it’s not possible to do so, you may want to pursue relationships with more flexible venues, or stick to selling retail direct to your own customers.

When I first started selling my products wholesale, several years ago, I was really shocked that stores got half of the retail price of something I had made, but now of course I understand it. Retailers have commercial rent, advertising, shipping, fancy packaging, credit card fees, employee wages, commercial utilities, special events, insurance, inventory, all sorts of overhead. They are also talking about you and your products to people every day, and occasionally getting editorial coverage for the lines they carry, which benefits both of you. Good stores earn their 50%, and the reward for both of you is their re-order, meaning they’re making their profit and you’re selling more stuff.

I will say that the reality of today’s retail market is that there hasn’t really been a paradigm shift in the traditional wholesale relationship that accommodates the handmade-product manufacturer very well, but it’s better than it was even five years ago. Nevertheless, you, as a manufacturer, are competing with companies that mass-produce their goods at very low prices. The retailer is always going to try to get your prices as low as possible because that is what their customers demand; customers who are choosing not to be at Wal-Mart in the first place are already fewer and far-er between than we’d like. Unless you are able to target very high-end markets who can ask very high-end prices, you will be pressed to find a way to meet the demands of the general public, who are, for the most part, buying happy meals that are cheaper than they were ten years ago. In a slow-ish economy, everything’s a tough sell if it’s not on super-sale. What people do and what they wish they did when they shop can be very different things; I think that, theoretically, people would love to support us indie designers. In reality, Urban Outfitters knocks off the deconstructed-seam-allowance look much more cheaply than we can, and it serves many people who appreciate the handmade aesthetic but can’t afford the real thing.

Nevertheless, we know that handmade work is something to be valued, and the more we can get our customers to recognize and appreciate all that’s gone into getting something into their hands, the more they will appreciate and be willing to purchase what we’re offering. It’s very important not to underprice your own work. Where there’s a will, there is always a way.

More on how to approach a store next time.