Wholesaleing

[skeits111]

Greetings,

I'm moving into a realm of my business that I'm unfamiliar with and unprepared for. Wholesaling. It was fairly simple to develop a plan for retailing over the internet based on approximate market value. Now I am approaching larger retailers that operate in a segment of our target market. I'm unsure of how to establish a pricing strategy, payment strategy, etc.. Do any of you know of resources that I can look into to help guide me through this process. Any information would be helpful.

Thanks
Brian Jennings
Kingdom Concepts Inc.

[orion_joel]

Hmm i cannot really offer any links or resources but will try and offer a basic way to build a plan i think..

Anyway when selling wholesale you have to consider a few more thing, like you say you are currently selling online. This is ok but you dont want to annoy your wholesale clients. For example say you sell pens they cost you $5 to make and you sell them online for $10. To sell these wholesale you have to find the price that allows you to make money and allows the reseller to make money. Now if everyone knows about your pens online then the reseller will really have to sell them for the same price as you do online $10. Which means you will have to sell to the reseller at $6 or $7 or so.

With my wholesale experience being limited to IT and Computers which has fairly low margins, i know that the reseller often will make more money then the wholesaler does. The most important thing to be sure you are aware of is that you are not trying to sell the product for to a reseller for the same price you are selling online as you are not going to have the reseller coming back if they have to charge more then you do and compete with that.

So basically you wont make as much money on the product wholesaleing but you should hopefully sell in higher volume which should reduce your costs allowing you to sell at a lower price.

[pete]

The percentage of profit the retailer makes varies from one market to another. Gift shops work on at least 50% Gross Profit (100% mark-up). Others work with less, some even more.

YOU need to research your intended market category to see what is the "default" profit margin for that segment. Then you have to see if you can sell at that price level and do two things - make a profit and have a competitive retail price for your goods.

YOU also need to consider what kinds of terms to offer to your wholesale customers. These can vary from COD, to payment by plastic, to NET 10 or NET 30 or somewhere in between, which means they have xxnumber of days to send a check, to what are called dating terms, where you send the goods and don't expect any payment for 90 days and then 3 equal payments of the balance. AGAIN, this requires YOU to research the market you wish to enter. If the traditional terms in that market are NET 30 and you come in with NET 10, you will start behind the 8 ball.

And, of course, such things as freight policy (free shipping for a xxx order), product warranty and possibly offering a "guaranteed sale" program. Also what about a "stock adjustment program"? If it doesn't well you'll take back xx% once a year with an offsetting order, etc.

[granadaproducts]

Originally Posted by pete

YOU need to research your intended market category to see what is the "default" profit margin for that segment.

Pete, I've done a bit of searching for the "default" profit margin for my own segment, but haven't had any luck...yet.

Any leads on where I could look for office supply product margin??

Thanks...

[pete]

No idea. I would think the bookstores would want to at least "double up", also known as Keystone, which is sell for twice their cost. This gives them a 50% gross profit.

Keep in mind, some want that 50% to include shipping, so for a $ 2 retail item to be worth their while they would need to pay no more than $ 1 including incoming shipping.

This 50% is just a guess. Frankly, I'd jump in my car, drive to the closest college bookstore and show them the product and ask them about pricing. They may be able to get $ 3 for them, who knows?

I realize this is the day of the Internet, but a little face-to-face time might just be what you need. Particularly with "under $10" items, "perceived value" is a better test of price strategy than a simple formula.

[granadaproducts]

I'm with you on your thoughts. I have the product in a handful of stores now. The buyers/managers like the product and have priced them at resonable "student pricing."

I think they could get more for each piece, but a couple have stated they have a standard markup regardless of the product. So they take thier cost + x% = Retail Price to students.

I know that's not the case everywhere. Others have gone for the "perceived value" pricing.

Thanks Pete.

[Netrepreneur]

Hi there GranadaProducts,

I see you take internet orders via email. Have you thought about enabling your site take orders directly? I think it would raise your conversion rate quite a bit (that is if .05% of prospects email to order, you may get 1-2% of prospects to fill out your order form and place an order). It may seem cost prohibitive to you, but you can do it for a lot less time and money than you think.

This is an area I'm very good at (low cost ecommerce launches), so if you are interested, I can help you.

BTW, how many orders do you get a month from your site now?

Netrepreneur

[Easy Webster]

Normally companies want to purchase wholesale at 50 - 60% below the retail cost. Just a general guideline.

Teresa

[orion_joel]

although it is nice to be able to got 50-60% profit when selling retail there are some industries that this isnt really possible in and they are mainly the technology feilds, because there are so many businesses selling in this market and competing there are some that will always just slash the price and be willing to make very little but want to sell large volumes so it means everyone has to try and compete.

[zak]

50% is ideal, In our line of business (grocery) you have high profit items like soft drinks and candy where youl make your money.the low profit high volume items such as phone cards or fresh baked bread ( we buy at 75-80 cents to sell at a dollar) are necessary to bring your customer. The same for the distributors we buy from. (we are mostly international item grocery). each wholeseller has items that they might be the importer (his or her good price is passed on to the retailer who can get better profits), but they also have other items that they get very little (they are middle men) but are necessary to fill the orders (for the retailer).
as a rule whole sellers make little per item, but on the volume
I know this is trivial to most of you but there is always someone out there who is new to business and might find it helpful