Recently I was approached by my EtsyKids Team to write a "knowledge sharing" article. The article could be about anything I thought I could share with the team that would be informative. Since Baby Chick Designs has been selling our designs wholesale to retailers, I thought this would be a great subject. Kind of a "How to..." article to help sellers hit the ground running. Below is the article. Hope this helps some of you venturing out into the wholesale world!
How Do I Sell My Products Wholesale to Retailers?
Have you ever been approached about selling your products wholesale? Many Etsy sellers have never thought about doing it or have thought about it, but have no idea where to start! Most Etsy sellers migrated to Etsy because they wanted an online venue to sell their handmade items...and didn't think about selling them in stores or have a business model set up for selling to stores. My company, Baby Chick Designs was started by myself and my very talented artist mother. When we started it, we wanted to sell our products both online and in stores. So, I've done a lot of research on the subject and have been successful in getting our products in stores. The information below is by no means the exact right way to go about it, and I am still fine tuning my sales approach...but hopefully it will help get you started in the right direction, or in the least, help you to determine if selling your products wholesale is for you.
What types of stores do I approach?
This depends on what you sell and who your target customer is. For example, we sell art for kids rooms. Our artwork designs are high quality giclee reproductions of original artwork. We sell canvas wraps, fine art prints, personalized growth charts, and kids placemats. Most of our artwork is in the $50-$100 range, so I had to look for stores that carry that price point for kids artwork. (In other words, Wal-mart was out of the question.) So, I focused on high-end baby boutiques that carry artwork, nursery furniture, layette, etc. You will find this out quite easily when you start to approach stores, the ones that buy your products will be able to sell them, the ones that don't buy it we feel like they can't sell it. It might be hit or miss until you figure out your target customer and type of store that is best for your products.
How do I price my products for wholesale?
This is the million dollar question that most Etsy sellers struggle with. They price their items for Etsy...and that works well for them. But when they go to sell their products wholesale, having to cut their prices in half makes them too low and doesn't allow for much profit. Here's what I suggest if you are an Etsy seller who is running into this problem. (1) Re-evaluate your Etsy prices. See what the competition is doing, however pay MORE attention to what similar products are selling for in the actual retail stores. Then, determine if you can raise your prices on Etsy without risking a drop in sales? If not, you can (2) Look at your
entire stock or product line and determine if you can offer a particular product line specifically for retailers, maybe a more high-end product that will sell nicely in the stores for more money. That way, you don't have to adjust your Etsy prices. Check with the retail stores that you would like to sell your wares in, to see what the price ranges are for your type of product. For example, Baby Chick Designs only sells our fine art prints (which are a lower price point) on Etsy. We don't sell them to the stores because we wouldn't make any money. We sell more of our gallery canvas wraps and personalized growth charts in stores. I did a lot of research before finally deciding on our prices for these product lines, but visiting the stores and seeing the in-store prices.
Then, when you decide on your product line for wholesale, do some competitive analysis. Go to the stores, see what prices similar products are selling for. Then, start with that price. Let's say you sell jewelry. You want to sell a certain product line that you think should sell for $100 in stores (and you've done your research and competitors are selling in the same range.) So $100 is your suggested retail price, then half it, so $50 is your "wholesale price." Then subtract the cost of making the product, labor involved, and your fixed expenses...let's say $20. Then you are left with $30, your profit. If this is acceptable to you, then you have your wholesale price and suggested retail price. Some sellers use the (x4) formula. Taking the cost of your product and times it by 4. This would be your suggested retail price. Half of it would be your wholesale price. Remember to figure in your actual cost of materials to make the product, time/labor involved in making your product, your fixed expenses...and then you should add in your profit margin...and then double THAT, to get to your retail price.
Is working with e-tailers or online retailers the same procedure for wholesale?
In my mind, the answer is no. Online retailers are typically re-sellers. They are purchasing items from manufacturers, like yourself, and re-selling them off their website. Similar to a brick and mortar store, but there are differences. Most online retailers are NOT going to buy products in bulk order from you. They don’t have a store front to hold your products. Instead, they will ask you for product photos, product descriptions, and a price list, and upload that on to their site. When someone orders your product, the online retailers will email you the order and you will be expected to fulfill the order, meaning making the product, packaging, and shipping it straight to the end customer. This is called "drop shipping." So, I consider most online retailers to be "drop shipping" accounts, not "wholesale accounts." However, you should always ask before sending your Price List. Some online retailers may own a physical store, and may buy a bulk wholesale order.
My pricing is different for drop shipping, because I am doing a lot more of the work in terms of packaging and shipping. Instead of a 50%-50% split agreement for wholesale accounts, I might do a 60%-40% or even a 70%-30% agreement, where I make back 60%-70% of the retail price. It will have to be up to your discretion based on the size of the retailer, if you feel you will get a lot of business from them, etc. I have a separate Price List for drop shipping and I email this list after I discern that I'm dealing with an online retailer/drop shipping account. Remember, the only reason you are providing discounted "wholesale" pricing is because a store is buying in bulk, making it worth your while to drop your prices. A drop shipping agreement is not doing this.
Should I do "consignment" agreements?
Consignment agreements are when a store will agree to sell your product, but you make money at the end of the sale, when the product has sold. Generally, you sign an agreement on the amount you will make on it, or percentage. I personally have not had a lot of experience with consignment shops or agreements. I've done one or two in the past, and didn't make any sales. Some stores will offer to do a consignment agreement to see if the product will sell, maybe because that haven't offered that type of product before, and are unsure if it will sell in their store. So, if you really like the store, the owner, and they are giving you a good consignment agreement, than it might be worth a try for the first couple of sales. Then, you can move to a "wholesale" agreement after you've proven that your product sells in their store. Or, as a recent seller pointed out to me, consignment agreements can be a great way to introduce new products or new designs into the market to see which ones are most popular, etc. She has had a lot of success and good relationships with consignment agreements/shops. So, if you are happy with your consignment agreement and the percentage you are making on the sale, then great!
What materials will I need to sell my products wholesale?
- Wholesale catalog or catalog list with all of your products (with photos of them and product titles and product codes.) You can make up the product codes yourself to use as a reference for your accounting and for the stores to use when ordering. This is not a UPC. Most stores will not require a UPC code. Tip: Do NOT include the wholesale prices in your catalog. This is for the Price List only. The reason for this is that you might need to update or change your prices at times, and you don't want to have to re-design a whole new catalog. Also, retailers will use your Wholesale Catalog in their store to show customers additional items that you sell that they don’t have in the store, so you don't want the end customers to see your wholesale prices. Make an electronic version of your Wholesale Catalog in .pdf form so it can be emailed to retailers in addition to giving it to stores in person.
- Wholesale Conditions and Sales Terms - This can be added to the last page of your Wholesale Catalog. It can include the following: Order Minimums such as Minimum Opening Order (either a flat rate amount like $200 or can be a minimum number of items, like a pack of 6 onesies.) Minimum Re-Order (this is usually less than the opening order.) Terms and Payment (What type of payment you accept such as credit cards/checks/Net 30 days, 60 days or 90 days; when payment is due.) Shipping and Delivery (time it takes to ship the product to them and shipping companies used UPS, FedEx, etc.) Return Policy (be specific here so there is no confusion.) Pricing information (might include your right to change your prices at any time, any special pricing for personalized items or different sizes/colors, etc.)NOTE: if you are accepting 30-60-90 day payment terms, make sure you have that amount of money in your account for either 30-60-90 days to cover your other expenses.
- Price List (include product category, product name, product code, size, color, wholesale price, and suggested retail price.) Include any other variables that the stores might need to know. This can be an Excel spreadsheet that you update when needed and make an electronic .pdf version so it can be emailed to stores along with your Wholesale Catalog.
- Samples of your products. Choose your most popular products and a good variety of products from your shop. Take as many as you can when showing them to the stores, without looking like you are carrying in your entire line. Make sure you take variations, for example, most of our work can be personalized, so I always make sure I have personalized samples to show. Let the buyer/owner choose what they want. You can make recommendations, but don’t assume you know what sells unless they ask your opinion. Store owners and buyer usually know what will sell best in their store.
- Order form. You should be ready with an order form that you will fill out in front of the retailer. It should have store name, address, contact person (buyer), phone, email, space for their credit card number, what they are purchasing, number of each item, any color/size variations, etc. You don't want to have to leave without getting all the information needed for the order. I only accept credit cards and checks. I don't usually accept COD (charge on delivery) unless it's a major retailer. However, most retailers will not want you to process the credit card until the day you ship the order. So, get the credit card number the day of the order, hold it, and then process it the day of shipping. Tell them this is what you do. Email them a receipt and include a packaging slip in the box that states what is included in the box. Be careful not to write the credit card number on the receipt (except for the last 4 digits) because of possible credit card fraud.
- Website. You should have a working website that shows all of your products in case you are selling over the phone and the retailer wants to quickly see your product line. Have a Wholesale webpage with a form where retailers can request your catalog and price list. Then, you can email them the Wholesale Catalog and Price List if they are interested. Remember to inquire if this is an online retailer/drop shipping account or a regular Wholesale account. Usually you can tell from looking at their website. If you can upload the Wholesale Catalog to your website, that's even better. But never include the Price List online, because again, you don't want end customers seeing wholesale prices. And, you will want to have different e-tailers drop shipping prices vs. brick and mortar wholesale prices, so it's better not to show prices online for retailers.
How do I sell and market to retailers/get new Wholesale Accounts?
There is no easy answer for this. I will list a number of things I do to get new accounts and it may take some trial and error to find the right formula for your business.
Direct Store Sales & Communication:
This is usually the first step a company takes when starting to venture into the Wholesale market. It's the least expensive route to take but can be a lot of work for one person. However, it's the best way to learn how to sell your products and find out what works and what doesn't work. Once you’ve had success with local stores in your area, you can entertain the idea of some more expensive and hopefully profitable selling approaches like trade shows and professional sales reps/showrooms.
- Call the stores to make an appointment. Be confident! Try not to be nervous. Practice your speech before calling or visiting a store. For example, "Hi, this is Debbie at Baby Chick Designs, we sell art for kids rooms. I wanted to find out your buyer's name so I can send them our Wholesale Catalog and Price List. What is the best way to reach them?" If you happen to get the owner or buyer on the phone, ask them right then if you can make an appointment to come show them your products in person. Keep your introductions short and sweet on the phone.
- Visit the stores - do a walk-in to see if you can catch the owner/buyer, have your samples/catalog ready, if they are not there, find out the buyer's name, phone and email, and call them later to set up an appointment. If they are there, apologize that you did not make an appointment and "feel them out" to see if they have time to talk to you. If not, try to schedule another time when you can come back.
- Email the stores your new collections, specials, etc. Using an email marketing software like Constant Contact is a great way to make your emails look professional.
- "Like" the stores on Facebook and periodically write on their wall or Twitter account
- Print advertising and website/blog advertising – look into the various trade publications that the stores you wish to have accounts with might subscribe to. You can periodically purchase advertising on these publications and websites/blogs and see if that yields any wholesale accounts.
Trade Shows and Markets:
Research the different trade shows that retailers attend. Which one would be right for you? There are some huge market trade shows in NYC, Dallas, California, and Atlanta that thousands of retailers attend. Each has different product categories. Most have "temporary booths" that you can buy for one or more shows. These usually range in the $1,000-$2,000 range for a temporary booth but you will be exposed to hundreds or more retailers at one time looking to see what the new products are for the year. You can also try to get your products into a "permanent show room" that will show your products year round. This involves an annual fee for the showroom and a percentage of each sale, typically 15%. You will have to review your wholesale pricing again to accomodate the 15% going to the sale rep. We did this one year at the Dallas Market Center. We had some success, but it was not worth the showroom fee because we felt that the sale representatives didn't do a great job of selling our products. We are looking into attending a more category specific trade show like the ABC Kids Show where we would have our own booth and sell our products directly to retailers attending, who would be specifically buying in the kids/nursery category.
Employ a Sales Rep:
You can hire a sale rep for your product line that will call on and travel to stores to sell your products. You can either pay them a salary to represent only your company or try to find one that represents several product lines and pay them a percentage of the sale, like 15%. Most sales reps work for permanent show rooms, and this usually involves an annual fee, plus a percentage of each sale, so make sure you review the fine print on the contract if you go this route.
One last tip: If a retailer asks for exclusivity in selling your products, think about this very carefully. Selling is a numbers game. I have never had this happen, except when there two stores located on the same street. I will honor the rule that I will not sell to another store within a mile or so of their store. Or, that I will at least not sell the same products to both stores. Only offer this information if someone asks. Usually they do not ask. NOTE: If you are employing a sales rep group, showroom or not, they will ask for exclusivity within the territories they cover, which is acceptable. That is very different from a retailer asking for exclusivity.
And finally, one great perk to selling your products to stores is that once you make some retail relationships, you might pick up some great ideas for new products. Some of our wholesale accounts give great constructive criticism and tell me what’s “hot” in the market, what’s selling, and what’s needed in the marketplace. Many of our new products have materialized specifically from a request or custom order from one of our wholesale accounts.
I hope this information helps you if you are venturing out into the Wholesale Market. Remember, start small, continue to learn, be prepared with your materials, and be confident...usually your products will sell themselves!
Owner & Sales/Marketing Manager
Baby Chick Designs, Art for Little Ones