Many members of the Pagan Business Network are artisans that hand craft their items. This includes oil blends, jewelry, herb blends, incense, flower essences, wall art, and a variety of other wonderful items too numerous to list. Many of us struggle with how to get our products out in front of enough people to make a living. One option available is to offer our products wholesale in hopes that other shop owners will purchase them and put them on their shelves or website. But this brings on a whole other set of variables that we need to consider.
Price – There is not a lot of margin between what an item costs us to make and the price most of us charge. Selling wholesale means that we have to cut our price so a retailer can resell it and make money while still offering it at a reasonable price for the customer.
Let’s examine that for a moment. First, we need to look at the cost of everything that goes into making an item. We are not going to talk about time involved here because the idea of wholesale is to sell more volume rather than higher margin.
Example item: bottle of tincture
In this example, I am using fictitious numbers that add up easily without too much thinking. So don’t expect that this is the actual cost of this product.
Ingredients: herb, grain alcohol
Supplies: cheesecloth or filter of some type
Packaging: bottle, dropper, label (don’t forget cost of ink), tamper proof seal
So let’s say that you spend $10 on an organic herb and can use it to end up producing 20 bottles. That brings the cost of herb per bottle to 50 cents.
Maybe your grain alcohol cost $30 a bottle and you can fill 60 bottles of tincture with that. That adds another 50 cents to your cost.
We will put the bottles at .25, droppers at .10 and labels at .05 plus .05 on ink and tamper proof seal at .05. These numbers are just for ease of the math.
So you now have $1.50 in actual hard cost in each bottle. If you retail your tincture at $10 a bottle, you would need to be able to offer it wholesale at $5.00 a bottle to give the retailer a decent keystone markup. Some retailers will purchase items at as little as a 40% discount from retail, but that doesn’t leave them a lot of room for profit when you look at shelf space and other costs of owning a shop.
In this scenario, you can easily sell this item wholesale and make money on the volume. This is where minimum orders come in. When you sell the bottle retail at $10, you make a profit of $8.50 per bottle. That may seem nice, but if you are only selling one bottle per week – well, not so much. One wholesale customer with a minimum of $100 order and you profit (even at $5 a bottle) by $70 on that minimum order. Now take those numbers out a bit. The one bottle a week with a higher profit margin over the course of a year shows $442 profit. If you were to market and sell one wholesale order (20 bottles) a week with a profit of $3.50 per bottle you would show a year profit of $3,640.
Now, those are not realistic numbers. There are some weeks with multiple sales, some customers that purchase more than one bottle. The key here is that you can do both. But you need to make sure that you are sourcing your supplies and keeping track of your costs in such a way that you are making profit from both customers.
Now that you’ve worked out your pricing so that you can offer reasonable prices to your retail customers and wholesale prices to other retailers, what other factors do you need to take care of?
Make it easy on your retailers to order from you. Have the products you are willing to sell at wholesale prices set up in a file or spot on your website that gives clear images, descriptions and wholesale cost and suggested retail. When asked if you will sell wholesale avoid answers like, “It depends on the cost of the product you are interested in.” Another way to do it would be to have a clear answer of, “Wholesale prices are the retail discounted by 50%” or whatever percent you offer.
My shop carries a variety of lines that are not my own. Those items I paid wholesale prices for so I cannot sell those wholesale. However, my own line is offered wholesale. So I make sure that everything that I am willing to offer wholesale can be pulled up on one page easily on my website.
Another variable that needs your consideration are the sales tax laws in your state. Do you need to keep a copy of a sales tax resale certificate from your wholesale customers? You need to look into that before getting heavily into selling items wholesale.
I hope this helps someone out there making the decision about whether or not they want to offer items wholesale.