Thursday, August 14, 2008

Wholesale 411

At some point you will, or have already been, contacted by some swanky little boutique who wants to buy your goods wholesale. When you wholesale, it typically means that you sell your products at “keystone”, or 50% of the retail price. For many of us who sell our handmade treasures on Etsy (or other venues), wholesaling our pieces for 50% the retail value is not something that we could pull off – in fact, for some of us, that would be giving our pieces away since it wouldn’t even make up for the cost of the materials. So, where does the problem lie, exactly? Is it that we do not price our products correctly? Is it that we have adapted our prices to what the Etsy market will bear (which I truly believe is different from the “real world” market)? I have seen many a forum discussion on the topic of pricing. A few Etsians have devised clever spreadsheets to help calculate our costs and how we should be pricing our goods. The basic formula of figuring out pricing goes something like this (don’t mean to give you horrible algebra flashbacks, so brace yourself):
- Figure out how much you want to pay yourself an hour. I know this is kind of a strange concept for so many of us, since many consider the wares they have on Etsy more of a creative outlet than a small business, but really, if you have any thoughts at all that you *might* want to sell wholesale one day, you should start making a very real effort to train your mind to think this way. We are going to say, that you want to pay yourself $10/hr.
- Then you figure out how many of one item – say a bracelet – you can make in an hour. In our example, we are going to say you can make 2 bracelets in one hour.
- Divide the hourly wage by the number of items you can make in an hour: $10/2 = $5. So your labor for that one bracelet is $5.00
- Add your labor with the cost of materials. We’ll say our material cost is $3.
- Our cost for the bracelet is $5 labor + $3 materials = $8
- To figure out your wholesale cost – take your cost ($8) and multiply it by 2 : $8 x 2 = $16 this gives you your wholesale cost.
- Multiply your wholesale cost by 2 - $16 x 2 = $32 this is your retail cost.
Yup, that’s right. How many of us do this? I believe there are two schools of thought on this, specific to Etsy sales: On one hand, I think that for those who are using Etsy as purely a creative outlet and making a profit isn’t an issue – you basically just want to sell your products to pay for your supplies and maybe a bit extra - then wholesaling, in the true sense, isn’t for you. BUT, I don’t see anything wrong with telling a potential wholesale buyer that you are willing to take a buck or two off each item – or offer free shipping.
For those who have used the formula, you know that you are still making a profit. In either case, a minimum purchase from the buyer should be stated (say, a minimum opening order of $100 and then repeat orders can be $50). It makes it more profitable for you, it gets you more exposure, and it, hopefully, moves some product from your shop so you can bring in fresh designs.
Lucky for us, we’re selling our pieces on a very progressive, autonomous community. You do not have to do what is ‘standard’ or expected. You can tell your potential buyer exactly how you would like your wholesale business to be handled. And that’s the Wholesale 411.


Cathe said...

Wow, thanks for doing them math. I'm going to bookmark this!

Your blog is great.

skinner studio said...

Thank you so much! This morning I received just such a wholesale offer through my shop and was wondering how to respond. Then, within 5 minutes I stumbled on your blog and voila! Help at the right time. Thank you for providing such helpful information that others can use. It is another reason the etsy community is so fabulous!!

Carol said...

An absolutely fantastic blog subject. People do not understand how low Etsy prices are. And like you said, some people are making things as "a creative outlet". They undercut prices and hurt the population there as a whole. Thank you for this!!


Shauna said...

great post, and beautiful blog! Thank you for sharing, it helped!