Wholesale vs Retail

We often get approached by designers/makers saying that they would like to start selling their products to shops on a wholesale basis.  We do appreciate that this can be a difficult decision and often one that those new to the business don’t always understand the full implications of. 

Don’t worry we are here to help.

As with anything there are pros and cons and it is important to compare these in order to find out which is right for you. 

Choosing the right option can / will depend on the business, the designer and the manufacturing process but ultimately will come down as ever to costs and time.

Firstly – the Pros

If you choose to make the leap from retail to wholesale, it is important that you do the maths first carefully to ensure that you are earning enough profit to make it worth your while.

• Research the retail price of similar products and then work backwards.  Can you make and produce your item and still list it at a suitable wholesale price which allows the retailers to add their mark up?

Retailers (Shops) in general will normally add a 2.5% mark up to the wholesale price.  This allows the retailer to account for VAT whilst also adding the mark-up they need to also be profitable.

Pricing is critical, there is no point listing a product in your brochure with a Wholesale price of £10.00 and then allocating it a RRP (Recommended Retail Price) of £15.00 just because this is what similar products are selling for.  The real RRP would need to be £25.00 so it is important to be realistic when looking at pricing.

• Purchasing the components and materials required to make one product in larger quantities will bring the cost per unit down – so it is worth negotiating if possible, with the supplier of your component parts.
• Designing and manufacturing a single product can be more time consuming than creating and making lots of different products.
• Outsourcing the making of products in bulk can be more cost effective in the long run and therefore saving you time to design future products.
• Selling wholesale to a larger number of shops allows you to grow your brand recognition.
• Selling wholesale requires designers to make a much bigger financial commitment as they will have to hold a greater amount of stock than when selling to retail only.

The Cons …

• Managing stock levels can prove difficult as it is inevitable that one or two products will be always prove to be considerably more popular than others so it is really important to test the popularity of your products before committing to larger runs.
• Storing a larger number of products can also prove tricky so looking at alternative storage options may need to be taken into consideration, otherwise your house could quickly fill up with stock!
• Fulfilling larger orders can on occasions be a stressful task as there will be a gap between purchasing the materials, making the products, selling the products, and receiving payment. This can be one of the major sources of pressure for small businesses, so it is important to stay on top of your outstanding payments ensuring you chase any outstanding invoices as soon as they become overdue.
• When selling your product you will receive payment upfront rather than having to wait often up to 30 days or more for payment to be made.
• The mark up per unit will be more so you will receive more profit per unit.