Wholesale Pricing

[candicec003]

Hello fellow soapers! I'am happy to say my little soap business is growing to the point where I've started thinking wholesale. I've come up with a wholesale price, but now i'm wondering at what quantity of bars/bottles of soap should the wholesale price start? Any input or advice would be greatly appreciated! Thanks

 

[DeeAnna]

It depends on your business model and your clients.

Are you a tiny business trying to grow? Then your minimum should be fairly low. Are you an established business trying to attract larger clients? Then your minimum should be fairly high. You can always change this policy as you go, of course.

Some things to think about, assuming you're in the tiny business category --

You can set minimums on overall total price and/or on quantities of any given product. Or both.

Minimums should be high enough that you don't make the mistake of providing wholesale service and prices to what are essentially retail customers.

Minimums should be also high enough to encourage a wholesale customer to buy enough. You want your product display to make a meaningful presence in their shop. If you sell to small shops, the minimum will be lower. If you sell to large retailers, the minimum might be quite a bit larger.

Minimum prices/quantities should be low enough to encourage re-ordering from your (possibly equally tiny) shop owners.

Another tactic to consider is to adjust your overall pricing strategy so you can offer a discount for larger orders. This lets you make a little more on the small orders and encourages customers to buy a little more to earn that discount.

 

[shunt2011]

You said you started wholesale in a post from December. ^^^ This is excellent information. Cost will also depend on your specific area.

 

[madison]

Congratulations candicec, I wish you more success.
DeeAnna,
I am not in the field but out of curiosity I like to know the difference between essentially retail customers and wholesale customer, please.
Thank you​

 

[DeeAnna]

@madison --

I'm a manufacturer who sells at retail and at wholesale.

My wholesale customers are those who are buying products in order to resell to others. I wholesale to gift shops, arts and craft galleries, department stores, apple orchards, Christmas tree farms, etc. The margin between my wholesale cost and the prices at which they sell my products at retail is the money that pays to run their business -- salaries, rent, utilities, insurance, etc. and hopefully a little profit. My retail customers are people who buy my products and services for their own private use. Just regular private people who want to decorate their home, buy gifts, and the like.

So ... if you were a retail customer of mine, but thought you could find a way to buy my products at wholesale pricing, wouldn't you try? Even if your answer is "no," I guarantee many others would answer "yes" in a heartbeat. These "essentially retail" customers are ones who want to "game" the system.

One way to discourage the gamers is to set the minimum order cost and/or the minimum order quantity high enough so the typical retail customer has no incentive to buy. That's what I was talking about in my first post. Most people don't want to buy 6 of something in order to get one or two for their house decor.

Another way is to require the customer to provide a state sales tax ID or business ID, which one should do anyway so you can document you are a legitimate wholesale supplier and are selling to legit retailers. States want to collect their sales tax and income tax, and if they aren't getting their tax income from you, they want to know who they should collect it from.

 

[madison]

@madison --

I'm a manufacturer who sells at retail and at wholesale.

My wholesale customers are those who are buying products in order to resell to others. I wholesale to gift shops, arts and craft galleries, department stores, apple orchards, Christmas tree farms, etc. The margin between my wholesale cost and the prices at which they sell my products at retail is the money that pays to run their business -- salaries, rent, utilities, insurance, etc. and hopefully a little profit. My retail customers are people who buy my products and services for their own private use. Just regular private people who want to decorate their home, buy gifts, and the like.

So ... if you were a retail customer of mine, but thought you could find a way to buy my products at wholesale pricing, wouldn't you try? Even if your answer is "no," I guarantee many others would answer "yes" in a heartbeat. These "essentially retail" customers are ones who want to "game" the system.

One way to discourage the gamers is to set the minimum order cost and/or the minimum order quantity high enough so the typical retail customer has no incentive to buy. That's what I was talking about in my first post. Most people don't want to buy 6 of something in order to get one or two for their house decor.

Another way is to require the customer to provide a state sales tax ID or business ID, which one should do anyway so you can document you are a legitimate wholesale supplier and are selling to legit retailers. States want to collect their sales tax and income tax, and if they aren't getting their tax income from you, they want to know who they should collect it from.

Nice explanation, got it, thanks DeeAnna.

 

[Lin19687]

Ha I like that essentially retail people explanation !.

Had someone at my last show look at one soap, I don't even think she smelled it, and asked if I wholesale. I said no.

 

[amd]

Why no? If you're not ready I guess that's one thing, but I would have found out how much 'wholesale' she really needs. Sometimes small boutiques only need/want quantities under 100, which is fairly do-able for small businesses.

 

[shunt2011]

I got a wholesale account at a small boutique the same way. Smelled my soap at a show. Unfortunately, the boutique only lasted a year. In a small town. She took 50 bars. I delivered them the next week.

 

[DeeAnna]

Wholesale can certainly add to the bottom line, but it isn't necessary to do wholesale to have a viable business. It's just a different way of doing business that works for some and doesn't work for others.

There's more work involved when selling at retail -- more time spent on customer service, more but smaller orders to prep and deliver, the need for a retail presence (shows, a shop), etc. -- but there is also more economic return per sale. There is (or at least should be) less work for wholesale -- fewer but larger orders to prep, often less time spent on ongoing customer service, and less or no need for a shop that's open to the public or for vending at shows -- but you need to sell more at wholesale to get the same amount of money in your pocket.

Like I said before, I manufacture and do retail and wholesale sales, so I get to see both sides of this situation. What my retail customers want is often quite different than what sells well to my wholesale customers. I've learned (the hard way) that I can't assume what sells well to one will be also popular with the other.

Most wholesale customers (shop owners) are looking for the most bang for their buck. They don't manufacture, so they have to be reasonably certain that what they buy from you is something they can actually sell in a reasonable time. Most tend to look for less expensive items with good eye appeal -- they are looking for items that will sell fairly quickly, keep their cash flow flowing, strongly appeal to their customer base, and get a reasonable return on their investment. They might focus, for example, on bar soap and lip balms that are inexpensive and look sharp and largely ignore more expensive items such as lotions and liquid soap. That's not to say all wholesale customers are like that, but many are.

If your heart's desire is to produce one-of-a-kind or artisan items, the usual wholesale business with the usual wholesale customers (as I've just described) will probably not be a good fit. Cultivating higher-end retail customers and perhaps a few select wholesale clients might be a better way to go. You'll have fewer sales but (hopefully) make more per sale.

 

[I_like_melts]

I do wholesale pricing for collaboration projects. My minimum would be 10 items/sets if they are large enough, but it depends on whatever would ensure that I cover expenses and made some profit. (For example, if 10 melts were 1 oz each, giving a discount would likely mean a loss after I buy the fragrance, mold, or whatever supplies I needed, 10 melts at 5 oz would likely be worth giving a discount for, especially if I gained a lot of exposure) I'm very small, but I would think that could be applied on a larger scale.