Is Wholesaling the Same as Discounting?

Moving your business from retail to wholesale selling involves thinking a bit differently.

 

Selling to a Wholesale Customer

 

A craft artist recently asked, “How much do I need to discount my work to sell it wholesale?”

She was new to the concept of wholesale, and was under the impression that she needed to discount her retail prices to arrive at a wholesale price. This is a common mistake made when artists start looking at wholesaling their work as a potential source of revenue.

The concept of wholesaling as discounting is actually backwards thinking. Rather than looking at how much you can cut your price to afford to wholesale, take a look at building your collection (and your pricing) from the ground up.

How much does it cost to make what you make? Use our wholesale pricing formula to add your overhead and materials costs, labor and include your profit margin. Notice that the wholesale price includes your profit. It is a price that allows you to grow your small business and earn what you’re worth.

The wholesale price is marked up by the retailer. They will at least double your wholesale price (keystone) or add a bit more, to 2.3 or 2.5 or even 3.0 for some high-rent retailers. Is this fair? Certainly! Although you can suggest a retail price (MSRP) if you want to, the store owners know what they need to charge to keep their businesses thriving, and use their own formula to arrive at an appropriate retail price that includes their own profit. If your wholesale customers are selling your line, that means you are getting reorders from them, and you are both making money. It’s a win/win situation!

Think about your current retail prices. What you are charging right now is likely too low for your handmade work. Why? Think about it. How much will a necklace sell for at a street fair? What if that same necklace was shown in a fine craft gallery located in an affluent area? Would it sell for more? Of course.

You may be pricing your handmade work for the street fair (or for your Etsy shop) so as to compete with lower-priced exhibitors there. The perceived value is less at an outdoor craft fair event or an online shop, and so you charge less. And you make less.

Shoppers expect to pay higher prices when they walk into an upscale retail store. They are looking at beautiful handmade work presented in a very professional setting.

Does your own handmade line belong in this type of store? If so, start thinking about the true value of your art or craft to a collector. Entering the world of wholesale will likely put your collection in stores where retail prices for your work are greatly increased. Your job is to add as much value as possible to each piece, and use beautiful hangtags and other marketing materials that tell your story and appeal to shoppers.

If you are considering entering the world of wholesale, start by thinking about building a profitable collection, beautifully made and with added value. Then, price it profitably to sell in retail stores that are appropriate for your work.

 

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