Wholesale Pricing?

[Kcinnick]

I am looking to put my products in two shops in the area, one in each of the two largest cities in our state. Well, one wants to do consignment, the other hasn't mentioned either way, he just wants me to bring him some items to look at so he can carry local. They both have the basic made in Mexico leather "Goods" in their shops, but nothing custom or local. I looked around and it seems the normal percentage for wholesale is 50%. I can't work for 50%, I was thinking more like wholesale pricing being 75% of retail, with a fixed retail between dealers and my website (To be up shortly). If they want consignment terms the belts will have to be behind the counter and I would provide a try on belt (I will provide a try on belt either way) and offer a 12.5% commission. I also planned on offering a 12.5% commission on custom orders generated from the shops. Does this seem like unreasonable terms. I don't really need to sell out of either shop, but wouldn't mind expanding and I can still be profitable selling at 75% of retail, but 50% of retail would have me working for pennies, I would rather sell 1/2 as much stuff and make the same money. I am pricing my belts between $75-$100 for Hermann Oak Double layer gun belts, $75 being made with drum dyed black leather, $100 would be an aged finish I do with a charge for the belt being over 50". I would also have some holsters and mag pouches on display and take special orders and offer the same 12.5% commission for custom orders.

If 50% is the norm I will stick to word of mouth and creating a website.

[bruce johnson]

Nick,

Been there/done that. I did it on a small scale for some people, but a big scale for me at the time.

Yes, doubling the whloesale for retaill pricing is a pretty common rule of business. On some things, the retailer can go even higher. They have overhead to consider and other costs the guy who works for himself with no retail location deals with in their defense. The reason you see a lot of lower end or foreign made things in these shops is that nobody working for themself can match the wholesale price without using cheap materials or talking a cut in labor. Don't cut yourself short. I did work for a few resellers, and here are a few things off the top of my head.

I used to figure my prices to them at cost of materials + waste factor + accounting for incidentals like thread, small hardware, finishes, oils, etc. and added a markup percentage. Then I added on the labor. At that time I decided I could do the labor for $10 less/hr. for the wholesale. A few things to the positive side. I had a lot of cash flow, which I needed. I made things they ordered that I probably would not have tried otherwise, and with that side of the business gone - still make pretty often. I learned how to batch and work efficiently.

On the downside. They have "need to have deadlines" usually and that can interfere with your other orders and personal life if you let it. If you are working on wholesale for less, it grinds on you to look at the order board and see other things sitting that will pay more. It can be tedious to make 60 of the same thing for an order. If they can find another source cheaper, you are out. What do you do when a customer finds out who is making this stuff and then calls you directly? Do you take the high road and kick some back to the retailer for being "their customer" or just take on the customer yourself? Even with a shop's stamp on something and not yours, customers can find out who actually made it. Sometimes they are wanting a better deal than the shop charges, and sometimes they just don't want to go through a "middleman" when they can buy from the source. What do you do when one retailer decides that your stuff might sell for more than you are asking? That is a sure fire way for customers to call you directly.

Consignment - The rates are less that sellign wholesale because the seller doesn't have anything invested in it. I did a little of that too. First one was a trainwreck. Stolen examples (maybe were sold), shopworn and need replacement, use your examples as high end to steer customers to things they sell cheaper but make more margin on - "You could pay $300 for this, but we have this for $220 that is pretty good too". I did do consignment with one seller that worked out well. He sets up at a really good trade show. I sent him stuff that fit the preChristmas market and it sold that week. It wasn't anything that competed with other things he was selling.

That's a little I can think of right now,

Bruce

[Kcinnick]

Well,

I shoot with these guys, at comps and get together's. I know one personally very well, he is a stand up guy, and if I got a special order from him I would give him the kick back. The deal is I am still selling locally, but I want to fix the price structure so we are selling at the same price. I already have plenty of loyal customers, but some people contact me and they want a belt today, and I just can't provide that kind of service. I don't do anything fancy, just your basic double layer gun belt, with high quality hermann oak leather with nice buckles. I am just getting into selling holsters and mag pouches, but I have gotten pretty good at making belts in batches. I can have as many as 30 going at one time at one of my 3 stages, I could probably go more but never had the need to. I have a dye station in my sun room where I dip dye everything but black (I use drum dyed HO), a glue and sewing/edging area, and then a finishing table (Kitchen table)....

Is 25% off really not enough to discount for wholesale? I know the margins on some of the products I plan to sell other than leather I make, and I can assure you none of them are 100% mark up.

Nick,

Been there/done that. I did it on a small scale for some people, but a big scale for me at the time.

Yes, doubling the whloesale for retaill pricing is a pretty common rule of business. On some things, the retailer can go even higher. They have overhead to consider and other costs the guy who works for himself with no retail location deals with in their defense. The reason you see a lot of lower end or foreign made things in these shops is that nobody working for themself can match the wholesale price without using cheap materials or talking a cut in labor. Don't cut yourself short. I did work for a few resellers, and here are a few things off the top of my head.

I used to figure my prices to them at cost of materials + waste factor + accounting for incidentals like thread, small hardware, finishes, oils, etc. and added a markup percentage. Then I added on the labor. At that time I decided I could do the labor for $10 less/hr. for the wholesale. A few things to the positive side. I had a lot of cash flow, which I needed. I made things they ordered that I probably would not have tried otherwise, and with that side of the business gone - still make pretty often. I learned how to batch and work efficiently.

On the downside. They have "need to have deadlines" usually and that can interfere with your other orders and personal life if you let it. If you are working on wholesale for less, it grinds on you to look at the order board and see other things sitting that will pay more. It can be tedious to make 60 of the same thing for an order. If they can find another source cheaper, you are out. What do you do when a customer finds out who is making this stuff and then calls you directly? Do you take the high road and kick some back to the retailer for being "their customer" or just take on the customer yourself? Even with a shop's stamp on something and not yours, customers can find out who actually made it. Sometimes they are wanting a better deal than the shop charges, and sometimes they just don't want to go through a "middleman" when they can buy from the source. What do you do when one retailer decides that your stuff might sell for more than you are asking? That is a sure fire way for customers to call you directly.

Consignment - The rates are less that sellign wholesale because the seller doesn't have anything invested in it. I did a little of that too. First one was a trainwreck. Stolen examples (maybe were sold), shopworn and need replacement, use your examples as high end to steer customers to things they sell cheaper but make more margin on - "You could pay $300 for this, but we have this for $220 that is pretty good too". I did do consignment with one seller that worked out well. He sets up at a really good trade show. I sent him stuff that fit the preChristmas market and it sold that week. It wasn't anything that competed with other things he was selling.

That's a little I can think of right now,

Bruce

[bruce johnson]

Nick, If they are friends and good with making 25%, that's a different story. That doubling the wholesale cost to determine retail is called keystoning and a pretty ingrained formula for a lot of retail pricing. It all depends on the overhead costsand profit expectations of the business how much money they need to make.

[Kcinnick]

I guess that is more of a specialty shop formula, because every retail environment I ever worked in the margin was in the 30% range for general merchandise, that is for a broad array of items, not just leather goods. These are gun shops, not leather shops or general stores. 25 % off retail is a 34% margin, if that is not reasonable, I think I am going to stay with the sell it myself route.