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Working With Retailers: Lessons Learned

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Earlier this year, I was approached by a retailer who asked to feature my leatherwork in his shop. The retailer owns a well-known, independent gallery representing other area artisans. It's also located in a high-traffic shopping district. It sounded like a good opportunity and I agreed.

After a few months, a change in the retailer's business model ended our partnership. But I certainly feel I learned a few lessons that I'll share here in case anyone else considers going down the "retail path."

Lesson #1: Retailers take a big cut of the sales price.

Retailers generally take a 40-50% cut of an item's sales price. This means you need to price your items accordingly. If adding 50% to the price of your goods is not feasible, then retail is probably not right for you. Also, keep in mind that your pricing must be consistent. You can't sell a belt at your retailer for $90, but charge $45 on Etsy. The customers will figure out the cheapest place to acquire your goods, and your retail relationship will come to a swift and inglorious end.

Lesson #2: You should get a big benefit in exchange.

Why do retailers take 50%? Because they're supposed to be providing value to your business. This value comes in the form of enhanced exposure, access to the business's clientele, joint marketing, and the value inherent in not having to file state sales tax returns, process shipping or provide in-person customer service. Now, 50% is a huge cut, so the retailer should be providing all of the above -- meaning, significant value to you. They should promote your goods via Facebook, broadcast email and other means.

Lesson #3: Be picky.

You don't necessarily need to partner with the first retailer that expresses an interest in you. Be selective. Visit the shop and look around. Would you shop there? More importantly, does the business cater to your target market? In my case, the retailer seemed to be a good fit for high-end leather accessories. They also featured jewelry and vintage home decor. But if I were selling holsters, I'd definitely find someplace else.

Lesson #4: Build your inventory.

Be prepared to meet demand for inventory, plus refresh your stock every 90 days. Your goal should be to establish a significant presence in your retailer's business. This means featuring a good selection of leatherwork. Different colors. Different price points. As an initial delivery, I provided 17 items. I've been told by other gallery owners that you should change out your stock every 60-90 days to ensure folks continue to see new stuff, whether it's selling or not.

I hope this information helps anyone else who considers venturing into retail. I might also recommend the book, Craft Inc. by Meg Mateo Ilasco, which gave me plenty of initial pointers on working with retailers.

Best, -Alex

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Good info -thanks

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Very good info!

My wife is an artist and we deal with several galleries, both in and out of state and you hit the key points to watch out for right on the head. There are just as many bad galleries out there as there are good. The average take by galleries ranges from 30%-50% and seems to depend on where they are located.

If you go down the retail road be sure to keep tabs on what the gallery is doing to promote your work. I have encountered several occasions where the advertising and promotion was exceptional in the beginning, but stopped as soon as the gallery signed on another new artist. How well your product is marketed is directly reflected in your sales. If the sales drop suddenly odds are so did the marketing effort!

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good points ABN. I have my things on Etsy and in a couple of local shops and I just went to a craft market. Price is the same everywhere. Only makes sense even though I'll make more on etsy if they sell. These are good tips. Cheryl

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I've had similar situations with my holsters & belts. My belts are being sold at 4 of the 6 gun shops in and around Eugene, Oregon. I wholesale them at $25 for a double layer belt, roller buckle - for shooting. A couple of the stores resell them at $35, while another sells for $49.95. These shops also refer my holster work to gun buyers. I sell my belts through my leather shop to holster clients for $45 - and always tell them where they can buy them for less. They typically want to purchase directly from me at my price, as I made the holster.

One sporting goods shop offered me an end aisle for my holsters, saying he was going to let me in on the ground floor. Problem was I sell my holsters for around $80 and would need that much from him so he could tack on his profit. This would set me so high he'd never sell a piece! Then there were other issues. I had a strong feeling one counter guy would never tell his customers about my products. I've also never rec'd a referral from them. All flags and I decided to not engage. I'd also learned about another maker who had around $800 worth of holsters in this shop and never really got anything going. Lots of inventory, no movement. This goes directly to your comment Ambassador of the shop needing to take ownership and interest in getting your things moving.

To align with another of your tips, I was not as picky at first going into this. I should have looked over the stock and got an idea how long things had been sitting around.

And finally, building inventory while having customers come into my shop is difficult. Plus I'm sure this guy really wanted to go consignment in the end anyway. Too many hassles and life is too short.

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A few comments about the Volume of sales:

1.

Know your limitations as far as volume goes. I once had a major retailer ask me if I could do a line for them, but they were talking 50,000 handbags . Even though we do a sizable volume- there's just no way to scale up like that. If we even had tried we'd have had to abandon all our old wholesale accounts....and if they canceled in a year or two, where would be be?

2.

Another thing to realize with volume is that "economy of scale" doesn't always apply with leather work- For example if a customer wants 500 pouches all in the same color, I can find a batch of scrap or a few hides that I've gotten a good deal on and sell for one price. But, if a customer asked me to do 10,000 all the same color/same leather, we'd have to go about buying hides and the price per piece would be substantially more. It's entirely possible that 500 pouches would be substantially less per pouch than 10,000....

Just my 2 cents after doing this for a while...

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What companies are able to make 50,000 of the same product? Where are they located and what machines do they use?

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It depends on the product, simple pouches or bracelets, we can handle a number like 50K, but for handbags or wallets you'd be hard pressed to find a US company able to do that many in a reasonable amount of time.  There are factories in countries like India or Pakistan who can do those numbers.

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On ‎4‎/‎5‎/‎2017 at 7:37 PM, mappy306 said:

What companies are able to make 50,000 of the same product? Where are they located and what machines do they use?

John Bianchi created Bianchi International while working as a police officer, doing holsters on the kitchen table during his spare time. When he retired and sold the business it is estimated that total production had exceeded 40,000,000 items, and during the same time period Bianchi served as a US Air Force National Guard officer, retiring as a brigadier general.

It is ALL ABOUT MARKETING, establishing your market niche, and filling that niche better than anyone else. Product design and quality are obviously top priorities, but without marketing to the likely customer you are spitting into the wind.

Just my $0.02 worth, as a retired holster maker with a very comfortable investment portfolio.

Best regards.

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I've done wholesale business for over twenty years, across Canada, the US and into Europe and Australia.  The first thing is to make sure your pricing works for you and your customer.  For the first fifteen years or so, we didn't sell direct to endusers at all, because we didn't want to undercut our stores.  So you have to price your items out for wholesale, recognising that the store will typically charge double what they paid, and sometimes more.  The markup is all about overhead and profit, paying rent, and paying staff.  Most stores will not feel they should be provinding you any value beyond buying your stuff to resell, and they will only do that if they feel like they can mark it up high enough, and sell it often enough.  . 

Don't underestimate low end when working with retailers   We started out making only high end goods.  Problem was, they take a long time to produce.  They're expensive, so they take a long time to sell.  Each inch of wall space is valuable real estate to a store owner; it all has to produce.  If the section of wall with your gear on it isn't turning over fast enough, they'll stop buying it.  Early in our history, we bought a clicker press and had a lot of custom dies made.  That allowed us to make a pile of lower end products more quickly, and was ultimately what made our business viable.  We kept our high end whips to impress the customers, which they did, following which the vast majority of sales were the lower end goods.  Ironically, they were also our higher margin items.

A good formula for pricing out work to sell wholesale is to take your material costs and triple them.  Include everything, glue, thread, dyes, packaging. everything. Figure out what you want to make on an hourly basis, and factor that in, too.  Don't underestimate your time; this is how many hobby crafters underprice themselves and find themselves essentially working for nothing.  Include time spent researching, ordering and receiving materials.  Add on a percentage for overhead.  How much does it cost you to keep the lights on?  Do you have professional fees associated with your business?  Do you offer your wholesale customers free shipping?  All that eats into your margins. Build a little into each product you sell.  

Understand margin.  Margin is not mark up.  It's the percentage of each dollar in sales that is profit.  To calculate your margins take the selling price, subtract your total input costs, including overhead etc, and divide that number by the selling price.  Eg. selling price is $85.  Your total input costs are $20.  85 minus 20 is 65.  $65 divided by $85 is 0.7647, or 76.5%.  You should try and keep the margins comparable across your product line; it's super helpful.  Keep them as high as possible.  If necessary massage your selling price to keep your margin up.  We found that it was not worth while to sell products with a margin of less than 50%. And somehow, those seem to be the ones that shop owners buy the most!   Knowing your margin can help you plan your business.  Say your total monthly over head is $3500, and your products have an average margin of 76.5%.  Divide your overhead by your margin to get your break even point.  $3500/76.5% means you need to sell $4575 worth of goods to break even.  Less than that, and you are paying for your business.  More than that, and your business is paying you.

Getting paid is important.  I don't like consignment.  In our case we had to chase retailers, and there was no guarantee anything would sell.  Hard to plan a business like that.  So we decided early on, no consignment.  Like countyholster said, life's too short. Do be picky about who you deal with.  Bad vibes are there for a reason.  In over twenty years, we only ever got stiffed by a customer once (Blowfish, San Francisco!).  Early on, customers had thirty days to pay by check.  We were chasing them constantly.  Later on, we just shifted everyone to credit card, payable upon shipping.  And we wouldn't ship till we got paid.  I would highly recommend that approach.  Customers will pay up front if they believe they can sell your gear for as much as they need to. Lots like to collect points on their cards, so they're happy to do so.  Don't forget to build the cc fees into your margins! 

Someone mentioned scale, and that's a great point.  Scale really only works if your gear is made overseas by someone else's machinery.  We never offered volume discounts.  If everything is made by hand, by your hands, even if it's just punching and assembling, there is a limit to how much stuff you can physically make in a given period.  If it takes ten times as long to make ten as one, why offer a discount for ten?  We used to tell retailers asking for volume discounts that we'd think about if if they'd sell every tenth piece at half price.  Stopped that dead. Don't do it, you just end up giving your time labour and expertise to the storeowner, who will sell it in and put in his/her pocket. 

Lastly, my experience has been that you always have to file taxes!  If you guys get away with it down there, great, but here in Canada it ain't optional!

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A lot of good sense there Kristina 

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7 hours ago, KristinaDRawlings said:

Scale really only works if your gear is made overseas by someone else's machinery.

Yeah my question for them was “you want me to work harder for less money?”...we do volume discounts only on small items that we can knock out quickly: drawstring pouches, mystery braid bracelets,etc.

Edited by nstarleather

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On 5/23/2020 at 12:19 PM, nstarleather said:

Yeah my question for them was “you want me to work harder for less money?”...we do volume discounts only on small items that we can knock out quickly: drawstring pouches, mystery braid bracelets,etc.

I know.  I'd be asked to do a discount for, say, a dozen whips.  Handmade, multi tailed, braided whips.  I'd try to be polite but essentially say no, plus you're lucky I'm not charging you double!  And that speaks not just to the amount of time something takes, and the physical effort involved, but also to the work that *not* able to do in that time.  The braided whips were the most expensive pieces we made for wholesale, but the time involved meant they were probably the lowest margin items, too.  So the time it took to clear say 500 dollars making whips was time *not* spent making maybe 1000 dollars on faster, cheaper, higher margin, smaller pieces.  And at some point you just have to pull the plug on that, or increase the price so that you won't sell too many of them!

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13 hours ago, KristinaDRawlings said:

I know.  I'd be asked to do a discount for, say, a dozen whips.  Handmade, multi tailed, braided whips.  I'd try to be polite but essentially say no, plus you're lucky I'm not charging you double!  And that speaks not just to the amount of time something takes, and the physical effort involved, but also to the work that *not* able to do in that time.  The braided whips were the most expensive pieces we made for wholesale, but the time involved meant they were probably the lowest margin items, too.  So the time it took to clear say 500 dollars making whips was time *not* spent making maybe 1000 dollars on faster, cheaper, higher margin, smaller pieces.  And at some point you just have to pull the plug on that, or increase the price so that you won't sell too many of them!

The other thing they don't get is that leather cost doesn't drop very dramatically once you get above a certain level.  The difference between ordering 2000 feet vs 5000 or even 10,000 is usually a low single digit percentage. 

All the items I make that get a quantity discount are under $5 wholesale. 

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Thank you for the great advice.  I'm new to leatherwork as a business but have experience in business creating custom works using other materials.  Your insight KDR is right spot on. So glad I found this site to communicate with and learn from fellow artisans. 

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