Friday, October 8, 2010

EB Friday Hotlist: How Wholesale Can Help Your Business

What's the difference between consignment and wholesale?  In both situations, you are offering your work to another business at a lower rate than your retail price for them to resell.  Also in either situation you might sign a contract and/or have an ongoing relationship with this particular business.  The major difference from my perspective is that in a wholesale deal your items are purchased outright.  The reseller can then mark up the prices and sell the items to their customers (or, really, do whatever they want with them).  When you consign your items, however, you are paid your percentage when and only when the items sell.  If your items sit on the shelf collecting dust, the same collects in your wallet.  I have heard horror stories in the Etsy forums of consignment deals gone bad, so I've decided to stay away from that avenue.  I would highly recommend wholesale, however.  It can be a fantastic feeling to have your work in a brick and mortar retail shop and it can be a great way to grow your business.

As many of you know, I recently sold about 50 pieces of jewelry to a new shop in Durham, NC called Hunky Dory.  If you're local, be sure to check them out and tell them Elle's Beads sent you!  I stopped into the shop the other day to show a friend my work and he snapped this picture:

The jewelry I made can be seen from the middle to the right side of the picture, along with a few pieces from some other artists.  I was fortunate enough to make this huge sale just by being found on Etsy.  Previously I had only briefly skimmed the forum threads and thoughtful discussions on wholesaling.  I raised my prices some, but that was the only action I took.  I assumed that since I only sold one-of-a-kind pieces that I wouldn't attract that kind of interest.  I was happily surprised to find out that wasn't the case.  So, there are some things that I was prepared for and some things I wish I had thought through in advance.  To hopefully get you excited about selling wholesale, here are my top five pieces of advice:

1.  Be thorough in setting up your online shop because you never know who may come across it and decide that your work is a perfect fit for their business.  This is my first piece of advice because I didn't actually seek out this order - the owners of Hunky Dory found me through searching on Etsy.  If you want to be found, you must make sure that your work is properly titled and tagged and optimized for search engines.  Use clear photos and accurately describe your work in the appropriate sections.  Especially if you sell on a site like Etsy where users can search for sellers local to them, be sure to include an accurate and complete location (city, state or province, and country).  Actually, doing all of this will help you not only with wholesaling, but with attracting regular customers, being featured in blogs or magazines, etc. - set up your shop to work to your advantage!

2. If you're interested in selling wholesale, recognize that you need to prepare for it ahead of time.  The most important preparation is tackling your pricing.  Go back and read that last sentence again.  From what I've read on Etsy, most wholesale orders tend to run at 50% of retail price.  That means if I have a ring listed in my shop for $10, my wholesale price should be $5.  This allows the retailer that buys your crafts to mark them up so that they can make a profit from selling them.  If you would lose money selling your items at this 50% rate, you are not ready to wholesale.  It's time to raise your prices.

You may be thinking, "Why would I want to sell my one-of-a-kind items at 50% off?"  It's true that for this kind of wholesale order you aren't making large batches of the same item at once, which saves time and cuts down overhead costs.  However, consider the amount of work that it takes to promote your individual items and sell them, and how much money you spend in advertising, renewing, and craft fair booth fees.  It may actually be more cost effective to sell a large number of items at once for less profit per item than one item at a time for a higher profit.  The point is to make a profit and make sure you aren't cheating yourself.

3. Another main preparation you should consider is delivery of the goods.  Whether or not you sell to someone local, you will have to consider how you will package the items and deliver them.  If you make a local sale, you may be able to arrange for the buyer to meet you to pick up the items.  (Remember to exercise common sense safety precautions - you are meeting a stranger from the internet and bringing valuable merchandise with you.)  Otherwise you will have to factor in shipping costs as well.  Make sure you're prepared with promotional materials and think of creative ways to use them.  I noticed that one of the other local artists who recently sold jewelry to Hunky Dory attached their rings to their business cards in a similar fashion to the way earring cards are used.  While every business may not allow you to include your own branding and promotional materials with your items, it can further expand your business if it is allowed.

4. Decide on your policies ahead of time.  Once you receive the order request is not the time to make up your mind on what your wholesale rate is.  You need to consider under what circumstances you will sell wholesale, for example:

*What is your minimum order amount for the wholesale discount? 10 items? 50 items? $200 worth of merchandise?

*Will you offer a smaller discount for those who do not meet your minimum order requirement?

*Will you have the customer place the order through your website or through an artisan venue?

*What payment methods will you accept?  Cash?  Checks?  Money Order?  Online bank transfers?  Credit card payments?  And how will you go about accepting payment?  In person?  Through the mail?  Through a payment service like PayPal or Google Checkout?

Make sure to clearly state your policies to the customer and consider adding them to your policies page on your website or shop.

5. Respond quickly, stick to your agreed time frame, and be as accommodating as possible.  Hunky Dory hadn't yet opened when they contacted me, but they were looking to get the shop opened within the week.  Without staying on top of communications and quickly getting together the order for them, I may have lost the sale.  You don't need a Blackberry or fancy tools to be professional.  I made use of the Etsy convo system to update them daily (sometimes hourly) on the status of the order and to make sure they knew I was concerned with making the sale an easy, pleasant transaction for both of us.

Now you may not have the time right now to prepare large orders for wholesale and that's understandable.  Most of us one-of-a-kind item sellers are gearing up for lots of smaller sales from holiday shoppers this time of year.  However, start thinking now about whether or not wholesale may be a viable option for you and take steps to prepare yourself for the possibility.  For more information on wholesale including selling non-OOAK items and exclusivity, I recommend checking the Etsy forums by using the search bar at the top of the page.

Do you have experience with wholesale?  Consignment?  Interested in it?  Let us know in the comments!

Until next time,


Anonymous said...

This is such an interesting topic for me! I'd never really seriously considered wholesale accounts before reading this post, but it's something that's always been in the back of my mind. Thanks so much for offering your expert tips! And congrats on the wholesale order!!

Elle said...

Thanks! I'm glad that you found the tips helpful!