Have you ever thought about getting started with wholesale? Maybe you’ve never even increased it, as you’ve assumed you need to be bigger, or more established.
Wholesale can be a whole new sales channel for your business, no matter what or stage you’re at.
I spoke with Therese Ørtenblad, founder of Small Business Collaborative to find out more about it. Therese is a wholesale expert with over 12 years of experience in the gifting industry. She’s passionate about helping product-based business owners make more sales, increase their profit and develop a strategy for growing their businesses with confidence.
What is wholesale?
Wholesale is generally when you sell your products in a larger volume than usual, at a lower price, to a retailer who will then resell them on. You can sell your products to small independent shops, large retailers, hotels or distributors in any volume and it would still be classed as wholesale.
A common misconception within wholesaling is that you need to sell enormous volumes to huge retailers but in theory, you could simply want a few local independent shops to sell and showcase your products. Wholesaling can mean selling tens of units, rather than hundreds or thousands.
Why use wholesale to grow your product business?
Besides adding an additional revenue to your sales, wholesale can also be seen as being paid for marketing. Wholesale can help get more eyes on your brand and reach a bigger audience than you might have already.
If you don’t have your own bricks and mortar shop then using wholesale can help sell your products as sometimes seeing a product in real life can be very different to seeing them online. If your customers have the chance to touch and feel your products in person would they be more likely to buy?
Alongside marketing it can also potentially help with your profit margins on your own retail side and direct sales, for example, if you can place a larger order with your manufacturer can you get a discount?
Another reason you should consider wholesale for your products business is the invaluable feedback you will receive from customers. The owner of the local gift shop might have been in the business for 20+ years and knows what sells and what doesn’t so this opens up a new opportunity to find out what they might like or dislike about your product.
How to get started with wholesale
- Get clear on your pricing. Work out your margins and think about where you want to take the business.
- Make sure that your products are retail ready. Are your products branded? Does the packaging explain what it is? How would it look on a shelf?
- Make sure your products meet all legal requirements – this is your responsibility.
How to price your products for wholesale
Have you previously looked into wholesale but got stuck on pricing? You’re not alone, wholesale pricing varies between independent shops and big retailers and some of the advice that you may have previously looked at could have been from the USA, where they have a different tax system.
As a general wholesale rule, a retailer would expect their wholesale price to be 50% of the ex-VAT recommended retail price (RRP). The recommended retail price is what your customer would sell it for in their shop, or what you sell your product for on your website.
Most retailers are VAT registered, which is why it is 50% of the ex-VAT price.
Another way to look at wholesale pricing is a term called ‘Markup’. 50% of the ex-VAT price is a markup of 2.4. An example of how this is calculated is:
If a product retails for £10, you divide this by 1.2 to get the ex-VAT price and then you divide that into two or you take the £10 and divide it by 2.4 e.g
£10 ÷ 1.2 = 8.33 (Ex VAT price) ÷ 2 = £4.16
£10 ÷ 2.4 = £4.16
This may seem high to you at first glance but don’t forget that retailers have a lot of overhead costs including staffing, systems, fixtures etc.
This price can vary according to the category you’re in. Sometimes bigger retailers want a better margin so it’s important to factor in these costs when you first start wholesaling. If you start at 2.4 you’re showing people that you’re competitive.
This pricing strategy is the same for online retailers too. Even though they may not have the shopfront and overhead costs they could have high staffing or marketing costs and will expect the same discounts you’d offer to a brick and mortar retailer.
Be comfortable with your offer
Once you’ve worked out your wholesale pricing take a step back and check you’re comfortable with what you’ll be offering. You may work out your pricing and realise that it’s not going to be very profitable for you due to production costs or your own time making the products for wholesale, but there are ways to make it work.
If you’ve had interest in wholesaling your products then you know they’ll sell. A way to get where you need to be with your margins could be to buy more confidently and place slightly bigger orders with your supplier in order to get a discount.
How to find retailers to sell your products to
There are plenty of ways to find retailers that might like your products and the most important thing to remember is to not make it too hard for yourself in the beginning.
- Ask your audience. If you already have an audience on Instagram start by asking them where they shop and where they would expect or like to see your products on sale.
- Contact local independent stores. Shopping locally is more important than ever at the moment so they will be more likely to want to talk and possibly sell your products locally.
- Look at your competitors. This doesn’t necessarily mean looking at another business that sells the exact same product type as you, but a business that compliments your products as you know their products would sit nicely with yours. Some smaller stores may only want one type of product e.g one candle, so if you sell essential oils then this might complement the candle they’re already selling
How to contact retailers
Craft an email template to send to retailers but personalise each email. Find out the name of the buyer/owner and do a bit of research. If relevant ask them questions to make it about them and make it clear that you are selling something by using highlights that you think they might care about e.g you hand-make your products, or they’re made in the UK etc.
Be clear about your pricing. This doesn’t mean you have to send your wholesale price list in the first email but you can give them an indication of your RRP as most retailers will have a specific pricing structure in their store so they will quickly want to know if your prices would fit in. Embed images to make the email visually appealing and also link to your catalogue or line sheet so they can see how to order.
If retailers say no then ask for feedback and see if you can make changes to accommodate them. If they give you valuable advice you can apply to all customers then listen to it! There’s nothing to stop you from going back to them after you’ve made the changes, they will most likely appreciate that you took their feedback onboard.
Try not to take rejection personally, the retailer might be having a slow time at the moment, or they might have a similar product already. There’ll be plenty of other stores out there who are waiting for a product like yours.
Handmade products and wholesale
If you hand-make your products you already know that selling these yourself is different from buying in stock t sell on and this also relates to wholesale.
Be very clear with potential customers, communicate your lead times really clearly and make sure that if you are getting overwhelmed with orders you don’t try to put so much pressure on yourself perhaps give them a longer lead time.
Most retailers are very flexible with lead times and they will plan around what you say so don’t feel pressured or panicked by these questions. This will also help to build trust as you’re being clear and honest throughout the entire process and they’ll understand that hand making products will take time.
Once you have a few customers and have built up the wholesale side of your business it’s really important to stay on top of everything, which means looking after your existing stockists just as much as you go after new businesses. A common mistake in wholesale is not looking after your existing stockists and constantly chasing new retailers.
It will be much easier to get an existing stockist to buy into a new product as they have already dealt with you, they’ve seen your products and they can trust you.
Build relationships with your stockists. This can also be something that can be easily missed and alongside staying in touch with your customers, why not build a relationship and get to know them, it will make it a lot more fun! Retailers will often have a wealth of knowledge and if you build a great relationship with them they could potentially give you valuable feedback or even offer advice on what trends they are seeing and what colour your next product should be.
Thereses number one piece of advice
Not everything has to be perfect. ‘Done is better than perfect.’ – Sheryl Sandberg.
You of course want to run a successful business and make money but try not to get too stuck on the small details. Don’t spend too much time creating perfect catalogues or a dream stockist list. Perfection can eventually hold us back and cause delays. Put yourself out there, take on feedback and most importantly have fun.
If you would like to find out more about wholesale then you can find Therese at smallbusinesscollaborative.co.uk. Therese runs wholesale webinars, workshops and courses and she also has a very interesting podcast with plenty of more tips on how to successfully wholesale your products.