The Business of Making

10 Things I Learned From My First Wholesale Order, Part 1

10 Tips For Your First Wholesale Order -- For Makers, From Westervin

Last month, I received my first request for a wholesale order. Thrilled, I immediately replied saying something to the effect of, “WHAAAAT ERMERGOD OK YESPLZ SURE LET’S DO THIS!!!!!” Or something slightly more professional. It wasn’t until after I hit “Send,” that I realized I had some things to figure out. Namely, how to sell wholesale, exactly. I understood that the basic wholesale arrangement involved selling a larger quantity of goods to a retailer at a reduced price, and it seemed like I’d seen somewhere that a 50% discount from the retail price was the standard. But was 50% a hard-and-fast rule, especially for small producers of handmade wares, like myself? If so, would that be profitable for me? And how much was a “larger quantity” exactly? My blinding excitement quickly diluted to a mixture of hope and hesitation. So I set about uncovering the mysteries of wholesale with help from the internet, a calculator, and some very smart people I know. Here’s what I learned.

1. Pricing Is Everything

An initial search of “how to price for wholesale” left me a little overwhelmed. It seemed the industry standard was indeed to offer wholesale items at half the retail price, but I worried that wouldn’t work for me. Then I decided to ask an actual person. Two actual persons, to be exact — two lovely women I knew with experience as a buyer. Jess Mott Wickstrom is the former Gallery Director of Lillstreet Art Center and co-founder of DesignEgg, and Claire Hurwitz Staszak is the current Manager & Buyer at Neighborly. Boy, am I glad I asked these two! I found this piece of advice from Claire particularly empowering:

“You should remember that you have the control.”

Right! My business, my prices. I determine what works for me.

“We don’t make 50% on everything,” she continued, “and sometimes we carry an item just because we really like it. The margin isn’t always a priority, especially if it sells well.” Retailers may understand that small producers can’t always accommodate the traditional 50% markdown.

Jess agreed with Claire. “When dealing with Etsy sellers,” she said, “I was never surprised if they wanted to sell me items at prices a bit higher than the typical 50% wholesale. I think 60/40 is fair. If a retailer wants a bigger discount, ask for a higher minimum order.”

Yes. I think can work with that.

Next, I wanted to be sure a wholesale discount, even one slightly less than the standard 50%, still allowed me enough profit for my time and materials. According to Etsy, it all starts with your costs: “A solid understanding of how much it costs to make each of your products will allow you to adapt your supplies, workflows and minimum order quantities in order to strategically price for wholesale and ensure that you’re still making a profit.” Etsy shares this helpful formula for determining your prices:

  • Break-Even Price = Supplies + Overhead + Labor
  • Wholesale Price = Break-Even Price X 2 or More
  • Retail Price = Wholesale Price X 2 or More

You can read the full Wholesale Pricing Guide from Etsy.

Finally, I was ready to whip out my tiny calculator and crunch some numbers. With my trusty data in hand and my advice from Claire and Jess in mind, I followed up on my first wholesale order request with some solid pricepoints. Through this process, I realized I was undervaluing my work. I decided to adjust the prices on a few of my current designs, and the results have been pretty positive. It was scary, but I feel more confident about my line now. I’ve also started plans for new designs and production techniques that allow for greater profitability.

Westervin Packaging (From 10 Tips For Your First Wholesale Order)

2. Pay Yourself

This is an extension of #1 but an equally important and separate point to make. This wisdom comes from Tim West, Associate Professor of Accounting at Northern Illinois University and World’s Greatest Father-in-Law.

“One thing I always tell people,” he mentioned to me over the phone, “it’s easy to give away a good living. I suspect this can be a problem in the craft world, because people are so passionate about what they do.”

So true, Tim, so true. I see this all the time. It’s like an epidemic in the craft world; so many makers aren’t paying themselves enough. Not only do we not know how to price our work so we make enough to live, but we must compete with the impossibly low price-points of mass produced merchandise. Tim suggests starting by calculating how much you need to make in order to pay your bills, eat, and have a place to live.

“For example, if you need $4,000 each month, you will need $48,000 for the year. Remember, that’s after tax so multiply $48,000 x 1.4 to approximate your before tax ‘salary.’ In this example, you need a ‘profit’ on your orders of $67,200. How many hours do you want to work during the year? If this is a full-time gig, you might consider 2,000 hours (50 weeks x 40 hours per week). The result, for every hour you work, you should should charge $24.00 per hour ($48,000/2,000 hours) in addition to your material cost.” So, that’s how you can calculate your labor costs for use in the pricing formula above.

But as Tim cautioned, this is just a starting point. Just because you need to earn X dollars for every scarf you make doesn’t mean someone will pay X dollars for your scarf. “Don’t forget the opportunity cost,” Tim continued. “If you take on too many intro priced jobs, you won’t have the time you need for better projects.”

3. Consider Consignment

If you aren’t getting as much interest from retailers as you’d like, or if there’s a particular store you REALLY want to get your items into, consider offering a consignment arrangement. This reduces the risk for a store.

“We do it occasionally,” Claire explained, “when we aren’t sure how well something will do, or if it’s a high-priced item. It makes it much easier to say ‘yes’ to someone.”

Offering consignment can supplement your wholesale revenue and help to generate more interest in your goods and brand. Just make sure you have a solid system for keeping track of what you send out, when you get paid, and if unsold items are sent back to you. Be clear about shipping costs and who is expected to cover them. Remember, also, that a consignment experience can be a great opportunity for market research. Keep an eye on what does or doesn’t sell and where. You could find that you’re targeting the wrong stores.

4. Incentivize Sales

Give a retailer more reason to order from you. Clare Yuille, founder of Indie Retail Academy, explains that, “there are probably a couple of extra things you can do to tip the scales in the shop-keeper’s favour, without it affecting you too badly.” Some examples include:

  • RISK FREE TRIAL. Let retailers carry your products for a specified period of time (e.g. 45-90 days) at no charge, but keep a valid credit card on file. At the end of the trial, they can decide to keep the products and be charged the wholesale price or return the items in like-new condition.
  • PRODUCT SWAPS. Like a risk-free trial, you can give retailers the option to swap a product that isn’t selling well for something else more promising, after a specified period of time.
  • SAMPLES. Offer to send a free sample of your items to retailers you really want to work with. This will get your figurative foot in their door and show them the quality of your creations. Just make sure it’s financially feasible for you to do so.
  • EXCLUSIVITY. Create an exclusive line for a favorite retailer or agree not to sell similar items to a retailer’s direct competitors.
  • DISCOUNTS. Calculate appropriate discounts (in addition to the 50% wholesale discount) for placing holiday orders early or making a sale at a particular trade show.

Westervin's Sample Linesheet Page -- 10 Tips For Your First Wholesale Order

{ sample page from my wholesale linesheet for the Westervin shop }

5. Make a Linesheet

This was completely new to me. A linesheet, I discovered, is basically like a catalogue containing all the products you offer that are available for wholesale. It contains basic information about your business, your available products, and ordering policies that a retailer needs to know and, ideally, allows them to quickly and easily place an order. In general, this information should include:

  • product name, number (if applicable), and description (e.g. sizes, colors, materials, etc.)
  • the MSRP (Manufacturer’s Suggested Retail Price) for each product
  • the wholesale price for each product
  • contact and ordering information
  • payment methods and terms
  • shipping methods and costs
  • order minimums (per item or per order)
  • lead time

“Okay, got it,” you’re probably thinking, “where do I get started?” Well, unfortunately, there’s no one-size-fits-all template for creating a linesheet, and I’ve seen oodles and gobs of variation in all the samples I’ve found. I did not let this stop me. In fact, I found it liberating to design my very own linesheet, something unique to Westervin. I used my basic photoshop skills and some photos I’d already taken for my online shop. In the end (because once I get started, it’s hard for me to stop), I created three different documents:

  • A multi-page CATALOGUE with full-page images, a mini bio about myself and business, and detailed ordering information. This will serve more as a marketing tool than strictly a tool for placing a wholesale order.
  • A one-page CHEAT SHEET, including thumbnails of all available products (shown previously in the catalogue) with the basic ordering information. This offers a quick reference for buyers when they’re ready to place their orders. This idea came from Claire after I sent her a proof of my catalogue. “I personally like looking through well-done multiple page catalogues,” she assured me, “but it can get annoying if you have to flip back and forth a lot to figure out your order.”
  • A branded ORDER FORM. This will be optional, as I understand some retailers may want to use their own forms. Either way, make sure every wholesale order has an order form — for safety and clarity.

For tips 6-10, read “10 Things I Learned From My First Wholesale Order, Part 2!”

Click here to finish reading.

5 thoughts on “10 Things I Learned From My First Wholesale Order, Part 1

  1. Sarah, this is an excellent comprehensive post on getting started on wholesaling. We’re going to share this with our followers on Twitter. I also wanted to mention that we have a linesheet/catalog builder that links with Etsy. You can save yourself a lot of time and money and create a linesheet with us (check us out on http://www.nowinstore.com).

    But once again – great post, you really flesh out wholesaling really really well.

  2. I was super excited to find your blog. I am currently working on wholesale for my Etsy business for the first time and have no idea where to start. Im very lucky to be in many local handmade groups that meet often and bounce ideas and advise around. I highly suggest surrounding yourself with other likeminded Makers and shop owners who believe in cohesion and not competition.
    Anyway, I am curious how you made your Linesheets. Are these all digital? PDF? Or an online type of catalog.

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