When makers are first considering the transition to wholesale, there is often a good deal of consternation around pricing their products.
“You want me to sell my products for half of my retail price?!” is a common comment seen in maker Facebook groups, and for good reason. Most often if a maker has been pricing their products without considering a wholesale sales channel their retail prices are far too low to make a true wholesale profitable.
In reality, pricing your products should start with determining a profitable wholesale price FIRST and then multiplying up to find your retail price.
Ok, so what do I do now?
The great thing about owning your own business is that you get to set the rules. If you have decided to go into wholesale, then it’s time to let your existing customers know that you will be raising your prices and carry on from there. Will you lose some customers? Possibly, but if this is what you need to to keep your business healthy then that’s just how it has to be.
One suggestion is to tell your customers, “Hey guys, we will be raising our prices on X date, so if you want to get anything while it’s still at the old price now is the time!”. Announce it a week or two before your prices go up to provide a legitimate sense of urgency and potentially spark a few sales.
Similarly, if you have been wholesaling and are now realizing that your prices are too low, set a date to raise them and let your retailers know. Or if you prefer to just raise the prices (say you discovered you were losing money on sales and don’t want to continue doing that) you could soften the blow by offering a limited-time promotion like free shipping on orders over a certain size or include some samples of your newest collection.
The easiest way to raise your prices, without feeling like you’re going to tick people off though is simply to design a new collection and retire the old ones. Price your new items at your new profitable levels and advertise them to your existing customers.
Keep in mind you may still find that some of your old customers are no longer interested, and that’s okay. They aren’t in your new target audience. As long as your branding and marketing are in line with the audience you want to attract you will find customers to replace them.
But I can’t sell my items for that…
This is another common concern we hear from makers. If you’re doing appropriate competitive analysis and know you’re marketing to the right audience (two key factors!) then you may be right. So what do you do?
There are a couple of options here to explore.
Can you reduce your costs associated with producing the item? For example, can you hire a product assistant to make the item for less of an hourly rate than you would charge yourself (or can they make more of them faster because that’s all they do)? Can you batch any portion of your production to optimize the amount of time spent per item, thereby reducing your labor costs?
Can you find an alternative supplier for your materials that has a better price or negotiate with your existing vendors? Or can you produce the item with slightly less expensive materials to begin with? Is there a way to save on your overhead costs, such as finding less expensive packing materials or moving back into your garage studio? Play around with the variables in our pricing calculator to see where you can cut costs
If at the end of the day, if you have analyzed all your costs and cannot find a way to bring them down and you know that you are targeting the right market and have done the right competitive analysis, then this particular item may not be well suited to selling wholesale. And that’s okay! Not every product is right for wholesale, and many makers have a mix of products that they do and don’t wholesale for this very reason.