Beth is an admin at Etsy on the Business Operations Team. She is writing about pricing in a multi-part series, so ask her your questions in the comments below. This week’s topic is how to prepare your business for wholesaling.
Wholesaling is yet another factor to consider as you price your work. Wholesaling is when a boutique or another reseller approaches you to purchase your items in bulk, usually expecting a discount for the large order. The expected discounts are between 30% and 60%, most often settling around 50%. These discounts are large, which is why it is so important to carefully consider how wholesaling could work for you before you price your items. As we discussed in Understanding Your Costs, it is critical to calculate your costs and related time and price your work accordingly. Remember that since you would selling multiple items with wholesaling, you may not need the same profit on each item for the economics to work out well for you.
Here are some numbers, for example:
$20 – Total direct costs
$45 – Price (this includes the amount you would like to make for your time)
$25 – Total profit per item
$45 – Price
$22.50 – Price per item at wholesale discount of 50%
$20 – Total direct costs
$2.50 – Total profit per item
In this example, the seller needs to consider if $2.50 per item is enough profit to justify the sale. It may seem low, but it may just be worth the sale. Depending on the quantity purchased, this profit can add up to a tidy sum. For instance, if you are selling 10 items, this profit is $20.50 and at 50 items $102.50. This is a simple example that illustrates the need to walk through your costs, necessary profit and the expected discounts before pricing if you want to consider wholesaling.
Wholesaling can be a great way to drive more sales, but you need to take care in pricing your work accordingly. Since each item you sell wholesale is not available to sell for the full price in your store you need to balance the increased number of sales with your ability to stock and sell in your own store.
When working with wholesale buyers, price is only once consideration. You want to outline the other terms and conditions you need to be comfortable with for the deal to work. For instance, you may find that it is not worth wholesaling unless the purchaser buys more than a certain quantity. In the above example, the seller may decide that 10 items is the minimum number to make a wholesale order work for them.
Other terms you may want to consider include payment before shipment (received and cleared) and a sliding scale for discounts. An example might be: 10-20 items receive a 40% discount, 20+ items receive at 50% discount, etc. Consider what you will need to make yourself comfortable with the deal and protect yourself. Some put these terms in their Etsy shop descriptions. However, I suggest listing on your front page that wholesale orders are welcome, like Contrary, an Etsy admin, does in her store. Then you can email or convo your terms directly to the wholesaler once you have established contact.
Another way to protect yourself is to conduct your wholesale orders on Etsy. This can be done a couple of ways:
1) After you’ve agreed upon a deal with a wholesaler, create one custom listing specifically for all of the items that they agreed to purchase. Make sure to title this custom Etsy listing as “RESERVED” so that some other buyer doesn’t purchase it by unwittingly.
2) Use existing or create multiple listings for the items to be purchased by the wholesale buyer (this can also help increase
your sales numbers and feedback).
Both ways create an online record or “virtual paper-trail” at Etsy which is important to protect yourself. Etsy Support staff will not be able to help you if you do the transaction off Etsy and something goes wrong.
Wholesaling can be a great way to increase your sales and your reputation. Done thoughtfully, wholesaling can help your business get to “the next level” and broaden your exposure, which is always good for future sales.
Check back in next week, when Beth will be discussing Theories in Discounting. Please leave Beth your questions and comments below!