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Mark C.

Creative Wholesale

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Since it number crunching time of year I thought I would share another way to approach wholesale.

I’m not big on wholesale but I do some of it in my mix of pottery income. I stopped wholesale many decades ago but have two exceptions to this now.

I was thinking about doing less art shows so one idea was this- (keep in mind I have done them for over 40 years now)

Over a decade ago I approached a food business that’s a local institution with a creative idea. It does a booming business so I had this thought about selling just a few items in my line. I suggested Mugs in 3 sizes. I would set the final price and for every mug they would get a fixed price of that sale-about a third of the price (actually just under). I would take care of keeping the back stock inventory full and they would keep the shelve inventory packed. I would bill them quarterly. I set the price so we would have good sales meaning they are affordable but still profitable. I can at any time change the prices (which I just did). At that time I suggest testing the whole idea like a test run to see how it worked. If it did not work well than I would buy my stock back so it really was a no brainer for them. As it turned out it has been a huge success .

Over the years we also tried cereal bowls for a year and they were to slow so I switched them out to a huge mug so now I have 4 mug sizes (it’s a collage town so kids like a huge beer mug).

This past year we came close to grossing 13k in total sales and I keep just over 2/3 of that.

I am one of the one of the best sellers in their non-food items line

Every year this sales number grows-its used to be less than half this.

It’s worked out well for both parties and we both are happy.

I get to do one less art show in another state so that overhead is gone although it factored in to the wholesale sales to some degree.

This shop is in town and I get there once a week usually anyway to check stock (I live out of town) I can can back stock enough for many weeks except during high sales times.

I mention this agreement because it’s not the usual keystone 100% markup as in traditional wholesale models. The owner was willing to try a new idea and it’s turned out well for us both. They can sell a quality hand made product to locals and they soon realized it also brought customers in from out of state even looking for my work which was a big surprise for them.

If you can think out of the box with a business plan it sometimes can pay off.

Stephen, Pugaboo, DirtRoads and 2 others like this

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This is a fantastic idea. Thanks for posting this. I bookmarked it for when I get to the time to do this sorta thing. I have a few small town grocery stores which I support and shop at. I bet they would be open this this sort of thing provided I do what you did about buying back inventory. I like it Mark. I like it a lot.

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Grocery stores work on small margins so 1/3 is about right for them.You could ask for even better margin.The volumes will be less than a small store thats always packed with customers.

My place bakes food and serves coffee.

pattispots likes this

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Bravo Mark! A well thought out and explained plan and a shop willing to take a risk equaled success.

 

I retired last February and now am devoting myself to pottery and am looking for ways to market my production. I have just branched out from my art fair, art center and regional invitational sales venues to include a gallery with a 50-50 split. The art fair overhead is pretty close to the gallery split when all costs are figured in (I am not one of those folks with multiple thousands in sales at art fairs.) The art center and regional invitational both get 30% of the sale, and there are few other costs other than getting the work to and fro. So your split is attractive, and it would be nice to find something similar here in Georgia. I wonder if the Krispy Kreme donut shops sell coffee mugs......

 

Best luck with the growth of your sales.

 

John

Karen Mc likes this

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John 

As a former Crispy liker before the expansion went bust I can say they market their own slipcast mugs with decals. Once they also had boxer underwear  with great little trucks on them (mine are all worn out and gone) I still have a stack of their paper hats.

I would look for a more non- corporate market place for hand made wares.

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This is a great idea!! Your margin is good, much better than most consignments, which are usually 40/60 here or even 50/50. Just to be clear, in the beginning, they bought them, but you now sell on consignment? Because you said you would buy them back if it didn't work out - 

Thanks,

Nancy

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With the volume of sales that you have in an ideal location it's a win win and you deserve more than a 50/50 split. It seems all to often that inventory needs are not met in a timely manor. If the location is less than ideal  and the volume of sales is low the 50/50 is more in line for most shop owners.

 

I appreciate insight of a successful professional potter.

 

Thank you

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Seems I need to clear up a few points

1st I'm well known in these parts for my pottery business-40 years of local shows and sales and in lots of shops studio sales  etc.

so my mug line in this shop was not much risk for either party.I also am very close friend with the owner-so believe it or not this was a harder deal as our friendship means more than any business deal. We set it up and if he did not like it he would ask me to take it away and we would still be friends-we covered ALL the points upfront-you would not have to do all this if you did not know the owner as I do.

Nancy its not consignment in any way-at the 1st meeting I offered to buy back any mugs if the whole deal went south which it never did-that was a startup offer to limit their risk and show them this would be a success if it failed they could not loose.

We display 4 of each size in one store three in another store as space is limited

I fill their two shops with mugs in the back stock areas, tidy up my display etc almost on a weekly basis. I keep track of all mugs I take to them in and bill them quarterly .

Thats a trust deal right there.-they only have to restock mugs from back stock to display. They do not count or keep track of any of it except all sales are run thru a computerized sales system which they use to track food so they know what to bake the next day.

They send me 4 checks per year-I break down the mugs sizes and quantity for both shops so their bookkeeper has all the sales info.I make it easy for them. 

For that work I get more money as they do not have to deal with much-the mugs sell themselves 

About 5 years ago a woman came in to shop and said her husband was out in car and they had come for my mugs from two states away while on a trip and could she take a few out to show her husband-thats when they realized I had customers coming from all over the west for the work.

We now have a very nice info card inside every mug about care and feeding along with my business name-they use my name on their sign with the prices as well as their web site-they sell a few online and I mean a few as online sales are soft on ceramic items (touch feel etc does not work well online)

 

I never let them run low or out -its happened like at x-mas when someone buys them all but it rare as I back stock so many. When you start a deal like this which is selling high volume you need to be a high volume supplier . I keep a stash at studio of their sizes at the ready as well as a few boxes in my delivery truck all the time year round to service this account.

Another thing is when folks call me about work I send them as a 1st choice to my outlets depending on what they are looking for. I try not to have them come to studio. Yes I make more money myself at studio but they take up my time and since I have 6 local outlets its easier to send them there. My digging thru my boxes and van to sell a mug or two makes no sense. I do not have a retail space at studio as I'm off the beaten track.That said I always have every year some folks at studio.

What amazes me now is what I call the crags list effect. People contact you about work and never follow thru. You just never know anymore-thats another reason to send them elsewhere . 

One last note I service this account and I do it well-thats a key point for them

Rae Reich likes this

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Oh, OK, I misunderstood, my apologies. You handling all of the paperwork for them is a good deal for them also, as it is a PITA. I say this as someone who owned a shop that consigned local and American made goods. Offering to keep track for them is very helpful, but if they didn't know and trust you, I'd doubt they'd let  you do that. I wouldn't have let consigners I didn't know and trust keep track and let me know what sold and how much I owed them. I realize that most artists are good and honest people, but still...there needs to be trust to do that. 

 

Mug, I'm not saying that someone doing volume doesn't deserve more than 50/50, but as a shop owner, I'd not do less that 60/40, with the 40 for the shop. In most situations, not this one, the shop owner keeps track of all sales, pays the credit card fees, electric, heat, pays employees to sell the goods, etc. So it wouldn't be worth it for me to take less than 40%. 

 

Nancy

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Oh, OK, I misunderstood, my apologies. You handling all of the paperwork for them is a good deal for them also, as it is a PITA. I say this as someone who owned a shop that consigned local and American made goods. Offering to keep track for them is very helpful, but if they didn't know and trust you, I'd doubt they'd let  you do that. I wouldn't have let consigners I didn't know and trust keep track and let me know what sold and how much I owed them. I realize that most artists are good and honest people, but still...there needs to be trust to do that. 

 

Mug, I'm not saying that someone doing volume doesn't deserve more than 50/50, but as a shop owner, I'd not do less that 60/40, with the 40 for the shop. In most situations, not this one, the shop owner keeps track of all sales, pays the credit card fees, electric, heat, pays employees to sell the goods, etc. So it wouldn't be worth it for me to take less than 40%. 

 

Nancy

This is strictly wholesale with a twist. I could bill them every time I dropped off mugs but thats a pain in the neck for both parties since its almost weekly.Consignment is a whole other ballgame.

I also have some of that going on but thats another topic.

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Mark:

I do not drink, but every once in awhile I will met clients at eatery/bar to discuss business. Your post reminded me of an upscale place I met some local suppliers years back that sold "custom" beer steins. As I recall (vaguely) they had 3-5 styles to choose from, and had a smaller scale for the women. The big feature was the family cress- with your initial in the Old English monogram. They had a fairly large display, so I assume by the display they did well.

Nerd

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 As a retailer it's common to buy and sell goods at roughly 30% mark up, but that depends on what you are buying and selling. I have bought wholesale goods that retail with a 50 to 100% mark up. 50 and 100% are great, but those items are user specific and only sell as they are needed. To get the lowest wholesale rate and keep it you need to maintain a certain sales volume to make it worth the wholesale suppliers time. The wholesaler that I refer too has three wholesale prices and they all hing on how much you will sell. If your a small store and it's an item you need, you get screwed.

I think this can apply to selling consignment items. Selling at a 30% mark up can make you money.

If I had a coffee shop Marc's deal would be fair, above and beyond what I would expect. If Bill Smith wanted to sell coffee cups that he made in his brand new kiln, it would be more like 50/50.

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I was in retail for 20 plus years and actually taught marketing for 10 years.  Most small retail businesses priced very close to what is called keystone ... double what you pay or 50%. Keystone strategy is in most of the text books .. what they call typical retail markup.   Many stores will include the freight in that base price and key stone from that.  I searched around and found that still seems to be true of many specialty retailers.

 

http://smallbusiness.chron.com/markup-percent-boutiques-35432.html

 

Of course I am only familiar with gift or fashion related stores.   In my small chain we aimed for 55-56% for shoes.  Slightly higher in apparel and even higher in generic handbags.  The only category I really gobbled up margins on was costume jewelry because I totally skipped wholesale venues.   As a rule I saw many stores 3x costume jewelry cost where I was getting way more.  You look at some of the gift store staples like Arthur Court and Aromatique and the merchandise comes in retail priced at key stone, not allowing for freight.  I used to try to recap that freight by buying on special promotions.  I think it's really hard to get above keystone on national brands now, with the internet so readily offering price comparisons.  You can consider that national brand has already built up demand and keystone on the wholesale cost is enough.  Two years ago I did a marketing evaluation on a gift store that was literally pricing over printed prices on Arthur Court and for some (-----) reason, they failed to realize the price was printed on two places on the box.  Customers were highly resentful because they saw this price and the overall image of the store was negative.   While I agree that keystone is pretty much necessary in a small business, you can make some exceptions.   

 

Mark:  I'm impressed that you are getting that %.  But you have to admit you're above average on almost everything.   But ... I'm not sure many others would be successful in negotiating that sort of deal :)  From my experience, that is not typical.  But as I said you can make some exceptions andyou have to consider they aren't paying for the merchandise upfront and it's basically a guaranteed sale.   I really don't know if I would accept that sort of deal or recommend it,  but I would highly consider 100% sell through AND the inventory carrying cost being removed from the equation.  Years ago I carried some embroidered pieces in my store at a lesser margin, around 25% , for a very short time.  I specially remember a bride using credit on them and me thinking ... that just cannibalized  a sale where I would have gotten a 50-60% margin.  After that, I never carried any thing I couldn't keystone plus.   Because you have to have figure your space in that equation.  In most retail, space is a commodity .. could you put something in that space with higher margins or would the 0% inventory carrying costs/100% sell through make it possible?

 

I have a current deal with my jewelry line with a high volume show exhibitor and it's 50/50, with me fronting the merchandise and getting paid when it's sold.  So far it's worked out great for both of us.  I wouldn't even suggest a 60/40 because I know it wouldn't be profitable for him.   I've priced that merchandise so the 50% covers me well.  I've also calculated the sales per foot in his booth and the 50% margin gives him more $ sales per linear foot than the other items in his booth.   He does have some products with higher margins (close-outs mostly) but the 0% inventory carrying cost and 100% sell through make the jewelry profitable enough to be included.  This has to be a win/win for both of us.  I won't give him a deal with my pottery line.

 

But I suppose if that retailer wanted a higher %, he could just up the price?  So obviously it's working for them.

 

0% inventory carrying costs/100% sell through ..... powerful incentives.     Might justify a 33/67 split.    Getting a retailer to see this  ... still, might prove difficult for many of us.   A  very interesting case, thanks for sharing this.  Definitely makes me think outside the box.

GEP likes this

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I've never been fortunate enough to buy wholesale and sell at keystone consistently. The more volume that you do the better the pricing. I think it also depends on what you are selling. The few items that could sell for keystone came straight from the manufacture. A wholesale supply company wants you to buy all of your supplies from them. If you start shopping for a better deal, many wholesalers get a little less happy to give you a bone, but they will often price match to keep your business. Business would be significantly easier if I could figure out how to get a better wholesale price. 

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