wholesale Wholesale Payments Part 2

[theothercandice]

Hi! 

First time poster, long time lurker. Thank you so much for @GEP for organizing the FAQ so I can find this helpful thread.

I just have some more follow up questions. I'm doing my first wholesale order with a shop and I feel really nervous about it. I tried to research on youtube and in this forum, and here are some assumptions that I'd like some insight in. 

Step 1: Retailer/Gallery/Someone reaches out  (or vice versa). Then you provide a catalogue/linesheet. 

Step 2: They put in an order form/You give them an order form to fill up

Step 3: Payment: This is the part where I'm unsure. It seems like there are ways to go about it. (I realize I can send an invoice in paypal to the seller) 
     Option 1: 20-30% deposit at the time of order, remaining balance due before shipping
     Option 2: 50% deposit at the time of order, remaining balance due before shipping
     Option 3: 100% before shipping
     Option 4: I keep hearing about net 30/60. But I dont really know what that means. 

Step 3.5: Paper Logistics: Do I charge for tax? Do they pay tax on their end? My seller gave me a sheet with her EIN. Is there something I need to do with this? Do I need an EIN??

Step 4: Make the order!

Step 5: Shipping and Delivery. I've read somewhere that the buyer pays for the shipping. In some cases, the buyer and you split the cost of shipping. How do you estimate for the delivery price? 

Step 6: What common mishaps have you experienced and what are good practices/terms you've given to protect yourself?
I read somewhere that one potter doesnt give buys option for buybacks and returns (unless they've made an error or something broke) since its wholesale and its equal risk. 

Thank you so much for taking the time to read this! 

 

[Callie Beller Diesel]

Hi and welcome to the forum!

As with everything in ceramics, the answers here can be case dependent. How stringently you hold to any of this can depend on your relationship with the buyer and the size of the order. I do recommend having systems in place ahead of time so that you present as professionally as you can. Any time you spell out expectations, even if it’s just in your own head, it helps protect both you and your buyer.

To answer your questions in order:

1). Yes. A line sheet is a simple catalog, so that people can see what they’re ordering. It’s separate from, but can be sent with an order sheet. I built a simple one in Canva that you can save as a PDF. If you google “line sheet template” you will find lots of good options to choose from. I took some inspiration from Mei Pak at the Creative Hive, and adjusted it from there. You should include your contact info and an identifier of your choice for each item, so that people can choose an item by name or item number. A wholesale price and a recommended resale price is also good. Keep your images clean and crisp: white background for this is preferable. Don’t mess around with styled images, except for perhaps a cover page. Keep those for a look book.

2) Yes again. Use a system that will be easy for you to keep track of. Information you want on your order sheet: Your customer’s business name, contact info and shipping information. Tax numbers if necessary. You need space to write item numbers, desired quantities and price, of course. It’s a good idea to spell out things like minimum first orders, minimum reorders, shipping policies, YOUR contact info, and instructions on how to reach you if there are issues. IF you choose to offer net terms (more on this in a minute), you should mention it here, but tell them to contact you for details. If you don’t offer it, don’t bring it up. You will also want to be VERY clear on your turnaround times, and if they vary at different points in the year.

 If you’re just starting out, a fillable google doc or sheet can work if you want to keep it paperless, and it leaves the option to print an order so you can use it for a production list and a packing sheet when you go to ship. If all that sounds involved, if the client is small and you know the shopkeeper, I’ve just had them email me with whatever it is they needed, and made sure there was an email trail that included policies. 

3) Any of those first three options are entirely up to you. For a first order and if I don’t know this person from a hole in the wall, I might ask for a deposit to ensure they’re in earnest. I don’t wholesale anything I don’t produce as a matter of course, so if something bizarre happens and they bail after that, I’m not out anything. I will eventually sell whatever it is that they were buying. If I know the retailer, I may waive the deposit. In all instances, you need to state that the deposit is non-refundable. On any reorders, I ask for full payment at time of shipping.

Net 30/60/90 terms means you are shipping the order before the customer pays for it, and they have a grace period of 30 or 60 or 90 days to pay you for it. It reduces some of the risk for the retailer, because it frees up some of their cash flow. I know that it is a great deal more common practice in, say, a stationary sphere, but I have not heard of it being offered frequently for pottery. I personally don’t work on a scale where I’m willing to mess around offering credit. I don’t recommend beginning with it. It gets complicated and time consuming fast, because you have to stay on top of accounts receivable, and no one likes those phone calls or emails. You will not be unprofessional or a bad business owner if you choose not to offer terms.  

But if there’s anyone who reads this who wonders how it might work in practice: I used to work for a candle wholesaler in the early 2000’s, and at the time we did not ever extend net terms to a first time customer. They had to pay in full at time of shipping, and if they wanted net terms, they needed to provide us with 2 credit references. Those credit references were called to see if the customer was in the habit of paying on time, and if they were, we would extend terms on reorders. If they didn’t get good reviews from their references, or if they didn’t pay us on time, net terms were cancelled, and any outstanding orders needed to be paid before shipping. 

3.5) Check with your accountant. Rules vary by region. I’m Canadian, and I won’t pretend I know anything about US tax law.

4) Yes again! (The fun part!)

5) Yes, in wholesale the retailer pays shipping. I don’t estimate shipping, I calculate it when the order is ready to go. It really does depend on how much they’re ordering, what it weighs, and how far it’s going, so estimates can be guesswork at best, at least until you have more experience. When the order is ready, I stack the items in a box and weigh that, and add a little bit for packing material. I use starch peanuts, so it’s not generally very  much, but if you’re using paper it might be worth seeing if it adds anything. Figure out a shipping cost using your preferred carrier, add a few dollars to cover shipping materials, and add that amount to the customer’s invoice. I do mine in Square, but Paypal is also a popular option.

 

6) A Few Things, in no particular order.

-Make sure your work is priced so that you can profit on a wholesale order.

-Make sure you know how much time it takes you to make everything, and build a extra time in to your guarantee for Things Going Wrong (TM). If you deliver early, you look good. If you deliver late, it’s less appreciated. 

-If you anticipate time crunches around Christmas, email your clients early (August or September) to see if they intend to place orders early to ensure prompt fulfilment.

-If and when something does go wrong, communicate with your customer promptly. If your kiln’s relays choose the last week in October to give out and you don’t have replacements on hand, let your customer know so that they can plan accordingly. Don’t give them too much detail, but let them know there have been unforeseen technical issues and that you’re working on it, but there may be a delay. Give them an updated estimated timeline, and perhaps add something to their order to sweeten it a bit. It could be discounted shipping, or something added to their order as a thank you for their patience. 

-it’s worth an email to your accountant to ask them what they’ll need you to keep track of for tax purposes. It’s usually easier to set this up right at the beginning, and begin as you intend to go on. It’ll save a lot of hassle at tax time.

-If you’re used to retailing online, there can be an impulse to get nervous about shipping costs, because if it’s listed as a separate line item, customers balk at it. Shipping multiple pots is generally more cost effective than shipping singles, and there isn’t a proportionate price increase with weight. While you don’t want to gouge anyone, don’t panic too much about it appearing too high.  Retailers do understand this, and they incorporate it into the price, or they can write it off as a business expense here in Canada. 

-Be clear with yourself on what you can and can’t deliver. That way you can be clear with your customer too. Clear and realistic communication prevents a LOT of misunderstandings and leads to better relationships. (Good life rule, that one.)

[Mark C.]

3 hours ago, theothercandice said:

Hi! 

First time poster, long time lurker. Thank you so much for @GEP for organizing the FAQ so I can find this helpful thread.

I just have some more follow up questions. I'm doing my first wholesale order with a shop and I feel really nervous about it. I tried to research on youtube and in this forum, and here are some assumptions that I'd like some insight in. 

Step 1: Retailer/Gallery/Someone reaches out  (or vice versa). Then you provide a catalogue/linesheet. 

I give them a list of forms to order from-my list

Step 2: They put in an order form/You give them an order form to fill up

Yes-they e-mail it back to me.

Step 3: Payment: This is the part where I'm unsure. It seems like there are ways to go about it. (I realize I can send an invoice in paypal to the seller) 
     Option 1: 20-30% deposit at the time of order, remaining balance due before shipping
     Option 2: 50% deposit at the time of order, remaining balance due before shipping
     Option 3: 100% before shipping
     Option 4: I keep hearing about net 30/60. But I dont really know what that means. 

First time order-paid in full-always

next order (second order) 30 days

Step 3.5: Paper Logistics: Do I charge for tax? Do they pay tax on their end? My seller gave me a sheet with her EIN. Is there something I need to do with this? Do I need an EIN??

No you do not charge tax they collect and pay the tax-its wholesale-not retail

Your EIN numberr is your federal tax number-goggle it .Apply for one and get it you may need it in future as I have used it for other things in the past. I never use mine on wholesale or theirs as long as you report this income on your tax return.I do lots of wholesale and never use those numbers.If ask for it you then have one.

Step 4: Make the order!

Make extras-things go wrong

Step 5: Shipping and Delivery. I've read somewhere that the buyer pays for the shipping. In some cases, the buyer and you split the cost of shipping. How do you estimate for the delivery price? 

Buyer usually pays-I have split it if I drive it far-local drops are free-If you pay for paid shipping they pay that amount-I had a shop once where I split the shipping buts thats rare.

Pack it well and insure it.This is a skill set in itself 

Step 6: What common mishaps have you experienced and what are good practices/terms you've given to protect yourself?

Write up a contract-covering breakage-how long lead time you need-payment details act-this is very important so be thorough

on the first order get the payment up front-this is where you can get taken.It happened to mein the 8os.

I read somewhere that one potter doesnt give buys option for buybacks and returns (unless they've made an error or something broke) since its wholesale and its equal risk. 

For wholesale no  buybacks or returns is common.

Thank you so much for taking the time to read this! 

 

 

[GEP]

In addition to the answers given above, make sure everything in your wholesale line is something you feel comfortable and confident making in large quantities. Lots can go wrong in ceramics, and high quantities multiply the potential problems. 

I haven’t wholesaled in over 5 years, so these norms might have changed, but these were the normal payment terms when I was doing it (mostly to galleries in the northeast and some midwest). First order: no deposit is required, payment in full is due when the order is ready to ship. I pack, weigh, and calculate shipping costs, then contact the customer and tell them the total amount due including shipping. They either send a check or give me a credit card number (nowadays a Square or PayPal invoice is probably more common). Then the order ships. If the first order goes smoothly, then I will extend Net 30 invoices for all future orders. 

You don’t need to buy anything back. It’s their responsibility to sell it once they bought it. 

If something arrived broken, I sent them a free replacement, then filed a claim with UPS for the broken items. Sometimes I got reimbursed, sometimes I didn’t. The occasional losses are part of doing wholesale. Learning how to pack is crucial!

If you are also selling your work online directly to customers, be careful not to undersell your gallery partners. They don’t like that, and rightfully so. Either don’t sell the same items online, or make sure to always charge prices that are at least double what you charged the gallery. This only applies to online selling. If your other sales venues are local art fairs, then you don’t have to worry about underselling your galleries, since it’s unlikely the audience with overlap. 

[theothercandice]

Thank you so much for the detailed reply @Callie Beller Diesel and @GEP!! I really appreciate this! As with doing anything new for me, I'm currently scared shitless lol! And knowledge is power! 

I'm glad to read things that reaffirm I'm in the right direction, revisit some decisions, and was the insight I needed. Money/Payment is an issue that I get nervous about. I worry if I'm over thinking things, but I also dont know what "normal/common practice" is in these situations. Also, what is fair to both parties. But as you mentioned, the answers are case dependent.

Its interesting that its also different rules for a first time buyer and a recurring buyer but it makes sense after you realize that kind of relationship it is. I'm definitely building myself a flowchart with these notes. (And talking to my accountant asap!)