Commission rates on goods sold in my store?..

[Bluebells]

I am opening a shop and will be selling items made by local people and want to know what is the going rate for commission on the sale of these items? I won't be buying these items, they will belong to the people who are selling them until they are bought from me.

I was thinking 15-20%?? I will make sure that the sellers don't advertise their goods anywhere else for cheaper than they will be selling for in my shop, but if there are any other tips anyone can give I'm always grateful for info.

Thanks in advance

 

[kulture]

I would suggest 50%. You have rent rates and wages to cover. Not to mention carrying all the risk.

 

[BusyVids]

I'd agree. 50% is reasonable

 

[captaincloser]

Thats why almost anyone would buy and sell as the margins will be much higher. You also need to get some mastery of the subject otherwise you will end up with a shop full of unsellable stuff.Some things sell, some move very slowly and you need to have this knowledge.

 

[Websitehandyman]

Blimey, 50% ! without even knowing what the items are or the prices ?

You should base your commission on two things;

1. The price - you shoulds have a swing rate, if you are selling items for £5 then making 10% is pointless unless you are selling hundreds a week. So for example you migh have;

under £10 = 25%
£10 - £50 = 20%
£50 - £100 = 15%
over £100 = 10%

2. Now you need to determine how many you might sell in a month (maybe) and have the same swing rate for those.

10 = 15%
50 = 10%
100 = 5%

So if you sell ten of a £5 item your profit is 40%

If you sell 50 of a £150 item your profit is 20%

This not only keeps your prices within reason but also allows you to offer the suppliers with extra profit if their items sell well. You'll have set your own figures based on what you need but in general thats whole wholesale used to work.

 

[PrestonLad]

It depends on the products.... but I can't think of a single product that would be sold through a local shop on commission where it would be fair for the commission (margin) to be any less than 33% (equivalent to a 50% mark up) - and quite often 50% or more.

Your thoughts of 15-20% would mean you'd be paying all your rent and wages and insurance and the interest on any capital you've borrowed/spent - your heating, lighting, shop fittings, waste disposal, advertising, carrier bags..... and possibly even risking your own home if all goes wrong..... all for 15-20 pounds on a 100 pound product. Yet the seller gets 80+ pounds... and their profit margins would be entirely under their control.... and probably a lot lot lot more than 20%.

If I was you, I'd find out what the typical mark up is in retail of your sorts of products... Your sellers should be expecting you to pay a retailer something similar to that. If they don't like it, then propose that they take the time, trouble and expense of opening their own shop !

 

[Talay]

I'd need to have in place a policy to remove non selling items and what to do with them if the owner didn't come to collect them. You cannot store their non merchandisable stock forever.

 

[kulture]

Blimey, 50% ! without even knowing what the items are or the prices ?

Yes, because the higher priced items will take a long time to sell, so will need to pay for the time they have been on the shelf. In any case the OP said it was stuff made by locals, so it would be a fair bet that it is art or gift or craft type stuff. It certainly would not be toys (kite marks/consumer testing/age test), nor would it be electrical goods (elf and safety). It is unlikely to be clothes.

Having said that in my local town there is a very successful clothes shop which sells used/unwanted clothes on commission. The shop gets 60%. They also get to say when there is to be a sale, and every quarter prices are halved to get rid of old stock.

 

[Bluebells]

Thank you for all your advice. I have worked in retail for some years and previously owned a gift stall where the mark up was 50% I just thought that because there is less risk involved in this venture... ie I haven't bought the products, then the margin should be lower.

I do need to find out what the going rate is, but i don't know of any shops near me selling under these circumstances. I need to do my research, this is my staring point really.

I really like the swing rate idea, but won't that just encourage a seller to price their item higher so they get paid more?

I guess I'm coming at this the wrong way... see I've been offered a retail unit at a temporarily very cheap rate because there are so many shope closed right now, and I'm trying to pass on my saving... wheras I need to think more along the lines of... I have this cheap rate now but that could change and how would I pay the rent if my rent goes back to normal.

So I guess I want to offer a good price to the people who make the products, (they are gift/craft type products and some refurbished furniture) but not price myself out of business.

Thanks

 

[kulture]

You really need to charge the same commission as you would expect in margin. Just because you are not tying in capital into stock, does not reduce any other costs. OK maybe a slight reduction of 1-5% off the margin you needed. As you do not have to borrow cash to buy the initial stock. Thereafter you are effectively buying the stock at the time you sell it.