Percentage given to the stockist ?

[-Chris-]

I read in another thread here, that a good way to get your products on the shelf of a shop, is to offer them sale or return, but how do you decide what percentage to give them in terms of payment? Especially if there's only a few £'s to be earnt on each item and hopefully going for volume?

 

[mhall]

Sale or return is useful for a Retailer but he will still want to make his standard margin. Basically, in most cases they will simply multiply the cost price by 2.4 to get to the Retail price. The product would need to be literally flying off the shelves for them to lower that multiplier. Make sure you have your policies in place in case of "unsold" but damaged stock and "unsold" but stolen stock. You need to agree where the liability lies.

 

[-Chris-]

Sale or return is useful for a Retailer but he will still want to make his standard margin. Basically, in most cases they will simply multiply the cost price by 2.4 to get to the Retail price. The product would need to be literally flying off the shelves for them to lower that multiplier. Make sure you have your policies in place in case of "unsold" but damaged stock and "unsold" but stolen stock. You need to agree where the liability lies.

Thank you for this input - this is unknown territory for me at the moment. Do you get the retailer to sign something?

 

[MBE2017]

Thank you for this input - this is unknown territory for me at the moment. Do you get the retailer to sign something?

Depends if you wish to be paid on any sales, and to have any unsold stock returned.

 

[-Chris-]

Depends if you wish to be paid on any sales, and to have any unsold stock returned.

What do people usually do? If you give them, for example, 10 items to place on their shelf, each item retails to the public at £20? How would you play that one?

 

[-Chris-]

How do others here do it please?

 

[billmccallum1957]

Get an agreement drawn up which states that the products remain your property until you have been paid. You give them 10/20/30 and call back in 2/3/4 weeks to collect payment and restock.

 

[Iain_Henderson]

For our retail trade we supply stock and display for free. Customer only pays for items sold less their commission (around 33%)

The customer does not make their usual multiplier but they take no risk - we do.

 

[gingerdad]

We have a number of local artists items on sale or return and all on normal margins i.e. 2.4

 

[gingerdad]

We keep an inventory for each artist and pay them at the end of the Month. They usually restock on demand but all very local so easily managed.

 

[swankypants69]

As a retailer I tend to be happy to accept a lower margin as I am not carrying the risk, the supplier is

Simply multiplying by 2.4 doesn't work for every retailer

Trying do that with a tin of Heinz beans, a bottle of whisky or a DVD ha ha

 

[-Chris-]

Thanks all for the comments, it's getting clearer. Supposing I leave 10 items with the stockist, each item costs to the public, £20, my nett profit on each is £10 (pre-tax), they don't pay me anything at all and I don't pay them. When I go back 2 months later, she's sold 5 of them for £20 each, so is it reasonable / usual that they would pay me, say for example, £15 for each item and keep £5 for themselves on each item?

 

[ecommerce84]

We used to use a local book supplier who did sale or return and it worked largely as you say:

He left us 10 of each copy, came round once a month and invoiced us for how many we had sold and then brought our stock levels back up to 10 of each.

One thing you need to keep in mind is if the retailer is VAT registered and your product would be subject to VAT. If the retailer in your example is VAT registered they would have to pay £3.33 of the £20 to the taxman, leaving them with £16.66. If you are looking for £15 from them, that will leave the retailer with £1.66 out of a £20 sale which 99% of retailers would not do. (although a retailer should be free to set their own prices so they may want to sell it for more than the £20 anyway.)

Aiming for shops who aren't VAT registered would avoid this issue coming up.

 

[-Chris-]

Thank you for this, it's a real help at the moment. I had thought of the retailer putting their price up slightly to make up the difference, so they can earn a bit more, but I wasn't keen on that, as the increased price might make the item look less good, also, I would also be selling the items online, at a cheaper price, which, if the customer then saw that lower price, it wouldn't look too good for the retailer really.

I am open to any and all ideas.

 

[DontAsk]

Basically, in most cases they will simply multiply the cost price by 2.4 to get to the Retail price.

Based on??? Clairvoyance???

We don't even know what the OP is selling.

A niche product or brand that will bring new customers in to the retailer will have retailers knocking on your door with considerably lower margins, based on my experience.

 

[-Chris-]

Get an agreement drawn up which states that the products remain your property until you have been paid. You give them 10/20/30 and call back in 2/3/4 weeks to collect payment and restock.

Thanks Bill, I'll probably do that, this way both parties are in no doubt. Do you have a sample one you could post or pm?

 

[pentel]

Using the already mentioned (several times) 2.4 multiple with a sale price of £20 expect the following:
£20 less VAT = £16.66

/ 2.4 = £6.94.

You get £6.44 + Vat if VAT registered.


As many people have also said a 2.4 multiple could be a bit of a fallacy....

 

[billmccallum1957]

see http://www.bizorb.com/templates/sale-or-return-agreement-template/

 

[Jeff FV]

The 2.4 accounts for VAT - I.e the retailer sells for 2.4 times they pay for it (ex VAT) , this means they double their money.

E.g. Retailer buys for £10 (ex VAT) and sells for £24 (10 x2.4). £4 to the tax man, £10 cost, £10 profit.

No fallacy about the 2.4 multiplier, we used it for years.

 

[DontAsk]

No fallacy about the 2.4 multiplier, we used it for years.

The fallacy is:

in most cases they will simply multiply the cost price by 2.4

There are many, many businesses who do not use that multiplier.

I suggest you have missed on years of extra profit by not using a higher multiplier.

 

[mhall]

It's certainly not a fallacy. We have also used it for over 20 years as a base figure. We multiply what the distributor charges by 2.4. If we don't believe we can achieve the resulting figure at Retail we simply don't buy. If we think we can get more, we will charge more which would obviously increase the multiplier. 2.4 is the minimum we will accept and our base line for knowing what our competition would also charge. If we have exclusivity in the area, if the product is extra special, if the packaging is really good, we may adjust our price upwards. We would never go down - we don't need to play in a race to the bottom to be cheapest.

 

[DontAsk]

You are now contradicting yourself. Initially it was simply multiply by 2.4, now you say the 2.4 figure is just a starting point, not the multiplier actually used.

There is no "most used" multiplier. That there is, is a fallacy.

 

[mhall]

There is no contradiction at all you fool. I said "in MOST cases" people would simply multiply by 2.4 which is exactly what MOST people do in the gift industry. If you speak to ALMOST every supplier at any trade show you will see that they also use 2.4 ( a few use 2.2, but that is usually to get the RRP down). I would, therefore, stand by my comment that 2.4 is, by far, the most used multiplier.

What a Retailer then does with his actual price is entirely up to him, but it gives him the idea of where the product sits in his range and the value proposition to the customer. It also gives him flexibility if he needs it. Bearing in mind that the Retailer CAN charge as much or as little as he wants but the RRP gives him an idea of where his competition would start from and also gives suppliers a way to tune their prices based on what they feel the end value of the product is to the consumer. (rather than just stick a percentage on top of the cost, which is a very 1970's view on pricing, they can create a product to an end price and then work backwards, generating more margin for themselves whilst keeping the Retailer happy with their margin).


Now, if you are not in the gift trade, then you could well have a different multiplier, if the OP was not referring to our trade then he needs to discover the most used multiplier for the industry they are targeting.

 

[deniser]

We are not in gifts but in clothing and our multiplier is also 2 plus the VAT which I believe is the same as 2.4 including VAT. We have also used this for the last 14 years so it is pretty ingrained in our sector. If the product warrants it, we will increase the price to what we think the customers will pay but the starting point in deciding whether to buy the product is always "can we sell it for double plus the VAT?".

We are a small independent but we know that some of the top end department stores will be selling the same products for a multiplier of 2.2 to 2.4 but that's because they offer a premium shopping environment.

We also round up to the nearest 99p, £4.99, £29.99 or £49.99 etc. if the 2x multiplier comes to a little under these price points.