Retail Commission/Mark-up

[momtrepreneur]

Hi,

I was thinking of providing a concession type of selling at some shops where they take some products from me to sell at their retail shops for some commission but how much should it be? Does this mean they take the product without paying and only pay me as they sell my items. How about wholesale? Do I advertise as 35% off the retail price for wholesale or should this be more?

I haven't got much experience on this type of selling and would be grateful for any advice.

Many thanks.

 

[gj]

I have a feeling the shops may well dictate to you what you will get. They will start with what they think they can sell for - and decide what markup they need in order to warrant giving the product shelf space, which brings them down to the absolute maximum that they will pay you.

Smaller independent shops may not be so rigid - they are sometimes more inclined to take a product on because it would be good to be selling that, even though the markup might not be as high as they would like.
Don't have many retailers as clients but they are looking at selling at 3-4 times cost and then generally means you need to decide whether you are a wholesaler or a retailer. Wholesale gets you much lower price, but less of the hassle of selling to the end user and greater volumes and access to a much larger market. Sometimes tough to accept selling your product for 25 to 33% of what you can see it being sold for in the shop, but what can you realistically sell to the end user?

Graham

 

[momtrepreneur]

Hi Graham,

Thank you for the info. I was thinking of approaching small independent shops, maybe offer them on a concession basis, lets say 15% to start off with (for sale of £350 p/w) then max of 25% when its over the £350 sale or is this an unworkable strategy? Too low/too high?

Or I could offer them as a wholesale cost, 35% off the retail price. I will be selling our products too online and mailorder.

Are these possible and the right way to approach it?

Thanks

 

[gj]

What are you selling? and what is the average retail price?

Graham

 

[momtrepreneur]

Hi,

I will be selling fashion jewellery, bags and accessories. The main items I would like to sell at independent shops range from jewellery £6.50 - £25 and bags £20 - £55.

Any ideas?

Thank you much appreciated

 

[gj]

I think the shop will need to be buying in at something like 1/3 of the selling price - and that is 1/3 of the net of VAT price. So if selling price is £23.50, shops net is £20 and they might be prpeared to pay say £6 or £7 (plus VAT if you are VAT registered - this was covered in replies to one of your earlier posts). Whether you could persuade an independent retailer to pay say twice that, to give only 35% or so profit to the retailer I rather doubt, unless your products are very unique and just what their customers are crying out for!

I guess you need to talk to some potential retailers and see what they might go for.

Obviously selling online and mailorder as a retailer gives you all the profit, but less the marketing cost. This could be quite large - how are people going to know you exist to order via mail order?

I think you probably need to fidn out a realistic price the retailers would pay and then consider whether you are prepared to make (I am assuming you make the bags, jewellwry etc) the products for only that amount. If you consider that is not enoght return for your time per unit, then retail via the internet/mail order is probabaly the sector to aim for. Then you need to look at the marketing budget you would need to get those orders coming in.


Graham

 

[Ozzy]

As my wife used to be a small retailer, she used to work on at least 50% gross on sale. This gave her enough to cover VAT on nett plus make enough to earn a living. We generally found this was also the margin that her suppliers worked on too, seems to be the defacto.

 

[momtrepreneur]

Hi guys,

Thank you both for very good advice. My products are not handmade but I need to stay competitive therefore can't charge too much but maybe need to review prices as I haven't taken too much into account about the charges I will be paying if I take card payment plus the packaging too, well I'm new into the business world so guess we learn and make mistakes but next time round we get it perfect well almost.

Maybe this question Richard could help if you may. What kind of questions do Inland Revenue ask and need to know when you ring them up to register as I'm planning to do that soon but thought just to get myself prepared I'm an email and text junkie so kind of loosing my know how when it comes to using the phone which is bad. Just a bit of insight into the kind of things they need from me and questions they ask so I could prepare all my paperwork in advance. I know they're not that bad as we all think but it all depends on the person at the other line, customer service. I've had my fair share of TERRIBLE customer service..if they could call it customer service.

Much appreciated.

 

[Alpha]

Hi Momtrepreneur

If you dont mind me butting in on the question aimed at Richard.

If you dont want to register via telephone you can complete an online form which can be printed off and signed. If you feel that this is easier use the following link

http://www.inlandrevenue.gov.uk/startingup/register.htm

 

[gj]

Alan is quite right - we always register our clients by way of a form

If you don't fancy the online version, you can print off the form using this link http://www.inlandrevenue.gov.uk/forms/cwf1.pdf, fill it in at your leisure and then post it off.

I think you will find that it is not as daunting as you might fear - most of the questions are self explanatory.

Hope you get on OK - if not post a question, talk to Business Link, or an accountant.

Regards


Graham

 

[momtrepreneur]

Thank you both for the links. Just two pages I couldn't believe it, its not as daunting as you say after all. What happens after that?

By the way has anyone here heard of Call Navigator, its a phone system where it directs all calls to your landline using their non geographical number plus it allows you to set up departments, the downside is its 0870, I prefer to use 0845. This company charges £10 per month plus £49.99 to set it up. Can anyone suggest a good reasonably priced company.

Re: pricing, Richard mentioned about 50% mark-up, actually I was thinking it sounds fair after all they need to make something. I don't charge VAT but then the pricing I have approached have not allowed for this. E.g some items I may only have put 35% profit on it after I have added on the expenses it cost me to purchase the goods not just the wholesale price I'm talking about packaging, card payment fee etc..after all that has been added then I may put something like 35% as profit on top so I'll be losing out if I offer it with 50% deduction for wholesale.

Should have been packing some presents but can't resist just 10 mins on my computer but then it turns out to be 5 hours.

 

[Anonymous]

hi momtrepreneur,

Glad you managed to get to the bottom of your tax issues.

In terms of your non geographical number - we provide NGN numbers as part of our service.

We can provide an 0844 local call number terminating on your landline with added option of time of day routing, this means you can have it sent to your office number from 9-5 and then to your home in the evening. there are other options for call forwarding but this is an example.

We can set up this number for £29.99 and is active within an hour. there are no ongoing fees, no line rental, no call charges whatsoever. you simply pay the set up fee and then it is yours for life.

we can also do a fax to email number with a consecutive number to your phone number - (good for marketing and creating the impression of a larger company). When you take the numbers together instead of paying £59.98 we reduce the cost to £42.00 - again with no ongoing fees.

We could also do a virtual switchboard where you can record your own messages - for example you can have "for sales press one, for admin press 2" etc. Each option can come through to the same landline or to different ones for each department. Each terminating number can also be changed as often as you wish.

The virtual switchboard is £79.99 or when taken with a Fax2email and NGN number instead of paying £134.00 we reduce the cost to £99.00.

All of our services are free for life once you have paid the set up fee and can all be purchased on our site.

Hope this helps a little but if you need any additional help or advice before you buy then by all means pm or email me.

 

[gj]

If there is an obvious retail price for your products, you should be aiming for that for your retail sales, and offering sufficient discount from that to your wholesale customers to get them to buy. If the discount the wholesalers demand menas you can't make sufficient money to make it worth your while then forget the wholesale sales.

If there isn't an obvious retail price, I think you need to try to establish one by reference to other products of a similar nature, if possible. It may be that you just have to bite the bullet and see how you go.

Graham

 

[Ozzy]

Graham is right that that you need to compare your product to other similar ones in the market. Don't be afraid of charging more for yours if your product is of sufficiently superior quality.
Also remember wholesale "should" be more about quantity, so although margins will be tighter you should make up for it on volume.

 

[momtrepreneur]

Happy New Year everyone,

Thank you all for all the great advice. I will be looking into the pricing strategy and may not make much on wholesale supply so will stick to supplying it direct as a retailer.

Turning to TMT post re: telecom. Thank you for the info but I would prefer to use an 0845 than 0844 simply because its easier for the customer to remember and it is recognisable, I didn't even know that there was an 0844. Your product and services looks great and prices are very competitive too.

Regards