Retail vs wholesale price for handmade product

[katiehanton]

I have a product that I am hoping to launch to market in the next few months. I have spoken to various retailers, and they are all very keen to stock it, but it seems there general rule of thumb for pricing the product for retail is to double the wholesale price inc. VAT. I understand this for a normal mass-marketable product, however for a product that takes 1-2 hours to produce and is entirely handmade this doesn't seem viable. To make the product costs me £25 pounds, to double up would see a wholesale value of £50 plus £10 VAT, so they are suggesting the product would retail at upwards of £120. I have a couple of issues with this... Firstly, I think this is too high a price point for what I am trying to sell. My market research would suggest people will pay between £80-£100, so £120 is pushing is. Secondly, I am seeing £25 of £120, when it is entirely my product, and my man-hours going into the manufacture.

What kind of deals are there to strike with retailers for a product like this, or are the alternative avenues to explore?

Any help much appreciated!

 

[Jeff FV]

You are correct in that the retailer will want to sell the item for x 2 + VAT of the price they pay for it. A better way to do the sums is the retailer will apply a mark up of (at least) 2.4 times the ex Vat price.

So if you think the rrp is £100, sell to the retailer at £40 + VAT.

If you think it unfair that you only get £40 when it sells to Joe Public, then go out and sell them to Joe Public yourself.

Finding your route to market is possibly the hardest, and most important, thing you'll do.

J

 

[Ross McElroy-Gray]

Don't be afraid of increasing your price. If your product is quality then you can brand it as high end / luxury and you will be surprised. We manufacture bespoke shelves. Our prices are up to 4 times the price of Ikea but the quality speaks for it self and thus we have a USP!

Our way of thinking is - We would rather make one sale and return a £100 profit than make eleven sales at £10 profit and return £110.

 

[talksalot81]

It is a tough one but you have to accept how the world works. We manufacture goods having done the technical work to develop them, our white label customers will work multiplying something like 4x to get a retail price which then allows enough that they can sell to wholesale. When you think about it, the retailers are making more like 4x the profit we do (given that our sale price is only partially profit). When you boil it down, we are the ones with PhDs and potentially spending dozens of hours developing products, we have expensive machinery and packaging lines to maintain etc etc yet the end retailer makes 4x the profit for just having it on their shelf - crazy world!

If you can get straight to the customers, you can make big money. But you have to be aware that is a difficult job and you may not be equipped to do it. In our case, we would sooner sell 4x as much through a handful of third parties than try direct sale and open up an entirely new branch of the business.