Selling to retailers for first time

Discussion in 'Retail' started by Adam Cox, Jun 17, 2011.

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  1. Adam Cox

    Adam Cox UKBF Newcomer Free Member

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    Hi, I run a fairly successful online business selling what are essentially luxury stickers. I'm at the point now where shops are showing an interest so just wanted some tips about how to deal with buyers and what to expect.

    1)A retailer has asked for prices, how would they expect these presented (In an emailed price list?) and how negotiable should they be?

    2)Should delivery be an extra cost or included in the unit cost?

    3)What admin kind of things should I have - other than a proforma?

    4)If my RRP is £6.99, production cost is .72 per unit then realistically what should I expect them to pay per unit? I'm expecting they'll want a markup of between 50 to 70%

    Thanks for any advice in advance, wish I'd discovered this site and you helpful people a year ago.
    Adam
     
    Last edited: Jun 17, 2011
    Posted: Jun 17, 2011 By: Adam Cox Member since: Jun 17, 2011
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  2. GeorgeStrait

    GeorgeStrait Banned

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    They will want a margin of 50% minimum ideally 66% on this sort of item. A mark up of even 70% won't be entertained.

    Delivery should be free over a minimum order value usually around the £150 mark at this sort of price point.
     
    Posted: Jun 17, 2011 By: GeorgeStrait Member since: Jun 4, 2011
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  3. Philip Hoyle

    Philip Hoyle UKBF Ace Free Member

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    Assuming it is a fairly slow moving stock item that's going to be selling maybe 1 per day rather than 1 per hour, I'd be looking at your cost price to them as being £2.80 which gives them a 50% margin.

    Look at it from their point of view. £6.99 less 20% VAT (most shops are VAT registered) is a net selling price of £5.60. For a relatively slow moving stock item, a retailer is going to want at least 50% margin, so that brings his cost down to £2.80.

    From your point of view, you should be looking at the three-thirds rule. One third of your selling price is your cost to buy, one third is overhead and one third is profit. So if it costs you 0.72 per unit, that means your wholesale selling price should be more than £2.16. So at £2.80, you're above that which is fine.

    Of course you are free to negotiate. You can start with higher prices and offer discounts for quantity purchases. As an example, £3.25 per item for under 100, £3.00 for between 100 and 500 and then £2.75 for over 500, then £2.50 for over 1,000.

    Re postage, I'd be inclined not to charge.

    You really want to encourage bulk buying so that you aren't plagued with lots of tiny orders that will soak up your time and effort to process.

    You'd get higher prices if you offered other incentives, such as sale or return, merchandising (posters, stands, etc), but if all you're going to do is sell the stuff and leave them to market it, then a 50% margin is the least a retailer will accept considering the risk of not selling, stockholding costs, potential for obsolescence/damage/theft, etc.
     
    Last edited: Jun 17, 2011
    Posted: Jun 17, 2011 By: Philip Hoyle Member since: Apr 3, 2007
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  4. Adam Cox

    Adam Cox UKBF Newcomer Free Member

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    Brilliant! thanks so much - exactly the kind of thing I was after. I'll digest all this info and let you guys know how it goes.
     
    Posted: Jun 17, 2011 By: Adam Cox Member since: Jun 17, 2011
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  5. deniser

    deniser UKBF Legend Free Member

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    I've never heard of this rule before. Is it applicable to wholesale only and if so, all sectors?
     
    Posted: Jun 17, 2011 By: deniser Member since: Jun 3, 2008
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  6. KateCB

    KateCB UKBF Ace Free Member

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    The two thirds rule is as old as the prudence concept - and I have know it for years, and you know what - I have no idea why I don't apply it, it makes so much sense!
    It applies to all sales generally, not just wholesale, as every sale has a cost to buy, an overhead (retail/wholesale/e-commerce etc) and a profit margin
    Right, off to the calculator to see how much of my pricing falls within the two thirds rule and what needs changing!
     
    Posted: Jun 17, 2011 By: KateCB Member since: May 11, 2006
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  7. deniser

    deniser UKBF Legend Free Member

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    It makes sense but the market doesn't bear those margins. No wonder retail businesses are failing all over the place.

    I will now also bear it in mind when buying stock. Means I have to ditch about 90% of it though!
     
    Posted: Jun 17, 2011 By: deniser Member since: Jun 3, 2008
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  8. GeorgeStrait

    GeorgeStrait Banned

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    I'm with you Deniser, I have some items that are higher, some lower, these days surely you can't do it across the board, and if you tried I would imagine you will fail.

    Does it work the same for a can of beans and car? Or a loaf of bread and a digital camera?
     
    Posted: Jun 17, 2011 By: GeorgeStrait Member since: Jun 4, 2011
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