Trade? Retail? Both? Looking for advice...

[Davek0974]

Hi all,

looking for advice on what direction to take my micro business in.

Amongst other things, I make and sell parts for the print industry:- tools etc. I sell these parts directly on the usual channels and on my own website. I also offer them to a few large business names who then sell them on through their own channels.

However, following a recent discussion with one of the owners, seems I am not playing fair by offering the stuff at less than they can due to the fact that they have to add VAT (i'm not registered) plus postage plus mark-up and the price we had set meant that their offerings were 200% more than my direct sale price.

Clearly I can see now why they would be a little vexed and reluctant to take any more product lines from me.

So, while having my lunch, I had the thought that I might be able to sell more products by offering to not sell direct at all and giving a proper trade price which, with no competition from me would mean they can charge what they see fit.

End result is that I might be able to come out better off by supporting them rather than competing with or undercutting them - this is the big unknown.

There are hidden benefits - no paypal fees, no listing hassle from customers, no lost-in-the-post orders, and so on. Of course, there are the usual problems too - waiting 30 days to get paid, running statements, dealing with bad debtors/late payments and so on.

I see this as one of those "fork in the road" points for a micro business - which one to take though??

 

[Mr D]

Pretty sure they cannot set your price.
Is your product unique and in demand sufficient to increase profits overall by restricting your sales?

 

[Davek0974]

Products are reasonably unique but very low demand - this is print not consumer goods.

My thoughts were that they could sell more if the price wasn't hiked so much due to me undercutting them.

I have three trade sellers, combined they sell more than i do alone hence my thoughts were that they could do even better if i was not undercutting.

I have no idea here, all i know is that i need to do something or they will refuse to deal with a supplier that undercuts - i can understand this.

 

[Mr D]

You undercutting them causes them to hike prices?

Must remember to tell amazon that one.

 

[Davek0974]

No, i am not giving them a low enough trade price to sell at what i sell them for, especially as they have to add VAT too.

If i stopped selling direct on these items, i could likely offer them the same price they get now and they could set any retail price they wanted.

If I lost these companies or dropped them I would lose a lot of sales, its a small, complicated market.

 

[Sam Cornish]

I would say Trade would be the way to go - less marketing expenses for yourself to get your product out there. Let the people who have the contacts sell the product.

However, what if you offered your customers a drop shipping service, this way you could hold the stock and charge a higher trade price. Im sure customers would be in favour of this as it's not as much outlay for them to buy stock.

 

[Davek0974]

Thanks, I think it's leaning that way.

Drop-shipping is an option but i do not know ant print service business that does that, they are all old-school companies and tend to like a bit of stock and looking after their own customers.

Plus that would leave me the hassle of packing and taking to post office etc plus dealing with lost parcels, late parcels and so on. I would rather be making stuff than packing it

 

[Socio South West]

The traps with trade suppliers tend to be that you supply a small number of companies and then lose one of the bigger customers, and overnight the business is struggling or totally dead.... so while you don't have the costs of retail marketing, you must keep looking for new customers however you choose.

As you rightly say, you don't have the hassle of end user relation problems and niggles as a trade supplier

Ease your debt collection problems by making the trade prices subject to prompt settlement of the account - so they get 20, 25, 30%... whatever.... off RRP for settlement by day 30.... but on day 31 they pay full RRP. Never had to chase a debt when I was doing that!

 

[Davek0974]

I know this industry - been in print for 40 years and thus i know pretty much all the outlets for my stuff

It can be boiled down to 4 maybe 5 big players and various non-entities. I am connected already with three of them.

As i said, its sort of niche business as it really is not mainstream or high-street but all industry support stuff really.

The debt idea sounds good too.

 

[obscure]

Why not just raise your Direct Sales price to match the price your customers are selling at. That way you aren't "undercutting" them and you get a much better profit on what you sell.

 

[billmccallum1957]

If you go the trade route, don't do 30 day invoicing, make it payment on delivery.

You will be doing them the favour by not selling direct, so they need to reciprocate by paying you when you provide stock, then no nasty debt chasing issues.

 

[Davek0974]

Thanks all,
I have been messing with pricing and discounts this morning and found a possible formula i can pitch to them which gives them a slightly better trade price but also sees my price increase a bit to balance the market.

It makes sense on paper, whether they go for it or not is a different matter

 

[BenBis]

The VAT element is irrelevant- as VAT registered businesses they reclaim purchase VAT as well as charging VAT on sales. If the three of them are responsible for most of your business, it suggests you should try (for the moment at least) to keep them happy. However if you can go direct to market and make more money, then long term that should be your aim. You've said that they are responsible for more of your turnover than you do yourself, so my approach would be to raise your prices to match theirs while you continue to work on your retail presence. This way you'll keep them happy, make more money on any retail sales you make, and you don't cut off your own retail option for the future.