What sort of Trade Price Should i offer

[Rosebud]

Hi there, I wonder if anyone can help me with my query.

My business has been going in full swing for the last year and is proving to be quite successful. I make and sell Bespoke Show Browbands for Equestrian purposes. I sell directly to the public and very much enjoy doing them. I decided to start my business when i gave up my full time job as a successful interior designer to have my liitle girl in December last year. My business is only small, it is home based so i have little overheads to pay, self funded and i manage away at it fine and it is proving to be quite popular.

I have recently been approached by a saddler who would like to take a small stock of my browbands into their shop as they are very impressed with what i make and having seen the quality of them would really like something different and unique to sell to their customers.

I am quite tempted to do this as it's another way of making my business known. However, i am a little stuck when it comes to a trade price and the terms of sale

If i sell a browband to a member of the public for a minimum of £30, what sort of percentage should i take off this price to offer as my trade price. I have had conflicting advice and am very confused. I was thinking about 15%, others have suggested to me 5% which personally i don't think is enough off for a trade price.

I would like to do this and i know where my profit lies but i don't want to be "a busy fool" as i still want to have a profitable business and do have additional idea's of ways to take the business forward in the future. I am quite happy to carry on just offering my products to the general public, i just see this as an additional way to promote my business.

Some simple advice would be most appreciated

ETA: With regards to terms, am i better to take full payment for a certain amount of products, or supply a certain amount and recieve the amount as they are sold by the saddler?

 

[tms-print]

hi there here at tms print we offer trade account holders a 20% discount off our general prices.

i dont know what your profit margin is like but i would say around 10% - 15%.

one thing you have to remember is they (the trade) will still need to make a decent amount of profit for it to be worth there while stocking your products.

Regards Ricky
Tms Print

Hi there, I wonder if anyone can help me with my query.

My business has been going in full swing for the last year and is proving to be quite successful. I make and sell Bespoke Show Browbands for Equestrian purposes. I sell directly to the public and very much enjoy doing them. I decided to start my business when i gave up my full time job as a successful interior designer to have my liitle girl in December last year. My business is only small, it is home based so i have little overheads to pay, self funded and i manage away at it fine and it is proving to be quite popular.

I have recently been approached by a saddler who would like to take a small stock of my browbands into their shop as they are very impressed with what i make and having seen the quality of them would really like something different and unique to sell to their customers.

I am quite tempted to do this as it's another way of making my business known. However, i am a little stuck when it comes to a trade price and the terms of sale

If i sell a browband to a member of the public for a minimum of £30, what sort of percentage should i take off this price to offer as my trade price. I have had conflicting advice and am very confused. I was thinking about 15%, others have suggested to me 5% which personally i don't think is enough off for a trade price.

I would like to do this and i know where my profit lies but i don't want to be "a busy fool" as i still want to have a profitable business and do have additional idea's of ways to take the business forward in the future. I am quite happy to carry on just offering my products to the general public, i just see this as an additional way to promote my business.

Some simple advice would be most appreciated

ETA: With regards to terms, am i better to take full payment for a certain amount of products, or supply a certain amount and recieve the amount as they are sold by the saddler?

 

[Drpepper]

15% won't be even close, any retailer (selling in this price range) will be looking for a minimum 50% mark up so you would have sell a £30 item to them for £16 (allowing for vat). Ideally retailers seek 235 mark up (i.e double plus vat). At 15% that will cover the vat alone with no profit, 5% would make the retailer a loss!! Unless they sold highly above what you charge, which I doubt they would.

You need to remember that the retailer has to cover rent, rates, staff, service charges etc etc plus the cash tied up stocking your product. After all of that they ideally like to make a living themselves as well!!

 

[SamStones]

I think you need to offer 50% discount and ensure you get paid up front - if it's a customer you know you can trust perhaps give them 30 days to pay or something. I don't think you should be taking money each time one sells as it just adds to your paperwork etc - although the customer may be prepared to accept a higher trade price if they're just working on a "commission" basis.

 

[Rosebud]

Thank you for the replies. I think that i might forget about it for the moment. Giving 50% off would not be worth my while in spending the time making them and would be a bit nieve of me to think that it was worth doing so, they are not being made on a huge scale to offer a discount like that. A comission type basis would be a better option, i have some on display at a local gallery who put 25% onto my usual price so that i am still making a decent amount should any sell but so they are also getting a cut, but at the end of the day another business will see my products as a way to make money which would be better off being in my pocket whilst my business is still relatively new. I think that advertising in equestrian magazines is the way for me to go to target more new business rather than trading with saddlerys at the moment.

 

[internetspaceships]

50% isn't necessary at all.

 

[spanish_inquisition]

Hi, Silver,
I am plannig the launching of a business and have thought about the possibility of selling to shops too.

First I was thinking like you: I dont want to lose the 50 percent; I can do just public and no give away hours of my work.
Then, I changed my mind after speaking to my boss at work:

-Selling to shops means selling not just 1 item but more (10 or more?) at once, which saves time (selling time).
I was thinking of getting a day in camden town and be my own shop; there you can see a selling time profit if selling to the other shops.

-And always is a great opportunity to get to people who buy in these shops, and probably other shops will want the product as well.

These are just my thoughts.
All the best
S.I

 

[spanish_inquisition]

50% isn't necessary at all.

Can you please explain it a bit more?
Regards
S.I.

 

[Rosebud]

But, the object of going to the time and effort to start a business is to make money. If you sell something for half what you would normally sell it for you might find that you are only just covering the cost of the materials without your time so when someone else is reaping in the profit frm your item, what's the point in then being a busy fool? The business doesn't justify itself or make sufficient money in that case. I have had a trade stand at shows and this was great as it meant that people could see my item, see it's quality first hand and i had a great days sales and all i had to pay was the cost of my stand space which wasn't much. But i do feel it would get my products "out there" if a saddlery had them on display, my branding would hopefully bring in enquiries, but not at a 50% loss to myself. That's not worth it for me.

I was really confused, hence why i asked the question as there is so much conflicting advice and to be quite honest i still am really confused.

 

[internetspaceships]

Hi there S.I.

Sure, apologies I was distracted half way through that post by an inane response on another thread

The trade price vs retail price depends very much on a number of factors.

The amount of products sold in a given time period.
The overall sale price of the item.
The availability of that product to the trade.

If you are the sole supplier of that product and it's a desireable item then if people want to sell it they will buy it from you at whichever level of discount you choose to give them.

 

[Drpepper]

But, the object of going to the time and effort to start a business is to make money. If you sell something for half what you would normally sell it for you might find that you are only just covering the cost of the materials without your time so when someone else is reaping in the profit frm your item, what's the point in then being a busy fool? The business doesn't justify itself or make sufficient money in that case. I have had a trade stand at shows and this was great as it meant that people could see my item, see it's quality first hand and i had a great days sales and all i had to pay was the cost of my stand space which wasn't much. But i do feel it would get my products "out there" if a saddlery had them on display, my branding would hopefully bring in enquiries, but not at a 50% loss to myself. That's not worth it for me.

I was really confused, hence why i asked the question as there is so much conflicting advice and to be quite honest i still am really confused.

It's really easy, a shop has massive overheads. If you want to get you products into the retail market what else are you offering the shop as an incentive? Advertising, promotions, well know brand? I don't think you will find any shop willing to take an unknown product for less than a 50% mark up at this price point. Your options are to either make the product cheaper, or up the price you retail it at so it the shops can also make a profit and sell it at the same price (if you sell it cheaper the shops won't be interested in competing with you to sell your product!). If you can't do either then it's not going to make it in any shops.

Remember that most products in shops follow this process:- Manufacturer, wholesaler, retailer (many may have others involved) and obviously each make a profit. Also consider that, and this on a larger scale, big names will pay supermarkets to take the products (a certain chewingum maker recently paid ASDA £5million to stock their gum).

Think that may have been a bit of ramble, sorry

 

[Rosebud]

It's really easy, a shop has massive overheads. If you want to get you products into the retail market what else are you offering the shop as an incentive? Advertising, promotions, well know brand? I don't think you will find any shop willing to take an unknown product for less than a 50% mark up at this price point.

But this is the whole point of my question. I have been approached, i haven't asked to supply. My items are mainly bespoke and not mass manufacture. My place in the market is aimed at people who want a specific product done to their requirements. If i try and lower a making price, the quality is affected as something has to give somewhere therefore, a lesser item is being distributed which is not my aim. I am quite happy to carry on making bespoke products aimed at public supply only

 

[Drpepper]

But this is the whole point of my question. I have been approached, i haven't asked to supply. My items are mainly bespoke and not mass manufacture. My place in the market is aimed at people who want a specific product done to their requirements. If i try and lower a making price, the quality is affected as something has to give somewhere therefore, a lesser item is being distributed which is not my aim. I am quite happy to carry on making bespoke products aimed at public supply only

Here's an idea then, supply the interested shop a couple of brow bands to display with some blurb explaining they are bespoke. The shop may then be interested in a 15% commission. They would probably want the customer to pay you direct (remember the VAT issue!). The only problem may be if your product lost them sales of their more profitable stock lines.

Either way good luck

 

[Billmccallum]

50% for the retailer is not really appropriate in this instance....

if you sell bespoke products, the retailer does not need to hold any stock except for display samples, so they are effectively acting as an agent by taking orders for you to fulfill.

Each shop will have their own expectation of income from trading with your product, so start out by offering 15% and see where they take it from there. If you can agree terms then it will be worthwhile, if not just walk away.

 

[SillyJokes]

You make show brow bands to order, to a customer's specification.

I've had a very quick look online and see that prices for show bridle brow bands are between £17 and £55 plus postage.

At £30 for something specially made your product sounds cheap. I think you should be able to sell to the shop, make money yourself and leave the shop enough room to make the money they need, but you may need to raise your own retail price as suggested above.

How have you arrived at your price? What are the material costs and how long does it take to make one? I'm guessing you buy a plain brow band and decorate it so your costs must be about £10. If it takes 15 mins to make one then you can do four and hour but if you are making them as one offs and it takes ages then I can't see how you are making any money at all.

 

[PBDPConsulting]

I have recently been approached by a saddler who would like to take a small stock of my browbands into their shop as they are very impressed with what i make and having seen the quality of them would really like something different and unique to sell to their customers.

I am quite tempted to do this as it's another way of making my business known. However, i am a little stuck when it comes to a trade price and the terms of sale

If you can already sell directly to your customers everything you make then there is no reason to have a middleman sell for you. Unless you don't like selling or selling takes too much time away from manufacturing. If they want to buy from you, let them buy from you at your normal price (and pay you), and they can then try and add a margin to the price they charge their customers.

If you can't sell directly all you produce, then I agree with the earlier poster who suggested a commission system. This is normal for craft products. Since the shop is not buying from you, just holding your product until it is sold, they carry no risk nor is their capital tied up, so their commission can be modest.

Just how 'modest' is the issue. Some craft centres can be expensive to run so their commission has to be higher. Or some offer a lot of marketing services, so they add more value in the value chain and they deserve a bit more. But in your case, the saddler is already running his business and your product is not going to take up a lot of space or marketing, so I think the commission he earns should be, a guesstimate, not more than 15%.

I suspect many of the buyers (of your type of product) will not be put off by £34.50 at the saddlers - even if they find out you are selling directly at £30, they will find it easier to buy 'now' while in the shop rather than coming to you later. But maybe my understanding of the psychology of this type of product sale is wrong?

In your type of business, always beware discounting your product. As you have already reasoned, discounting may mean it is not worth you making your product. Usually, discounting is worth it when increases in volumes drives down production costs, and you (the producer) can pass on some or all of the savings to your customer. But in your case, with your type of product and manufacturing process where your ability to increase capacity is limited by how much you personally can put in, there can not be any cost savings - if you make one product it costs X pounds and takes Y hours; if you make two products it costs 2x X pounds and takes 2x Y hours.

So, simply because someone says they will buy a lot of your products does NOT mean you should give a discount. I think it is preferable to always try and stick to your desired price and, if selling to a retailer, get them to ADD their margin.

I hope this helps!

 

[Allan123]

Places like Robinsons will be looking at something sizeable, buying in at £15+VAT and retailing at your £30/35.

I can't see a small independant grumbling at making something in the region of £5-10 (15-30%) on 1 though, and if they are so keen and like them, we're talking about them adding on a couple of quid each and making it £35. That's nothing for what the price of some diamante browbands cost, or even a decent showpony style browband is. Not uncommon to see them from £40-70.

If yours have an extra wow factor and stand out from the usual crowd, no reason why the retailers can't sell asa premium product. Mums love the glizty stuff for showponies, as do the adults who compete regularly.

 

[Drpepper]

Be aware also of the difference between discounting (which is always best avoided at the point of sale), and supplying trade.

Lots of conflicting advice coming your way I'm afraid. If you have a shop interested have a chat with them and see what they would actually be happy with, that'll get you the absolute answer, in this case anyway!

As I said before, presuming your not VAT registered and the shop is, a 15% margin just doesn't work, and every £5 they add to that £30 product is worth just £4.25 to the retailer (so if the shop did buy at £30, added £4.50 it would retail at £40.53, 25% more than you retail them for - customers don't like that and the shops reputation is ruined and all for a 15% mark up!!).

Have a word with them and let us know how you get on

 

[Rosebud]

Thank you for all the advice. I might just add that i don't just sell browbands at £30, £30 is for a basic ribbon only browband. I used the minimum of £30 as an example for an answer. My products vary in price from £30 to £60 and are aimed at show horse owners, which i can justify to myself and make money with as i have little in the way of overheads. I have a workshop on my property, i have no staff other than myself to pay. My prices are lower than some others who make a similar product and are the "big names" in showing, but inevitably prices will have to increase as the cost of materials, business demands and other factors increase. My local saddlerys have similar items for sale which are a much inferior quality and ever so slightly cheaper. In horsey land it doesn't seem to matter how much something costs at the saddlery, if you really want it, you'll buy it on impulse without thinking too much about the cost (within reason) I've been doing it for long enough! LOL!

 

[KidsBeeHappy]

ANother way of looking at it is what is your CPA of a customer? And does that customer become a repeat customer?

If it costs you £20 to acquire a customer, and few customers repeat order, then you can view your trade discount as being the £20 the you would otherwise have to spend in marketing yourself, your company, yourwebsite, PPC, offline adverts etc etc etc.

 

[Paul Kelly ICHYB]

For anyon selling, use prices that are:
a - competative
b - profitable
I know that this is really basic advice, but, you have to have an uderstanding of your market to know what the pricing/margins are and ensure if you want to compete, you must ensure you make money.

Remember, youdo not have to be the cheapest to compete - brand, background, features, quality and exposure all can add value.