Wholesale Selling & What I Should Know Upfront

[Guybeard90]

Hi everyone!

I am just launching a new business and have designed a new kitchenware product. My plan was to sell D2C through social media and not to look at wholesale (at least for the time being). I have had a slight change of heart and think I might as well look into the idea.

Does anyone have any experience selling to department stores such as John Lewis or Kitchen Shops such as Lakeland? I gather both of the mentioned companies have their own buying departments, so I assume they buy direct as opposed to through a wholesaler / distributer?

Is the best approach to contact retailers directly and ask if they are interested in the product or to contact a distributer (any hints on prominent kitchenware distributers let me know)?

Lastly, how should I approach pricing? I have done some reading on this but wanted to clarify:

Say my product RRP is £100, the NET RRP is £80 after VAT is deducted. What is a good starting point for WS order? 60% of NET RRP, aka £48? Or should I be starting higher?

I cant see the example above working out if I were to sell to a wholesaler as they would need to make 10-15% (at a guess) which would make the retailers price £52.8 - £55.20 which thins out the margin for the retailer quite a bit. I assume they have to plan on offering sales in the region of 5-10-20%.

Any advice / help will be greatly appreciated.

Guy

 

[MOIC]

In the unlikely situation that John Lewis or lakeland take you on as a supplier, they will tell you their terms, their price they want to pay, their requirements.

You won't like it.

Just to add, I'm not being negative. It's the reality.

Start small, build your product, get reviews and build your brand.

Supplying the big boys is not for a new business.

In any event, I wish you luck with your venture.

 

[Guybeard90]

Yes this is kind of what I had expected. I was nervous about cash flow selling wholesale anyway. But thought it would be helpful to have the information regardless.

Thanks!

 

[Mr D]

Wholesale - you would presumably attend trade fairs. Pass your catalogue / business details to lots of people. Talk to a lot of people. Get decent videos made of your stock.

Figure out your credit policy, figure out what risks you will take. Figure out who can sell your stuff.

If I was buying kitchen stuff with £100 RRP I'd be looking at buying wholesale at around £30 - and a discount for a big order.

Oh and your figures are wrong. VAT is 20%, its an added tax not a tax on the retail price. So as £100 is the price including VAT, 5/6ths of that is the price excluding VAT. You add the VAT onto the excluded price to get total.
£83.34 is the price excluding VAT for a £100 RRP.

Wholesaler may well want a bigger margin - they have to have room to offer their retailers a decent discount for volume too!

You are realistically better off figuring out your total costs, adding something on for profit and that's the lowest you can go wholesale. Don't get into RRP until you figure out the rest of the costs first.

 

[MBE2017]

Most retailers, even the small ones, would want a 2-2.5 multiple mark up. Larger stores such as you mentioned will probably ask for a lot more, think of sale or return, min advertising spend at your cost, free display stands for stores, 9 months credit etc.

Working on your figure don’t expect more than £35-40 max, unless you raise the selling price, and most importantly the item actually sells. If you approach companies with a decent brand, well known, established etc, then you would have a bit more control, but not much more.

 

[Guybeard90]

Ok thanks for the advice Mr D and MBE2017. I will stick with Plan A and may approach this at a later date when hopefully I have built up a brand.

 

[Red Wood]

We deal with many big name electrical wholesalers on a volume basis.

Margins are very low, they also want a rebate and other kick backs which further depress the margins. Everyone wants to supply them so it's a race to the bottom in exchange for the volume.

 

[Socio South West]

As others have said, supplying the large multiples may get your product good exposure, but it comes at a cost - charges for advertising, charges for promotions, storage charges, delivery penalty charges, and so on... They are out to drive their purchase cost to the bottom

You would do better to find distributors who are selling to the considerable number of small and independent kitchen and hardware stores. The easiest way to find these is probably through trade events.... if they ever happen again!

 

[Mr D]

As others have said, supplying the large multiples may get your product good exposure, but it comes at a cost - charges for advertising, charges for promotions, storage charges, delivery penalty charges, and so on... They are out to drive their purchase cost to the bottom

You would do better to find distributors who are selling to the considerable number of small and independent kitchen and hardware stores. The easiest way to find these is probably through trade events.... if they ever happen again!

OP is in luck, home and gift 2020 is happening next month.
No idea if autumn fair is following same format or will go ahead at all. That is early September last I looked though dates subject to change.