Free friday - Question

Today's free friday question is from Jennifer. She asks:

How does wholesale work, where to start?

Ok, this is a tricky subject. For wholesale you have to do some calculations:

1. calculate your production and labour costs. This means (all incl. tax):
- the material to make your product
- the time you spend on making your product (determine your hourly rate)

2. add these together and this is your break-even price.
Let's say you make oven mitts. The material per item costs 5,-.
It takes you 1/2 hour to make one item. With an hourly rate of 40,- this means 20,- per item.
This makes your break-even price: 20,- + 5,- = 25,-

3. Now add 50% to the break-even price and there's your wholesale price without shipping.
(In this example 50,-).

4. Calculate shipping costs (do you only sell in your own country or worldwide?) and add these to the wholesale price.
If you do not want to add too much shipping costs to the price of one item, you can set a minimum order amount and spread the shipping costs over that amount of items.

And now we have a problem... oven mitts of 50,- a piece are quite pricy, will people buy them?
My experience here is that or you have to produce them quicker and with cheaper material or you have to choose to make less profit.

In this case, research a bit on what others ask for a simular product, what are their prices? Let's say you can buy nice oven mitts for 25,- a piece.
Minus your material costs of 5,- your 'profit' would be 20,- Maybe once you get the hang of making them, you can make them in 15 minutes (doing a bunch at the same time helps to speed up).

This is up to you, would you like to sell more and make less money a piece but make more money in total or stick to your first price and sell less (but also have to put less time in it).

In my experience the best thing to do is to find ways to speed up the production and lower the material costs instead of a higher price.
For example: my Instant Comfort Pocket Boxes took me 30 minutes each in the beginning!! Now that I make more at the same time of the same design (as a little production line) it takes me 10 minutes each.

Other tips on wholesale:
-make a pdf file with good photo's of the items you sell and a list of the wholesale prices (incl and excl tax) that you can mail to clients. Also add your terms and information about your products in this file (who made them, are they eco, what are your return policies in case of damage?)

-Be clear about your delivery time and stick to it. This depends on you product. I go for a 'within two weeks' delivery. (Set your time a little bit later than you actually need. It will make you client happy when your products arrive earlier. And happy clients is what we want ;-) )
You can also ask you client when they need the products and make arrangements with them on when you will deliver, most clients are very reasonable and willing to come to an understanding on when to deliver.

-shipping: you are responsible for shipping until the items arrive at the client.

-find shops you think will be interested in selling your items and visite them in person (bring the item you want to sell) or email them (figure out who's the person to address and use their name in the mail, not a 'dear sir/madam' or just 'Hello'). Ask if they would want to sell your product in their store and add a good photo to the mail (and/or link to your webshop if you have one).
If they are interested, you can send them the pdf file with information on the products.

-Last but not least... make a nice package of the products you send to your clients. Add a personal note or postcard and a business card so they have your contact information.
Send the invoice by email or, if the client prefers (ask if they do) in paper.

-Etsy has a good How-to on wholesale. You can find it here.

Good luck!