To launch and successfully run any business is no small feat. But you’ve done it! And now, here you are trying to figure out your next game move. But what kind of move? You’ve contemplated different options, but one in particular is on your brain. Go big or go home, right? Right… why not try your hand at wholesale, you’ve pondered... You’ve already created a platform where your customers know, love and buy your brand and now the word has gone around that your business might be ready to take on the next step. Emails and phone calls have started to trickle in from retailers interested in carrying your brand (gasp!) and you think to yourself that you could get into this… but, where do you even start?
Here, at April 47, we’ve put our heads together to compile a short and comprehensive guide that highlights the not-so secret ingredients to going bigger with your brand. In this post, we’ll go over the key steps to take while setting up you wholesale business and how wholesale can help your business grow.
Let’s start from the top. What does wholesale mean?
The term “wholesale” in itself readily evokes a shift in your position as a supplier. You will now be looking at taking on intermediary parties that will help you sell your product to the public on a greater scale. In other words, retailers will now come to you to purchase your goods in order to sell them to their own customers. This new-found partnership will entail loads of communication and could produce greater returns on your sales.
Wholesale implies that you will be selling your product in larger quantities, or in bulk, to retailers rather than directly to individuals.
Let’s break it down
You are currently selling your own brand through your own online or physical platform and you’d like to see it do its thing in someone else’s shop as well. As a wholesaler, you will have the opportunity to make your brand available to other retailers; widening your distribution channel by having your product sell in multiple arenas at once. This will ultimately result in many advantages for yourself as well as your retailers.
5 major steps to setup your wholesale business
Now that we’ve laid out out the WHY wholesale could be great for your business, let’s list out the tools you’d need to have before taking the leap!
THE MOST important factor in creating a successful wholesale business is pricing. This component could very well make or break this chapter of your business if you don’t nail on the head the first time around. However, as a retailer yourself, half your battle with this is already won; you can work backwards from your retail prices to establish your wholesale ones.
Take an item that you would sell for 160$ retail for example; the baseline for establishing wholesale pricing is usually around 50% of what your MSRP (manufacturer’s suggested retail price) is. As a wholesaler, this 80$ is the price at which you would sell your item to a retailer looking to carry your brand in their own store. This part of the equation is straightforward, but we’re not done yet. Simply put, the wholesale price should reflect the sum of the price it costs to produce said item and the profit margin you are looking to make from selling it. This means that if it costs you 40$ to make this item (including materials, labor, packaging, shipping, etc.), your wholesale price should be about 80$ and thus, your retail should be 160$.
For more details on pricing you can read our "The A-B-C’s to Pricing Your Product for Wholesale" post.
Now, by selling a single item in a retail setting, you are set to make 120$ off your cost of production or a 75% margin. However, you’ve only sold one item. What if you were able to sell ten at a time? Since you would be wholesaling to retailers at a discount, your margin would logically be smaller, but your return in terms of dollars per single sale would be far more interesting. Selling ten units that cost 40$ a piece to produce for 80$ a piece creates a return of 400$ for one single sale, while your margin is significantly lower at 50%.
2. Terms & Conditions
While pricing your goods adequately for wholesale is crucial, making sure you maintain clear terms and conditions with your wholesale customers will ensure the prosperity of this aspect of your business.
When it comes to purchasing in bulk, your customers might feel more at ease knowing that you have return, exchange and swap policies in place. Having such options allows your customers to feel more confident when buying from you and helps to create a sense of partnership, like you are working with them to be as successful as possible in selling your product.
We’ve put together for you a short summary of the main elements of a wholesale policy agreement, but feel free to adapt this content to best suit your business’ needs when drafting your own.
Though all your sales should be final, a 15-day grace period during which your customer can inspect their new goods will give them the opportunity to identify everything they’ve received and check for any overages, shortages, defects or any other mistakes that may have slipped through the cracks on your end.
Should your customer receive any defective items, an exchange policy is the best way to go; it will help you save lots of time, money and avoid many headaches. Having the defective item sent back on your dime isn’t the most appealing solution, so, having your customer destroy or simply keep the item while sending them a replacement is the less costly alternative.
A third interesting recourse to have available to your customers is the possibility of requesting to “swap” a style that is not selling as well as anticipated for a different one. Some retailers will request swaps for styles, colors and even sizes/formats. The best advice we can give on this matter is that establishing a firm time frame for such requests is important. In doing so, you will be able to resell the items that have been swapped out by one retailer to another while they are still fresh and in season. Having your customer work on selling the tricky style for an X minimum number of weeks before requesting a swap, while respecting a Y maximum number of weeks since they’ve received the style to submit their request. Unfortunately, some retailers might consider this option a merry-go-round display of endless swap opportunities. Make sure to avoid getting stuck on such a ride by adding a re-stocking fee for any swaps. This way, swaps will be understood as a serious tool rather than a first recourse for styles that show a tad of resistance.
Within your terms and conditions agreement, also make sure that you establish a minimum order quantity, or MOQ, from the jump. You’ll thank your past self for doing this when seeing your brand well represented in someone else’s shop.
Having an MOQ, definitely adaptable and relative to the size of each of your customers, encourages your customers to purchase sufficiently in order for sales to be profitable for you and promotes a strong representation of your line each season (you’ve worked so hard to build your collection or assortment, have your customers do it justice!). In order for your brand to stand out as its own entity and to keep it from getting lost among everything else available in your customer’s shop, make certain that your MOQ encompasses a healthy number of styles, units per style and runs of sizes/formats.
As discussed earlier, when selling wholesale, your margin is lower than it would be in a retail setting, so, locking down a heftier number of units will turn up a heftier payout for you. We suggest either doing so through a minimum dollar order quantity (example: 2000$ wholesale per season) or a minimum order quantity (example: 300 units per season).
We’ll share a little trick of the trade with you: if you are a smaller business with a smaller assortment available, focus on imposing a minimum dollar order quantity.
Shipping and all of the logistics surrounding this aspect of your business will also be critical pieces your wholesale puzzle. No shipping costs on your dollar is definitely the way to go. The exceptional situation will arise in which a customer has received a defective or otherwise incorrect item and demands to return the item (hence, refuses to destroy it or keep it) and expects you to cover the cost of return shipping. Biting the bullet, just this once, might be the best way to go to maintain a good relationship with your customer.
Finally, the best part, getting paid! Making sure you have clear payment terms in place before beginning any partnership is vital; your customers should be aware of these terms before starting to do business with you as to avoid any confusion or misunderstandings when the time to pay up comes around.
Larger volume retailers, department stores or chain stores, will usually request payment terms on their own. The norm for these types of customers is usually a 30-day window from the time they’ve received their goods until the deadline to complete their payment. However, if you are just starting out and cannot afford to front the production cost for the inventory that your customer wishes to order, having them pay with a credit card (in full, preferably) before you ship their goods to them is common practice.
3. New Customer Form
After all your hard work is done and you’ve built the skeleton of your wholesale business, you are now ready to take on a new kind of customer and will need a tool to get the gist of who these new customers are and what they’re all about.
Creating a “new customer form” is an easy way for you to do this. We’ve created an example for you which highlights all the right questions to ask. This will be the first step to getting to know the who’s who, the what’s what and to building your customer list later on.
4. Sales tools; Linesheet, Lookbook, Brand Book & Order Forms
To know the ins and outs of sales logistics on a wholesale level is amazing, but, that’s only half of the equation. Think of it as the synergy between a crew backstage and a cast on stage. The logistics are your backstage crew that are in fact the spine that holds your wholesale business up, and your brand, that’s the star of the show. Knowing how to present your brand and your product to any potential or loyal customer is of paramount importance.
LINESHEETS, LOOKBOOKS AND BRAND BOOK are your tools of choice; these tools will help your customers to visualize and to get familiar with your product as well as with the essence of your brand. These tools will also work for you by helping you manage your customers’ orders later on. Making sure to have all three of these on hand at all times will make your life way easier. Some customers might even ask for digital copies of these themselves prior to scheduling an appointment to view your line in person.
[check out our The 2-D building blocks of a linesheet post for more insight ]
5. Customer Target List
Beyond the potential customers that could be reaching out to you, it’s important for you to always stay on the lookout for any other targets. The art of identifying the right customer is one that every wholesaler should master.
To start, you will want to browse around your neighborhood, your city, the web, why not the whole world if you can, for shops that catch your eye and target those that you would love to see you brand in. However, liking a store, whether it be a brick & mortar store or an online shop, isn’t all there is to it.
Who are they?
Where are they?
Which brands do they carry?
Would my brand sit well alongside their resident brands?
Does my brand identify fit the essence or the philosophy of the company that owns this store?
Do they carry any competing brands?
Does the store do well with their existing brand assortment, particularly those comparable to yours?
Could there be another store nearby that would be a better fit for your brand?
Some stores will not want to carry your brand if another store nearby already does, so, select your preferred target wisely. There are many questions surrounding the selection of the ideal target customer, but if you’ve checked all of these boxes, then feel free to reach out and sell!
Once you start building your target customer list, it’s important to keep a contact log or customer list. This way, you will be able to easily and efficiently organise your customer contacts and track your interactions with each of them.
Your customer list should include:
each target store’s name
contact person’s name and position within their company (i.e. buyer, representative, manager, etc.)
the store’s address
a short list of relevant brands they carry
comments regarding emails and phone conversations you have had with them.
This tracker will become your best friend. Keep in mind that though some targets will eventually become actual customers, some may decline to carry your brand, so making sure that you keep all of this precious information on record will also help you establish your game plan for the next season.
VOILÀ! You did it!
We hope that we were able to provide you with the kick start you were looking for and that you won’t hesitate to reach out to us if you have any questions or would like to dig deeper into any of the topics covered above. You can do so via our private consultation service by clicking right here. Good luck!