INTRODUCTION
Preparing the materials and systems needed for your first gift sales presentations is the most important task you need to accomplish before visiting your first potential retail store buyer. Most people assume the hardest work goes into making the product, but if time is not spent developing and setting up the systems you need to wholesale BEFORE you visit your first buyer, you will find yourself in a confusing and overwhelming mess! And you will look very unprofessional to your potential buyers!
RETAIL/WHOLESALE PRICE STRUCTURE
As a general rule of thumb, your wholesale price should be 50% of your retail price. If it is less, you will have a difficult time selling your products wholesale. Often, it will take some work to make sure there are adequate margins for you both and the gift retailer.
Here is a formula to use when determining pricing for your products:
First step is determining your cost per unit. Costs include the following:
o Ingredients or raw materials
o Processing or assembly of raw materials
o Packaging and labeling
o Shipping of raw materials to your place of business
Second step is to determine the retail or selling price of your item to the consumer. Using a competitor’s selling price is a starting point to ensure you are in the same price range. From the selling price, you work backwards to arrive at the wholesale price you should charge.
From the retail or selling price, subtract the retail and distributor or sales rep margins. Most retailers in the gourmet foods industry use a margin of 40%, whereas gift retailers use a 50% margin. Distributor margins are generally 25-35%, and broker or sales rep commissions are general 15%. Even if you currently do not use distributors, brokers or sales reps, these margins should be included in your pricing. As you grow and add these services, you want to have your pricing in place.
As a manufacturer, you should aim to retain a 40% gross margin. This gross margin must be large enough to cover overhead, administrative costs and marketing expenses.
Example:
If the retail or selling price is $5.00, total manufacturing costs per unit are $1.40 and the manufacturer pays shipping costs of 5 cents per unit, you would sell your product to the distributor for $2.20.
PAYMENT TERMS
Typical standard payment terms for selling to gift stores are Net 30 days. In other words, you deliver or ship your products and in 30 days the retailer will pay for the order.
Credit card payment is another standard payment method which is becoming more popular with gift store buyers.
Other payment terms which are not as common are as follows:
o Pay via PayPal. In the eight years I have been a sales rep, I have not seen a store use this option, but it is available if you have a PayPal account
o 2% Net 10. If the store pays their bill in ten days rather than 30 days, they can deduct 2% from the total due.
o Net 60 or 90 days. In the event that you wish to get your product on the shelf quickly, but have the cash flow to wait longer for payment, this is a good option. I used Net 60-90 to promote early sales during a very slow season.
o Pay half the invoice amount when the order is shipped or delivered and pay the balance due in 30 days. I used this option with a store that was historically late with their payments.
o COD or cash on delivery. If you deliver your products, this option will probably work, but I don’t recommend it if you are shipping.
Which ever terms you decide to use, remember to investigate all your options and be well prepared when offering payment options to your potential buyers.
SALES AND ORDERING MATERIALS
Sales material for the retail store buyer is very different from the color brochure you may hand out to consumers. Gift store buyers want to know five basis facts about ordering your products:
1. What does it look like?
2. How much does it cost?
3. What is the minimum order?
4. What are your terms?
5. How do I re-order?
Your sales material should answer all these questions.
Simple, but effective, sales materials can be created on your computer. Start with a picture of your products and make sure you include all the information that answers the five questions above: List unit and case costs, minimum amount for orders, ALL the terms you will accept, and your contact information (phone, fax, email and website). Sales sheets can be copied and left with buyers.
Write your orders in sales order books which can be purchased at any office supply store. Two copy sales order or general order books work best as you can use the top for your records and a second copy for your buyer. Rather than having the sales books personalized (an expensive process), you can print a small label to adhere to the buyers sales order copy that includes your name and contact information. Leave this copy with the buyer.
If you are able to buy or create business cards, give one to the buyer or store manager. Business cards make your company look more professional.
DELIVERY SYSTEMS
Determining how you will get your products to the retail outlets is often an overlooked point in the wholesale sales system. You can give a perfect presentation to gift best Shoes buyers, but if you don’t have a delivery system, your products will never make it to the shops!
Listed below are a few options to getting your products into the store.
1. Deliver the products yourself. If you have a small territory to cover, delivering your products is not a bad idea.
2. You can hire a distributor to handle your products. Often, with this scenario, you would sell your products to a distributor at a deep discount who would warehouse and distribute them via their system.
3. You can ship your products to the retail outlets. This is the most common way to get your products to the shops. With this option, it is customary to bill the retail outlet for the shipping while you pay for the cost of packing your products.
If you decide to ship, make sure to check out the shippers available in your area. UPS, Federal Express and US Postal Service are three very reliable shipping vendors. Each company has their own requirements for packaging, insurance and delivery time. You should acquaint yourself with the specifics of all the companies you plan to use. Most freight companies have websites where you can open an account and print labels right from your computer.