Do I sell my product to someone else to resell?
Hi there, So I know this girl who is a well known in Sydney and Australia and has a lot of traffic to her site. Yesterday I asked her if she could sell my stuff on her site and I would give her a 5% cut. She said no problem but she thinks I need to lift the price of my garnmets (and she is right I'm not making enough profit on them and they are way too cheap). So I decided to lift them from $35 (11.90 profit, purely what i make on shirt not including my labour) to $40-45 (not decided yet). She has come back to me today and said it would be better for her to buy them off me if I could give them to her as a wholesale price and she would buy a few of each and sell them herself. So I guess she is going to sell them for $45 and make her profit on them. I am thinking of saying to her yes I can give you them for $35 if you buy 20 garments + or do you think I should make it more? And should I be asking her are you going to say they are yours or i-indi's (mine).
George Grimekis CPA Accountant at Alpha Omega Accounting & Business Solutions
I think you can raise your wholesale price a little bit, but you may need to negotiate as your friend might see a profit figure in her mind that might not agree to yours.
In the first scenario, garments sell at $45 per piece, then at 5% cut means that $2.25 per garment would have went to your friend.
If the second scenario, if she sells the garments for $45 per piece then she would make $10 per garment.
What value do you place on your labour? Would a wholesale price of $38-39 (Profit $14.90-$15.90) be enough to cover your labour too?
Also, i would be saying that they are your garments only. It's your product and you want to build your name. You may have more retailers come knocking one day.
Before you do anything, I suggest you take a long, hard look at your pricing structure.
11.90 profit, purely what I make on shirt not including my labour
I'm not sure you grasp the meaning of the word profit. If I read you correctly, selling at $35, you get $12 for making a shirt. Meaning $23 goes in materials and overheads. I'm guessing each shirt takes minimum 2 hours to manufacture, using machinery you've provided. If that is roughly correct, you're making $6/hour as wages and zero profit.
Depending on how much you value your time, I suggest your wholesale price should be $135. That's just to cover wages, and still there's no profit.
Forgive me for being deliberately flippant, but your figures reveal a serious issue that needs to be addressed before you settle on a wholesale price to your friend. If she sells them for what they're probably worth – say $125 – you're going to be seriously out of pocket within a week.
Gwendolyn Kestrel Digital Analyst at seoWorks
I absolutely agree with Steve. If you've done your pricing correctly to cover your materials, labor, overhead (time spent ordering supplies, marketing, etc.) then you'll have a fair price set and won't have to worry about how resellers price your goods.
So, I also suspect that your items are under-charged right now.
Wholesale is a great way for a scale-able business to establish a steady income without having to worry as much about advertising, shipping, etc.
There are a number of ways to look at this. For example how many sales do you make yourself and how much effort do you put in to make those sales.
If someone can sell the shirts for you, it takes less effort on your behalf therefore less cost to you. If she is willing to buy them from you at a wholesale rate you should be happy, not many people get this offer.
She will have some cost involved in the sale process so it will be in her best interest to make as much as possible. If you retain your current pricing model with her at $35 per item it sounds like you will both be happy. Sure she is getting a higher percentage however she is doing the sales work for you.
With any business relationship both parties need to be happy otherwise it will not last. If you are happy with $35 per shirt and she is able to make enough sales to cover your costs alone, surely that is better than nothing. And there is always room for future conversations and products you could sell.