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08-28-2004, 01:48 PM #1
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Pricing and Selling Your Candles Wholesale
To wholesale or not to wholesale? That is the question! *grin* I have several wholesale accounts that are running very successfully, but deciding on the actual wholesale prices was not a mean feat!
Now, I don't know about you, but I don't always sell my candles for what they are actually worth in terms of a high end retail value. Because I make the candles myself, I don't have the costs involved for a retailer like lighting, heat, utility bills, staff wages etc. This means my costs are lower and I can sell the candles at a great price.
When I sat down to work out my wholesale prices, I used somebody else's formula of 2x my cost. I spent ages working out the cost of each candle in terms of ingredients per pound in weight and I was horrified! There was no way I could sell them for that and make anything more than a little pocket money!! While I wanted wholesale accounts, I didn't want to work my butt off for very little in return.
I abandoned the idea for a few months until I got friendly with the owner of a local candle shop who had showed interest in some of my candles. He said "Ohh that would sell for £xx amount," (then he got his calculator out) ... "so I'd pay you £xx" he said. I asked him how he worked out what the wholesale price would be ... and he gave me this great formula!!
RETAIL PRICE / 2.35 = WHOLESALE PRICE
I had been starting at the wrong end. I'd been starting from my cost rather than the retail cost, which is why my figures were coming up so low!! As an example, let's take a candle that costs me about 1.60 to make. Now my own retail value of this particular candle is 6.99, but in a shop it would sell for 8.99.
8.99 / 2.35 = 3.82
Why 2.35? Well, let's break it down. The retailer has paid 3.82 for the item. It you multiply that by two, it gives him 7.64. The extra is his profit. The .35 comes into play to cover his additional costs such as heating, lighting and staff wages.
Let's go back to my cost of 1.60. If I had used the first formula I was given, I would have doubled that for the wholesale price and made myself the ripe old sum of 1.60 for my efforts. With the 2.35 formula I have made 2.22 which is a much better amount! You also want to remember that the retailer will be buying in bulk to get this price. If you don't charge enough for your candles at wholesale then you are spending days working your butt off with little in return.
Should you set a minimum order value? YES!!! Well, obviously it's entirely up to you, but I strongly advise setting a minimum. There will always be *one* who decides to order one votive candle and expects a wholesale price if you advertise no minimums!! You also want to think about whether to have minimums for each range, especially votive candles. I will only wholesale votives in batches of 12 all the same scent. This is to prevent people ordering one lavender, one pineapple, one rose etc.
What should the minimum order value be?
Entirely up to you!!! The minimum order value for people wholesaling from me is £125 -- (rough conversion is $180 American dollars) and it clearly says that on all the paperwork I send out to potential wholesale customers. BUT with each w/sale price list I send out, I also send a covering letter saying that I am happy to work with them on the minimums. This makes them feel specially looked after (which they are, of course!!!!) and more likely to place an order.
Postage on wholesale orders
For my regular customers I charge a flat rate postage fee. Sometimes I have to eat the additional costs, sometimes the customer is overcharged but it evens itself out and I've never had any complaints! There is no way I could do this for a wholesale account though. The average customer order from my website is about £25-£30 ($36-$43 American dollars). My average wholesale order is £250 ($360) and there is a significant weight difference!!!
I charge my wholesale clients postage at cost. They have as many delivery options as the post office can give me. It ranges from next day delivery to 3-5 day delivery. As I require up to 21 days to complete a wholesale order (size depending!) most retailers opt for the cheaper 3-5 day delivery as they don't want to eat into their profits more than they have to! I also have a couple of retailers who arrange collection themselves or pick it up personally. Try to offer a range of options.
But how do I *get* the wholesale accounts?
The best way is to let the retailers approach you. Wholesale accounts won't happen overnight for your business. You need to build up your reputation for producing quality hand crafted items and then they will come to you!! I get approached at craft shows and through my website all the time. After you have been approached and sent out your w/sale price list, follow it up with a phone call or email.
Sometimes the direct approach is quicker. Simply walk into a shop and introduce yourself to the owner or manager. Explain that you are a candlemaker and ask if they are interested in look at your work. Never take anything in with you except maybe some sample votive candles. It doesn't show respect to the store and it is assuming that they will want to look and comes over as unprofessional. Never assume anything!
Never approach a shop on a Monday, Friday or over the weekend as these are the busiest times for a shop and they will not be able to give you their full attention. Mid week mornings are the best time -- owner/managers will be tired in the afternoons and you want to catch them at their best!! Have your business card, price list and brochure to leave with the owner to look over incase they don't want to make an appointment right away. If they do want to book an appointment to talk further, arrange a time that is convenient to the store owners, and make sure you are on time for it!!
At some point, you will find that you have a comfortable number of wholesale accounts that keep you comfortably busy. The point you stop taking new accounts depends on how much you want to produce and also whether you are willing to employ others to help with the demand.
Whatever you do, make sure you get the retail side of YOUR business up and running well before you get into wholesaling. Retailers will expect to know what the best selling lines and fragrances are and you will be expected to tell them honestly!!
- 09-22-2004, 10:11 AM #2
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Great stuff here Carolyn. Thanks.52 week money challenge - $41.00
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