If you have a product to sell, then it might make sense for you to have other retailers promote and sell that product to their customers. For some entrepreneurs, wholesaling to other retail stores is more cost-effective than starting a brick-and-mortar or e-commerce retail business.
Wholesaling is selling a product to retailers at a price that is less per unit than the retail or customer price. This is done so that the retailer can then make money on the customer sale. Some businesses operate exclusively as wholesalers, meaning all of their customers are small retailers. Some retailers, especially those with niche products, opt to wholesale their goods to other retailers outside of their regions to increase sales.
Should you decide to sell your product at wholesale prices, accurately pricing your product and forecasting your expenses become very important. Below are some of the key steps you should take when considering to sell your goods wholesale.
1. Your Wholesale Price Must Cover Your Costs
Just as with retail pricing, your wholesale price must cover all of your costs. This includes your overhead costs, as well as the materials needed to produce your product. You also want to ensure that there is some room for profit in the equation. Wholesale costs vary from industry to industry, and even from product to product.
2. Offer a Suggested Retail Price
Once you’ve determined your own costs, you should have a suggested retail price in mind when selling your product to retailers. Also, if you intend to still sell your product directly to customers on your own (e.g. through your own website), you want to be sure that you make a note regarding pricing in your terms and conditions. You don’t want a retailer to undercut your pricing and take sales away from you. It’s best to set a threshold price point to ensure the pricing never dips too low.
3. Set Clear Payment Terms
When selling your products wholesale, you’ll want to have set payment terms. For small business owners, it might be best to get paid upon order, receive a deposit amount toward the total invoice, or set up net payment terms such as 30 or 60 days. If you decide to set up net terms, you’re effectively extending credit. Before you do, gather client references and run a credit check before agreeing to fulfill the client’s order. Once you have payment terms set, be sure to include them on your invoice template so that your clients know when they are obligated to send you payment.
4. If Applicable, Set a Clear Return Policy
It is up to you to offer returns or exchanges. You can offer to take back items that are defective or damaged in shipment with or without a restocking fee. Or, should you choose to, you can make all sales final.
5. Get Product Liability Insurance
True to its name, product liability insurance protects you and/or your company from liability if someone is injured by your product. Many retailers will require proof of liability insurance before agreeing to carry your product.
6. Target the Right Retailers
Spend time vetting the retailers you think are the best fit for your product. If it’s a small boutique in your hometown, make sure to visit the store, speak with the owner and establish a relationship. If possible, visit the store on different days and at different times so you can get to know a wide cross-section of their customer base.
If you’re pursuing a retail outlet that might have a few more locations, speak with their buyer about the different features or products that they look for when buying for the store. Make sure to already have your list of unique selling propositions for your own product ready to go. Having one ready allows you to quickly illustrate how your product meets the retailer’s and the customer’s needs.
No matter what type of store you target, spend time researching its website. Examine their most popular products, read product reviews and visit sites like Facebook, Twitter and Yelp. Your brand will be associated with their brand, so you want to be sure that their reputation won’t damage yours.
7. Don’t Forget Marketing
The best way to generate interest in your product among retailers is to get customers talking about it. The best way to do that is build buzz around your product through marketing, advertising or public relations efforts. Create a website, use social media or offer to demo your product at local farmers markets or in nearby locations.
8. If You Can’t Sell It Yourself, Seek Outside Help
It’s possible that sales just aren’t your thing, and that’s okay. If you find yourself unable to make any headway with retailers or buyers for an extended period of time, you might consider hiring an independent sales rep or distributor to do the selling for you.
Ideally, this person would have some previous experience selling a product similar to yours and would already have established connections with appropriate buyers or retailers. The best part is you can hire a sales rep on a commission-only structure, meaning you only need to pay when he or she actually closes a sale.
Selling your product wholesale is a great way to get it onto store shelves and in front of customers. It also removes some of the burden from you to make all of your sales yourself. But, you will need to be aware of the steps outlined above to ensure your wholesale business becomes a success.
If you’re exploring options for how to sell your products, read our next article on setting up an online store with Amazon.
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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.