moving into wholesale – money questions

[Noir]

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I am a maker of hand-crafted jewellery. I have gone from being a hobbyist to registering a business and selling through market stalls. I am now looking into the possibility of selling wholesale but am a bit lost on the money side of things. I know that cash-only sales are okay for weekend market customers but think I need to expand my payment options for wholesale. The problem is I don’t have much money to sink into eftpos facilities and am wondering if there’s really any other standard ways to accept payments as a wholesaler. I’ve read a little about facilities like Eway which would allow cost-effective credit card transactions online but I’m not sure this would be sufficient in the case of face to face sales at trade shows or when canvassing to store owners.

In my own case most supplies are purchased online with a credit card – but is paying with a credit card standard practice for retail businesses these days? What other methods might they want to use?

Also, I’m a bit worried about being expected to invoice customers rather than take payment upfront – I don’t think I can afford to do this. Is it unprofessional to not give credit when selling wholesale?

I’m really trying to work out if its viable to go ahead and pursue wholesale opportunities at this stage – I feel I must do some wholesale to ever be able to make a full income but I’m not sure I can cope with the extra costs before I’m making extra money.

[Past-Member]

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I have 2 hats – I am both a service provider and I create products to sell. But at present I am not wholesaling due to the high costs in creating the products.

There is the Australian Gift & Homewares Assoc and I recommend attending the next trade fair for research. Everyone appears to use Eftpos/Credit card machines for orders.

Also, if you are selling at wholesale, you need to look at what the retailer marks up. For example: say the retailer wants to buy at 60% of what they sell for. Then when they discount at sales, they will still make some money. You have to work out if that’s an amount you are still able to make a profit at. All orders should be paid for before delivery. Sometimes it’s not worth selling wholesale for some products. This too needs consideration.

Have a look at
http://www.homeandgiving.com/
Next dates for trade fairs are
4-7 July 2009 – Sydney
1-5 August 2009 – Melbourne
27 Feb – 2 Mar 2010 – Sydney

and the association home page http://www.agha.com.au/
You could also phone the association and chat to them about your dilemma.

Good luck.

PS there is a thread somewhere about credit card costs etc.
I personally use the Commonwealth Bank merchant service as their rates are good for me. But there’s a lot to investigate. I also use PayPal for overseas purchases and sales.

[andrewfirth]

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The challenge you face is the same as any expanding business. I would suggest preparing a budget which would set out your costs and your expected sales. This information can then be used to calculate the number of sales you need to break even. For example if your costs to attend a trade show or exhibition are say $1,000 and your average profit per sale is $10, then you will need to sell 100 units to break even. Once you have done your budget you will be able to change some of the assumptions and see if the next step is a viable one. To minimise the impact of giving credit terms to your clients, ensure that you can turn around the product quickly, invoice immediately and follow up payment promptly. Other short term finance may be able to be obtained to cover this period of time. In relation to not giving credit – I think it could come down to how you ‘sell’ it, however if you really can’t give any credit then it may be an indication that you are not quite at the stage to take this next step. I wish you well with the opportunity!

[Warren Cottis]

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Hello Noir

Unless you have deep pockets please forget the antiquated wholesaler / retailer path.

At the moment you enjoy the glorious thing called “cash sales”!!!

I cannot stress the importance of cash flow… it is the biggest cause of business failure… it doesn’t matter if your business is profitable because business is like Monopoly… when you are out of money the game is over.

If you go to retailers they are going to want you to provide a range of your items immediately and they will want to offer to pay you in 60 days… but guess what?

If your items don’t move fast for the retailer (who is also pushing other supplier’s products) they will come back to you and push your payment out to 90 and 120 days and all the time you are paying for the cost of your items that are sitting in their store.

Worse still… you have no control over the sales process… God knows what skills the sales person has to adequately describe the attributes of your items to the next customer who may or may not walk in the door of the retailer that you have so graciously provided your stock to for free until you get paid. (ooops, that’s a long sentence)

So what’s your alternative?

Embrace the internet where YOU can control all of these variables and sell direct to the public for cash or credit card with a lot less immediate risk.

[rox]

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wholesale can be frustrating and depressing at time.

You have to rely on your customers to pay there accounts on time, which doesn’t always happen.

I wish that we could pull the cash sales like we do from wholesale.

[Author]

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