Home Forums Starting your journey Retailers – buying methods, margins and approaching

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  • #992861
    Bespoke1
    Member
    • Total posts: 16

    Hi all,
    I’m starting an online baby accessories and clothing business, launching early next year. Shortly after launch, I want to expand and sell to retailers both small and large (my ideal target would have my products stocked in Myers, Baby Bunting etc in 3-4 years from launch). I’ve read numerous threads on this fantastic site but non seam to answer my questions I have so hoping this thread will be useful to me and others in a similar position (apologies for the long first post)!

    Question 1: I’ve done a bit of research but would like to hear from people with experience, Do retailers prefer make up and/or profit margins presented to them in a sale pitch?
    What is a typical mark up or profit margin retailers expect to be able to apply between the wholesale price and the RRP? I believe it is 40% markup but want feedback on if this is generous or not enough? (For example item is $25 wholesale with an RRP of $35, the markup is 40% and the profit margin is 28.47%)

    Question 2: What is the industry standard for retailers – do they buy stock outright i.e buy X amount of products from the wholesaler and pay for it before delivery OR take it on consignment i.e stock the product but can return unsold good (ownership of the product remains with the wholesaler). I assume if on consignment wholesale price would be greater and retailer margins less than if product bought outright?

    Question 3: I’ve read on other (older) posts different ways to approach small retailers and understand there is an element of approaching them on an individual basis but do they not have other methods of sourcing stock? For example wholesale directories or listings? And how do you get your foot in the door with larger retailers (the Myers and Baby Buntings of the world). I plan to attend trade shows / expo’s but how do I get my products in front of them apart trade shows?

    Thanks in advance for your help and responses!

    #1188560
    Kelly Exeter FS Editor
    Member
    • Total posts: 241

    Welcome there [USER=69735]@Bespoke1[/USER]. I don’t have any answers to the above as I am not a retailer but just wanted to welcome you to the forums. I am sure someone with the specific knowledge above will be around soon to help you out :)

    #1188561
    Kelly Exeter FS Editor
    Member
    • Total posts: 241

    Welcome there [USER=69735]@Bespoke1[/USER]. I don’t have any answers to the above as I am not a retailer but just wanted to welcome you to the forums. I am sure someone with the specific knowledge above will be around soon to help you out :)

    #1188562
    Rowan@quaotic
    Participant
    • Total posts: 712

    There are many answers to all your questions, it all depends on the circumstances and market but here are my answers.

    1, for a small shop they would need at least 100% mark up. Only large retailers have the business to afford a mark up of less due to high turnover. In my old shop my general mark up was 200%. If I bought a product for $10 I would expect to have a resale value on it of $20 to $25. It also gave some leeway for sales and specials.
    And, yes if it was something I was not familiar with I did like my distributor to suggest what the item was likely to sell for and tips on marketing that item.

    2, I always bought stock outright. I would be uncomfortable with the hassle of consignment.

    3, Many small businesses prefer to go though an agent because they are experienced, good at their jobs and know how to talk to the retailer but people who want to sell their own goods directly to retailers were generally not good at the selling part. I was always happy to see someone selling their own goods but they rarely got a sale from me.
    Sourcing stock can be a pain for small businesses as they often don’t need the high minimum orders that wholesalers want, that is where a good agent comes in.

    I hope that answers some of your questions but other people would have different answers.

    #1188563
    bb1
    Participant
    • Total posts: 4,485

    I won’t buy anything unless I can put a minimum 100% markup on them, its not worth the hassle for anything less. My markup ranges from 100% to about 150% depending on where I settle with the pricing.
    The cheaper the item the more markup I want, but having said that I currently have one item I paid $110, and am retailing at $285.
    Recently went to a trade show, some were suggesting RRP’s others weren’t. Some had minimum RRP’s others didn’t really care.
    Oh, and my markup is on top of the full cost of the item, purchase price, GST, delivery, Online sales fee’s, etc. I calculate all those, double it, and than consider how much extra I want.

    #1188564
    Bespoke1
    Member
    • Total posts: 16

    Thanks for your responses.. I will work an absolute minimum of 100% markup into my financial models.

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