When you start a brand, the dream of getting into stores is often at the top of the list of goals and jumping into wholesale too early can cause more problems than it’s worth. Below are some tips and questions to ask yourself to determine if you are ready. There’s a big difference between the random wholesale account and making a push with your brand into retail.
Are you selling enough online consistently where you can afford taking a reduced price on inventory?
Wholesale pricing most often is 50% off of your retail price. If you are priced at $25 online, that means they want it for $12.50 and so on. My journals are $10 online, so they wholesale for $5, my shirts $12.50. It’s a big reduction in profit per piece and if you try wholesaling when your turn over on tees is still very small, it will hinder your growth ability more than it will help. Building direct sales through your online store or at events is key to establish first.
Are you capable of re-printing a design easily when you need to?
As you’ve probably learned with selling t-shirts, regardless of how much you try to attempt guessing the perfect inventory levels for each size on a design, it never works out perfectly. You should be at a point financially with the brand to be able to easily send a reprint order over to be made without it breaking the bank. There is no magical size break down that stores order by because each store has a different demographic. You need to be able to handle ordering more quickly if a size is low or sold out to fulfill the orders.
Do you have a solid group of proven designs to offer wholesale that have shown that they continue to sell well over time?
The best approach to wholesale when you start is to have a selected group of best sellers to offer. These should be the designs that tend to outsell all of the others. Whatever designs you choose, you are committing to keeping those in stock that season. If a design is unproven or has low sales, maybe keep it out of the wholesale line sheet for now. I allow customers to purchase any items listed online but not on my line sheet based off of current inventory and let them know that it may not be available on future orders.
Are you in a position to be able to handle net 30?
Net 30 means they have 30 days to make payment from when they receive the order. Any new accounts, I require they give a credit card, but once a customer gets into the re-order status, they will be wanting net 30. If that creates a huge strain on your business, you may not be ready, because trust me, they will ask for it. I’d say that 90% of my stores are on net 30. Plus side of net 30 is that they usually send a check and you don’t lose 3+% on the transaction. If you do wholesale on a random one here, one there basis, you can probably get away with credit cards for payment. You shouldn’t be charging their card until their order ships. This isn’t your way to get funding to produce the order. They will not be happy if you charge their card and the order ships 3 weeks later. Not a good move.
Are you capable of funding all of the expenses tied to offering wholesale?
You should be printing up physical line sheets if you are really looking to push wholesale. They cost a few hundred to get made if done well. If you don’t know what one is, check out the article posted on here. You will more often than not be covering shipping costs for their order. What I do is set a minimum order to qualify for free shipping. For me, that is $300 in the US. Canada is $750 and international is $1000. I offer to cover half shipping on any orders below those prices. It helps get their orders at the numbers that make more sense for you to do that. Stores not only appreciate the free shipping, but they expect it often. You will also need some sort of hang tag for your items and you should be purchasing UPC codes for each of your items you offer. I’ve gotten some from nationwide barcode. Ultimately, they are pretty cheap, but you need one for each item. A size small has a different UPC than a medium, etc, so for garments, the number of UPC’s needed adds up quickly.
Do you have the time to handle each account?
Stores can take a good amount of time to maintain. As the number of stores goes up, so does your time devoted to them. I have sales reps that are going out and getting new accounts, so outside of stores I’m approaching personally, they are doing the leg work of trying to land the account. The work following up for payments and any other questions the stores have is usually in my hands. If you sell to small boutiques, get ready for fun times getting paid. When I used to sell to a bunch of boutiques, some paid quickly and others were like getting blood from a stone for $250. I would heavily suggest having a credit card on file for them. And, don’t expect that card to always run successfully. I’ve had declined cards more than I can keep count of because of cards running out of state often and you need to make the call and get it sorted out.
The dirty C word - Consignment
If you really want an account and are small, there’s a chance they will offer you consignment. Usually you can negotiate a higher draw since they aren’t putting any money out and you may be able to get 60% of retail instead of 50%. In my experience, consignment rarely works in a way that is worth it. You are not only putting stock that could be used better into a store that may sit unsold, but you are relying on their bookkeeping skills. You need to babysit a consignment account monthly. The very few times I have done consignment when I was a new brand, the only way it worked was by establishing terms and a trial period. For example, you can give the store 30-60 days to have the product on consignment and after that set time, you meet and evaluate if the store will purchase the products instead of consignment. If after 30 days, the store can’t decide, you need to pull your product if it isn’t selling through. If it was selling through, they’d want to buy it to make better margins. My feeling on shops that offer consignment or request it is that their stores will have a more scattered look as they will allow just about anything in to fill the space. This also means they most likely are not making a ton of money if they have to get free product and equates to headaches when it comes time to getting paid. 99% of the time, I would avoid consignment and 100% of the time I would avoid it if it’s not a local shop you can drive to to keep on top of.
Wholesaling can be a great way to grow your business, but you need to be ready to do it in a way that doesn’t hinder your growth by spreading you too thin. I went from 3 to 100+ stores in 9 months and the growth was amazing, but also pushed me pretty far. Growth and expansion cost money and the more coming in, the more that goes out in larger numbers with production, so you should evaluate where you are at financially and if you can handle the timeline of purchasing goods to produce and possible net 30 payment.