You've determined wholesale pricing for selling soap and bath and body products. Wholesale is what you charge retailers who buy large quantities of your handmade products to sell to their customers. For the sake of your company's growth, you won't want to sell your handmade products to everyone at wholesale prices. By selling at retail prices, you will have enough margin to have an occasional sales promotion and still make money!
Converting Wholesale to Retail Prices
To mark up to retail pricing, take your wholesale price and multiply it by at least 2 (known as "keystone") or up to 3. Retailers are going to take your wholesale price and mark it up by 2.2-2.5.
Example:
- Wholesale 8 oz. Body Lotion = $5
- Suggested Retail Price at 2.2x Wholesale = $11
- Suggested Retail Price at 2.5x Wholesale = $12.50
If you are new to working with retailers, it may seem at first glance that they are making an incredible profit selling your product. But consider that retailers also have their own costs to account for, including overhead, advertising, theft, in-store breakage, damage to merchandise and more. Instead of focusing on the money that retailers are making off of your product, think about the time it would take for you to sell the same merchandise on your show schedule or online.
Consider Retail Competition
Retailers have challenges that impact wholesalers and can affect the way you operate. First, there is a great deal of competition between retailers in close proximity, such as the same neighborhood or small town. Retailers spend significant time selecting merchandise that reflects the tastes of their customer base. As a result, shops often want to represent lines that are not sold in neighboring and competing stores. Consider offering exclusivity on your line to one retailer per town or neighborhood.
Second, be careful about undercutting. Retailers don’t want to have to compete with you selling your products cheaper at a nearby
craft show or farmers market [insert link to new farmers market post] when they just spent hundreds of dollars to carry your line.
Another challenge for retailers is crafters who also sell online on their own websites or at handmade marketplaces like Etsy or ArtFire for less than the suggested retail price. Pick up most products in a retail store and you'll see a price tag placed prominently over the manufacturer’s website address.
Some store owners are concerned about savvy retail shoppers who purchase a product in their shop and then visit the website shown prominently on the label. Shoppers will be the first to let retailers know if they believe they were overcharged for an item. Or they’ll simply pull out their smartphone in real time to do a quick price comparison before making a purchase. A shop owner who is reprimanded by a customer for their high prices may no longer want to be your wholesale client.
The moral of the story? If you choose to sell online, sell at suggested retail prices. If retailers refer to it as “competition,” encourage them to promote the benefits of brick-and-mortar store sales to their clients — no shipping charges and no waiting for your items to arrive
Doing the Sidestep: Offer Different Product Lines
Occasionally, a crafter chooses to wholesale a line nationwide and can’t justify the suggested retail pricing for his or her local market. In these cases, one option is to split a collection or create a new collection. You designate one collection for wholesale only and the other for retail only. Create two lines, at two different price points, aimed at two different customers.
For example, think of the fashion industry where a particular designer may have a couture line sold in high-end boutiques and another line sold through mass merchandisers or discount stores. For selling handmade bath and body items, you could split your collection by incorporating unique scents or designs for one market or the other. You also could change the packaging and labeling so the lines are different and noncompeting. Each line must serve its own purpose.
Be sure to avoid comparisons between the two lines. Consider two brands: one for wholesale only and one for retail. Again, do your research, determine which products will sell best in each environment and carefully choose price points.
Doing the Sidestep: Offer Different Product Lines
There is the occasional situation when a crafter chooses to wholesale a line nationwide that perhaps the suggested retail pricing cannot be justified for its local market. In these cases, one option is to split a collection or create a new collection. One collection will be for wholesale only and the other for retail only. Create two lines, at two different price pints, aimed at two very different customers.
For examples, think of the fashion industry where a particular designer may have a couture line sold in high end boutiques and another completely different line sold through mass merchandisers or discount stores. For bath and body, incorportate unique scents or designs. Change the packaging and labeling so that the lines are completely different and non-competing. Each line must serve its own purpose.
Be sure to avoid comparisons between the two lines. Consider two brands - one for wholesale only and one for retail. Again, incorporate research into the project and carefully choose its price points and determine which products will sell best in each environment.
The only caveat is that you'll need to keep up with production and inventory on two lines, which can be a daunting task. It may be easier for an established business to launch a new line rather than a new business launching two lines simultaneously.
As you are pricing your product for retail, remember to:
- Make sure you mark up your wholesale prices to retail prices
- Make sure you are not putting yourself in a postion of being direct competition for the retailer you are selling to
- If you find yourself in that situation, if possible, create two different product lines so that one can be sold at wholesale and one can be sold at retail so that your retailer does not feel threatened
