How friendly are your terms?
Let the terms do the selling
Back at our last INDIE show, we had a buyer who was ready to order. The maker however wasn’t clear on the shipping costs and started waffling.
“I don’t know, I’ll need to check”.
This is a classic rookie mistake, made by a lot of advanced makers as well.
Now our whole idea is to do Less Selling. Let’s bring up the friendliest terms possible.
-Free shipping
-Cancel anytime prior to shipping
-Free returns, no questions asked
-Net 30 (that is, they can pay you after 30 days)
Let’s talk about why retailers LOVE these terms.
Shipping
Retailer’s dream:
Free shipping
The retailer charges the customer the shipping cost.
Which means your product is sold slightly higher at the store.
Which means the customer may double check on their phone to see if it costs less at your store.
Which means lost business for the store.
Getting Real
You may not be able to offer free shipping. But maybe you could deliver for free in your city. It’s also a great way to meet retailers in person.
You could also offer free shipping over a certain order amount.
Get creative.
Cancellation
Retailer’s dream:
Cancel Anytime
Holy shit that’s amazing! There’s zero risk. Retailers might blow their open to buy budgets and then go back and re-evaluate.
The reality
Is it possible, no. You are making a handmade product, you have bought supplies and materials. So your cancelation policy should work backwards until the time you actually start doing the labor, which might be 2–3 weeks prior to when the product is shipped or 2–3 days. Once a product is shipped it’s shipped. Get as close cancel anytime as you can.
Returns
Retailer’s dream:
Free returns
Here’s Zappos return policy
It’s easy, and it’s FREE! If you are not 100% satisfied with your purchase from Zappos you can return your item(s) for a full refund within 365 days of purchase. (Returns must be unworn, in the state you received them, and in the original packaging.)
The Reality:
Free returns are ok for a big corporation like Zappos. Here are few things you can offer if the retailer doesn’t like your product once they receive it.
-Exchange for another item
-Free returns for up to two weeks if you are unhappy with the item. Sometimes after buying online, the product may not look like what the retailer had in mind.
-Free returns if the item is intact and returned with the original packaging
Net Terms
Retailer’s dream:
Net 90
What it means is buyers have to pay you only 90 days after they receive your merch. This is great for two reasons:
First off, there is no risk of defaulting. If they don’t like your product, they haven’t lost a dime.
Secondly it’s great from a cash flow perspective. The accounts payable doesn’t have to get covered until month 3.
You might see a positive amount on the income statement. But look how it messes up your accounts receivable. But your cash flow statement could start kicking you in the shins and you might run out of cash pretty soon.
If you take a net deal, then the store must meet 3 criteria:
Must be an established store.
Must be a store you really want to work with.
Must be a store you are currently working with
Must not hurt your cash flow statement
The Reality
Net 0
“The standard practice is to pay upon delivery,” says Katie Gaertner of Inner Sunset boutique store Whistle.
But you might need the cash to start manufacturing. Really that’s not the retailer’s problem. But Indie retailers are a lot more forgiving. At our show INDIE, 80% of the retailers paid cash at time of sale, which for the maker is a dream scenario.
You might need 50% upfront and 50% upon delivery
You might need 100% prior to three weeks of shipping
You might be okay with payment on delivery
Or best case, you could be flexible on net terms
Find payment terms that you are comfortable with.
This article is one of 10 part series “Less Selling , More Sales” The Wholesale Guide for Introverts. To navigate to other topics, click here.
