Three ways to price for wholesale
Pricing is part science, part gut, part luck. When all three align, your product starts to move. Here are a few tips to remove the guesswork out of pricing and some common pricing mistakes to avoid.
Double your cost price
Calculate your cost of materials for a batch + hourly rate.
Divide it by the number of items in a batch. That’s your cost price.
Double it. That’s the minimum wholesale price.
This price is called the Keystone price.
Most independent retailers use keystone pricing to sell your goods which is a 100% markup.
Your wholesale price is $50. Retail price is $100.
Keystone pricing covers the minimum cost for the retailer. It goes towards paying the rent, staff, inventory management and promoting your goods.
Now here’s the thing. Even if Keystone pricing is popular, retailers love it when your retail price is less than half your wholesale price. It’s when a retailer can buy from you at say $30 and sell it HIGHER than keystone like say $75 which is a 150% markup.
It’s quite hard to hit this level of markup for handmade and retailers get it. As long as you can hit 100% markup you are fine.
Once you cover your cost of goods and profits, if retailers can sell your goods at more than a 100% markup, it’s retail heaven.
Ask the retailer
If your product doesn’t move at the price you set, it doesn’t matter what the cost price is.
Ask a retailer what it would sell for at their store. Halve that number. That’s wholesale price. It has to be either half or lower than half of the retail price.
Retailers are busy, so here’s a template to ask.
Sub: How much should I price this for?
Dear {{Retailer}},
I’m a jeweler from {{town name }} in the process of building a new collection. I definitely have an eye on your store. I’m curious how much a piece of my jewelry would sell for at your store (even if you don’t bring it in).
The materials are: {{Names of materials}}
(Pic showing scale)
It’s ok even if you reply back just with a price I know you are busy.
Thanks,
((Your Name))
url:
IG:
In our conversations with retailers, we learned that they do not mind giving this type of feedback.
On SKUE you can actually ask retailers to say what they they think it should sell for.
Reverse engineer the retail price
If you have been selling at craft fairs, you’ll know what price your product moves. The common mistake is designers price their products by adding the wrong margin to their COST price.
Here’s an example.
If your cost to make goods is $50 and you sell it for $75 at craft fairs (and at your online store), you’re in for a shock when you do wholesale. Because the retailer will expect to sell it at least at keystone price which is $100.
If you sell it for $75 direct and expect the retailer to sell it for $100. Because customers are notorious for checking the prices online before they buy. I mean we’re guilty of it too. You know when twe check prices on Amazon while buying something as dumb as a suitcase. It’s called “showrooming”. Retailers of course hate this. You would too if you ran a store.
You have to make sure that your direct to sale price is always double your cost price if you plan on doing wholesale.
Use all three methods and soon you’ll get a better handle on what pricing works best for you.
Vinit is co-founder of SKUE, a marketplace for makers to get retail ready and sell to stores. If you are a member of SKUE you can always reach out to us if you need help with the strategy or crafting the right pitch. If not, you can apply here.
