This is a guest post by AmyTangerine. She has been working in style and design for 10 years. Recently she combined her powers with crafting company extraordinaire American Crafts to create a gorgeous line of scrapbooking goods. Here she talks about how she navigated the world of wholesale pricing while staying true to herself and her vision. Want to read more of her story? Check out her blog or say hi on Twitter
Over a decade ago, I began hand crocheting arm warmers so I could wear them on outdoor photo shoots. At the time, I was working as a freelance fashion stylist in Atlanta. I happen to wear them into a boutique opening party, and the owners fell in love with them. They were interested in placing an order, and as soon as I got over the giddiness of possibly selling these, I had to figure out a few things. What would people pay for these unusual accessories and what amount did I need to charge to make sure I was covering my costs?
Welcome to the wonderful world of wholesale pricing.
To help determine what I was going to charge for the arm warmers, I asked a few people in the business for some advice. Ideally, the basic formula consists of adding your cost of materials to your labor costs and then doubling that number to arrive at your wholesale price. For example, a pair of arm warmers cost $2.00 in yarn and took 2 hours to make. If I were to find someone who would be able to make it for $8-$10 an hour, then the cost would be $18-$22. So after doubling, the wholesale price would be $36-$44. At first I thought this was just too much, but couldn’t figure out a way to get around this, as it was a hand-made item. Reassured by a couple mentors, I decided on a wholesale price of $37. Retailers typically do between a 2-3 times mark up.
Upon delivery, I told the store that the price, and they didn’t flinch. They sold them at $78 a pair, and while that seemed a bit outrageous to me, the moment I delivered them, a pair was sold right out of the bag.
Some things to keep in mind:
* Covering your costs is important, and since this is a business, so is making money.
* It’s okay to reduce or raise your price a little bit, so long as you are comfortable with the number.
It’s important to not price yourself out of the competition, but not covering your costs would be counterproductive.
* Be realistic and avoid getting too attached to what you are trying to sell.
While it’s important to be proud of your product, ultimately the focus should be on making it a viable sale. I don’t think I could have commanded a $78 price for my arm warmers on my own, the fancy boutique felt confident in doing so and were covering their costs and making profit as well.
In the spring, it was time to make a different product. I decided to take tank tops and add hand-embroidered flowers to them. They were all one-of-a-kind and took 3 hours to make. While selling them to a handful of boutiques was nice, the way to get more reach would be to attend a tradeshow. I kept this in the back of my mind while still pursuing styling jobs. When a call came in from a store buyer telling me that Cindy Crawford was in Glamour Magazine wearing one of the tanks, I knew it was time to take it to the next level.
After some research, I submitted an application to a juried tradeshow called Workshop NY. It was a smaller show held at Chelsea Market that focused on international emerging designers. Thankfully I was chosen and I immediately had to scramble to start planning for it. I didn’t know I was ready, but I had to jump at the opportunity.
Don’t do as I did and scramble at the last minute. Instead, try these tips:
* Start planning early.
* Know all your costs involved early and make decisions based on a reasonable budget.
If you know you might go, book the hotel ASAP. You can usually cancel up to 24 hours prior.
* Make a lot of lists to stay organized.
* Take your time to do things right.
Rushing often leads to little careless mistakes that can add up and affect your bottom line.
* Make your samples as best as you can.
* Be armed with plenty of marketing material.
Even if you are on a tight budget, it is really important to have proper business cards and order forms. Make the duplicate or triplicate order forms and bring lots of clipboards and pens.
* Spend a little time and money planning your booth space, but ultimately the most important thing is your product.
Make it visible and make the buyers want to place their orders right there at the show.
* Be prepared to work hard, have fun, and smile!
Sarah Von is a Vianza contributing columnist and interview wrangler. If you follow her on Twitter, you’ll be privy to all sort of tweets about small business, good ideas and, um, cheese.