- Getting your prices right is the most integral part of wholesaling. You want to make sure your prices are low enough that they will be attractive to retailers, but high enough that you’re still making gobs of cash.
- If you’re new to the wholesaling game, there are a few things a buyer will ask you, and it’s good to have an answer prepared.
- Setting up a wholesale channel is a fantastic way to distribute your products, especially if Nordstrom (or another large retailer) shows interest in your brand.
Interested in sticking to fashion brand traditions? Then, wholesaling your products is the way to go. Here’s how the wholesale process works.
In short, you go to an in-person trade-show to show off your collection to different buyers—byers that represent large retail stores. When a buyer likes your collection, you sell your pieces in bulk at a discounted rate. The retailer then leverages their brick-and-mortar foot traffic to sell your products in their store.
Take Nordstrom for example. Nordstrom isn’t a fashion brand itself. It’s a large department store that sells products made by other high-end clothing, accessory, and perfume brands.
Setting up a wholesale channel is a fantastic way to distribute your products, especially if Nordstrom (or another large retailer) shows interest in your brand.
To help you get started, here is what you need to know about wholesaling, including the pros and cons of a wholesale channel and how to get the ball rolling.
Advantages to brands of a wholesale channel
Here are the top reasons you should create a wholesale channel.
Wholesaling can take place online. Advances in technology aren’t only reserved for the world of D2C sales. There are many ways you can connect with retailers via the internet, like using an online wholesale platform to present your collection online. You can also sell your products through online wholesalers like Amazon.
Wholesalers front the costs of advertising and marketing. If you only engage in D2C sales, you are in charge of your own marketing. When you sell your products to large retailers, you get to piggyback on the marketing efforts of stores with massive budgets.
Orders are large. In direct sales, you typically sell one or two items to various sets of customers. When you enter into a wholesale arrangement, you sell a bunch of the same items to one customer. Win!
You can leverage existing audiences. When you create a wholesale partnership with a top brand, you have instant access to their audience.
Revenue multiplies. Bulk purchases make it much easier for you to output more of your inventory and grow your revenues quickly.
Instant credibility. As soon as you land a wholesale contract, gone are the days of struggling to make your brand known. Your brand will instantly gain the trust and credibility from your customers, other retailers, and be known in your industry as a professional brand.
Excellent relationship with retailers. When buyers and vendors build relationships, both benefit. Retailers get access to new and popular products without having to do market research and product development. Vendors get access to an existing supply chain in new markets, reducing setup costs.
Drawbacks of a wholesales channel
While wholesaling is a fantastic way to get your product out the door, and quickly make sales through retailers that already have a reliable brand, there are still some potential pitfalls.
You outsource your marketing. This can be seen as both an advantage and a disadvantage. If retailers are marketing your product, it’s a lot less expensive for you. However, you also have little control over the messaging.
You need capital to get started. When it comes to wholesaling, you need money to make money. Getting a collection ready for a wholesale retailer is expensy.
Overhead is large. Sometimes, retailers buy inventory at unpredictable times, so you have to purchase and store a lot of stock to be ready to send when a sale goes through. This means a lot of your cash is tied up in inventory.
You need storage space. Since you need to have a large amount of product on-hand, you need to rent a large warehouse for storage.
You rely on the middleman to make sales. This also can be either an advantage or disadvantage. When you sell your products in bulk to retailers, it’s up to the retailer to push your products. If you team up with an excellent retailer, your revenue could skyrocket. If not, you run the risk of having more inventory on hand than you initially projected.
Showroom sales representatives take a cut. Most young designers rely on showrooms to make initial sales and future appointments. When a representative makes a sale of your product, they take a commission.
How to start wholesaling your products
Doesn’t wholesaling sound exciting? Here’s what you need to do to get started.
1. Set your prices
Getting your prices right is the most integral part of wholesaling. You want to make sure your prices are low enough that they will be attractive to retailers, but high enough that you’re still making gobs of cash.
As a starting base, the standard is that your wholesale prices will be 2.5 times your production costs, and at least 50% lower than your retail rates. For example, if it costs you $1 to make your product, your wholesale price would be $3, and your suggested retail price would be $6.
This is not an exact science. Some designers know they will lose money on one product and make far more on another. Study the market and adjust your prices accordingly.
2. Research retailers
Next, target the right retailers. If you sell high-end, expensive fashion items, you don’t want to waste time engaging with Wal-Mart.
- Who is your target customer?
- Where do your target customers shop?
- Where do you envision your products stocked?
- What is your competition doing?
- How much shelf space will you need?
- Does your product fit in with a particular brand’s assortment already?
Seeing your products in your dream store isn’t luck or magic. It’s the result of research and hard work.
3. Understand buying strategies
Buying strategies vary from retailer to retailer. To make a sale, you have to be in the know. Here’s what to consider as you do your research:
- Will you be reaching out to the store owner of a small boutique?
- Will you need to set up a face-to-face meeting with a specific buyer of a small chain?
- Does your retailer prefer to use online wholesale technology to manage inventory and purchases?
These are all things to consider before you start promoting your products.
4. Set your policies
If you’re new to the wholesaling game, there are a few things a buyer will ask you, and it’s good to have an answer prepared. Buyers will ask:
- What is your minimum opening order?
- What is your minimum reorder?
- How do you plan on supporting your stores?
- How will you handle damaged products, exchanges, and refunds?
- How much is shipping?
- Who will pay for shipping?
Know the answers to these questions before your first wholesale meeting. Also, keep your policies consistent across the board for all your retailers.
5. Take pictures of your products
You can do a lot of work building your brand before having product photography. However, before you meet with a buyer, it’s critical to have your product photography finished.
The best route is to hire a professional product photographer. If you’re working on a budget, you can take the photos yourself. Just remember to take pictures with a white background, and edit them, so they aren’t ugly.
6. Create your linesheet and order forms
A linesheet is a simple catalog that displays your product and all relevant product information. Linesheets should be well-designed, easy to browse, and straightforward. Here is what to include on your linesheet:
- Cover with branding logos
- Contact information
- General ordering information and sales terms
- Product images
- Product names
- Product descriptions
- Available colors or variations
- Wholesale prices
- Minimum orders
Along with a linesheet, you need an order form. Here is what to include in your order form:
- General ordering information
- Bill to and ship to addresses
- Minimum order and quantities
- Payment methods accepted
- Terms of sale
- Policy regarding returns and cancellations
- Shipping costs
- Damage claims
- Buyer signature
You can create physical linesheets and order forms, or you can use wholesale software and create your linesheet and order forms online.
Once you have followed the steps outlined above, you’re ready to start pitching to buyers. For more information on direct to consumer (DTC) sales, check out our sales channel guide.