So what IS wholesale? How is it different than consignment, and which is better?
It depends. (Doncha hate that??!!)
After a store views your work and decides it’s a good fit for their store, they could pay you outright for your goods, according to your terms. That is wholesale!
"Terms" are simply how and when you want to be paid.
"Prepay" means the store pays before you send it to them. Most stores would at least like to SEE your product before they order from you. If you took an order for a store (at a wholesale show or from a store visit, for example), you make the items, and when you are ready you send it to them, you ask for payment--that's "prepay".
"Payment on delivery" means you bring your work in and they pay you on the spot.
"Net 10" technically means that you expect payment within 10 days of your creating the invoice. ("Net" means the total amount of the invoice.) But every store I've ever dealt with interprets it as "10 days after the goods arrive, I'll send the check." Be forewarned.
"Net 30" is industry-standard--what most "big-time" craftspeople offer. It means you expect to the invoice to be paid in full within 30 days.
Again, most stores interpret that to mean, "Send a check for the full amount 30 days after we get the stuff." BUT again this is entirely up to you. Many craftspeople like to see how the relationship goes before offering net 30, and that's a wise decision. Is the store easy to work with? Do they pay on time? Are disputes or discrepencies --for example, if your inventory list doesn't jive with theirs, or a mistake in pricing occurs--handled quickly and professionally?
"Net 60" is not as common, but it exists--especially if you sell to a catalog company. They work so far in advance to prepare a catalog and get it to customers, they tend to need more lead time before paying you.
Then there's an odd little beast called "1/10 net 30" or "2/10 net 30". It's not as common with us "little people" (i.e., "small producers", but it exists. It means, "If you pay this invoice in full within 10 days, you can take a 1% discount" (or 2% or whatever percent you are comfortable with.) This is something you can use to encourage a customer to pay promptly.
Should you offer net 30? Sound advice is that newbie craftspeople should get paid upfront, at least the first few times. And it's good practice to NEVER offer net 30 to a store you've never done business with before. (As an old song goes, "A man should never gamble more than he can stand to lose...")
Once you feel this is a good relationship, you might want to offer net 30. But if you are NOT comfortable doing this, then simply stick to your prepayment or payment on delivery terms.
In wholesale, you (the artist) determine the WHOLESALE price. From that, the store determines THEIR retail price—usually 2x but more often, 2.2x to 3x your wholesale price. This means if your widget's wholesale price is $10, the store might mark it up to $20, $22, $23, or even $29 or $30.
Before you think of this as a "rip-off", consider this: Not too many years ago, mass-produced fashion jewelry in department stores was ROUTINELY marked up three times the wholesale price! And large mark-ups are still common. How do you think that department store makes money on a "special purchase" sweater at $29.99 can be sold for $16.99, and the store still makes money?
If you ship the goods to the store, the store pays shipping. Returns, damaged goods, stolen goods are the store’s responsibility and are determined by your terms.
So what are the advantages of wholesale over consignment?
· You have money in hand before the store even sells any of your work.
· You are paid for work as you deliver it (or shortly after.) AND you set the terms. (Now, the store may not AGREE with your terms, but it's your business, you get to decide when you get paid.)
· You can make inventory as you receive orders from the store.
· You know exactly what kind of items to make, and how many to make.
· Wholesale creates "high energy". The store is financially invested in your product, and probably works harder to sell it. After all, they don’t recoup their investment (and profit!) until they actually sell the work.
· The store owns the product, and is responsible for lost, damaged or stolen goods. You can determine how involved you want to be for repairs and rotating ("freshing") stock.
· You establish the trust level—prepay, net 10, net 30, etc. If store is a slow or difficult payer, you can still do business with them by returning them to prepay status.
· The store pays for shipping and any shipping insurance. They also pay shipping for returns, exchanges, etc.
What are the disadvantages of wholesale?
· Sometimes despite your best efforts, you may not get paid for your work. Bad checks get written, or maybe even NO check gets written. Remember "the check is in the mail"? It can work against YOU.
· Your overall percentage of the retail price might be smaller-you get 50% or perhaps even less, rather than 60% as in "standard" consignment.
· If you don’t price your work accurately, you may lose money. For example, if you determine your wholesale price by taking one-half your retail price, and your retail price was too low to begin with, you're hosed. (For the record, you SHOULD get your retail price by figuring out your WHOLESALE price first.)
· Once you’ve sold work, you have no control over how it is displayed, priced ormarketed. You also cannot control whether it is marked down or put on sale. If you have retail customers who bought a $200 item from you, they will be upset if they see it in a store with a red slash through the price tag and marked down.
· Because store has to invest directly in product, they may choose “safer” or less expensive work. Or buy less to begin with.
· A store saying “no” to your work is harder to accept than a customer who merely passes by your booth.
· Your bad professional habits—not meeting schedules and deadlines, poor quality or inconsistent quality, poor packing, etc.—may lose you sales and accounts.
· A wholesale account takes on-going customer service from you—follow-up calls, checking in, taking the pulse on sales & reorders, price increases, new products, etc.
· Your work may not translate well to a wholesale market, or take a lot of extra explanation and marketing.
So which is best, consignment or wholesale? As you can see, there is no single right answer. When I started out, I did mostly consignment. Then I did wholesale with a mix of consignment. Then I refused to consign anymore. Then the economy got tough and I did some consignment again.
Now I do a mix. There are some stores that only do consignment, and they have turned out to be GREAT stores for my work. I make more money from them than some of my wholesale accounts. There are also stores who refuse to do consignment--they are tired of the paperwork and disputes over damaged or stolen work, and they'd rather just buy it and deal with it.
In general, I like to get paid right away (who doesn't??) and I'm willing to consign with stores who have a great track record of selling lots of my work, and paying me on time when it does. I often find stores are willing to buy my jewelry and sculptures outright, and would like to consign a few wall hangings.
And for galleries that sell 2-D work", as paintings and prints are called, the consignment model is now much, much more common. The heady days of the '70's and '80's, when a gallery might buy outright the entire inventory of an artist's work, are long gone.
So think about what you willing to do payment-wise before you get to the store. It's okay to ask for payment the same day the buyer picks out pieces to purchase from you. It's okay to consign, too, especially if that's the only way they do business. It's okay to ask for payment upfront the first few times, and then offer terms.
It's all okay.
But I have to tell you, the first time I walked out of a store with an empty box and a big fat check in my pocket, THAT was a wonderful day!
