Enough holiday fun time! Back to work with our "Getting Started" series.
What is a minimum order?
This is simply the smallest order you will accept as an opening order with a wholesale (or consignment) account.
A minimum order can be a dollar amount (say, $300) OR a certain number of items (perhaps a dozen items).
What ISN'T so simple is figuring out what that should be. Minimum orders, like pricing, depend on several factors. And, as always, deciding what YOU need to get from the process. Adding to the confusion, many of the factors are intertwined. Hang on while I try to wend my way through some of them...
One factor is, what size order is worth your while? If you are visiting a store, and you've traveled an hour, and it takes an hour to look over your inventory and discuss your product, your process, your pricing, etc., will you settle for a $50 order? A $100 order?
If you are shipping an order to a store, and you have to invoice, pack and ship the order, then deliver it to the Post Office or UPS or FedEx Ground, and it takes you a couple hours to do that, is a $100 worthwhile? A $500 order??
But another factor is, a lower minimum means a lower threshold the buyer has to cross to invest in your work. If your minimum order is $500, and the owner isn't sure she can sell your work, that's a high threshold. (Of course, if she's SURE it will fly out of the store, it isn't.) (I told you this is a fuzzy process!) It's a lot easier for her to take a chance if your minimum is in the $100-$200.
And of course, it also depends on how much your product costs. If you make fine furniture, and one single item wholesales for $1,000, then a minimum order of $5,000 is not out of line. Conversely, if your item wholesales for $1, then $50 might be a very reasonable minimum order.
Another factor is if you make product for specific orders (as opposed to stockpiling product, then filling orders from your inventory.) Maybe YOU need to buy a minimum amount of supplies to make an order--say, a certain number of feet of silver wire. You'll have to take into account the minimum dollar amount YOU have to buy in order to fill that order.
The "how many?" factor is, how many pieces of your work is needed to make a good showing?
Some store owners know instinctively how many pieces of something they need to make a good showing. Others want to buy as few as possible, so their investment is as low as possible in case the product doesn't want to work out.
You can guide their amount of purchase by knowing how many are needed for a good display.
In fact, often a buyer will ask YOU what you think a good "showing" of your work is. If you're just starting out and you aren't sure, that's okay. But it's more energy if you have SOME idea. Be ready to pull out your best sellers (if you've already been selling retail) and explain why. They may agree or disagree, but again, you've started the conversation about how many items (and which items) will work for THEM.
If we're talking jewelry, then you may need as many as a dozen or so pieces, or even more. If we're talking furniture, then perhaps as few as six pieces, or even three, are all that is necessary.
If you are not sure, make a visit to a local store that sells things like yours. Pay attention to their displays. Note which ones look substantial, and which ones look sparse and like "leftovers".
But also be aware that TOO MANY ITEMS can also be overwhelming. For the first time in years, I visited a lot of small local craft shows this season. One of the biggest mistakes I saw in display was having hundreds of items to pick from. Choosing "the best one" became impossible, and I would simply give up and move on. So making buyers take "one of everything", or having too many choices, can work against you. A focused, cohesive grouping may be a more powerful display than one that says, "I make these in blue, green, purple, pink, red, orange and black, and I make THESE in blue, green, purple, pink, red, aqua, silver and black, and I make THESE in blah blah blah..." because your customer/buyer is soon going to be be saying "wah wha wah?..."
Personally, I tend to be attracted to single items that look like they are the only one available--my penchant for shopping yard sale and flea market, I suppose.
But many people tend to avoid buying the "last one" of anything, as it can tend to look like "the one nobody else wanted." So if your minimum order is three widgets, and two sell, that last one could sit a long time. The store owner will see it hanging around and think, "Hmmmm, not selling...." It might even discourage her from reordering. So a larger number that can be sold from, and still looked "well-stocked", might work out better for you.
Conversely, if you make many multiples, or lots of "one thing", take a look at items like that. What looks like a generous display without looking like piles and piles of the same thing? For example, if you make lip balm in one flavor, does the store owner really need to buy fifty? Maybe not. But if you have a display fixture that holds 24-36 tubes, that's small and sits right by the cash register (where many impulse purchases are made), you have a good case for having a minimum order of three dozen pieces.
Incidentally, this is why selling wearables that have to fit--like hats, sweaters, etc.)--are such a tough sell in stores. The store has to have so many hats to get a good selection of sizes and colors and styles, many figure it isn't worth the time, space or money outlay. If you have a generous exchange policy, or if you are willing to consign and "swap out" occasionally, that may help in closing the deal. (Be thinking of how well your product might hold up under these circumstances, though. Will they get shop-worn quickly, or damaged easily? This might not work out well for you.)
And yet another factor might be your production methods. Do you make one widget at a time? Or do you create items in "batches"? For example, if you make pottery, it's not very cost-efficient to make just one pot requiring one kind of glaze and a kiln firing. It would be more efficient to fire several (or lots!) of items at a time.
Now, for the tricky parts. Maybe what will work better for you is a combination minimum DOLLAR amount AND a minimum NUMBER amount. This is especially useful if you make items with a wide price range.
For example, I make jewelry which wholesales starting at $18 or so, on up to pieces that wholesale for $450. Having a minimum dollar amount of $100 would be silly, as a store could simply buy one piece.
A minimum DOLLAR amount of $200 AND a minimum number of 6 items gets around this nicely.
I struggle annually with my order minimums, and my current policy of $2006 items is absurdly low to many craftspeople. Many jewelry people who work in precious metals (where even small or simple pieces are pricey), or who already have hundreds of accounts, might not even consider such a small minimum. They know their jewelry, they know it sells, and they only want "serious buyers" on board.
But a relatively low minimum comes in handy for people like me who are just starting out (and yes, after eight years of wholesaling I still consider myself a beginner!) It means a buyer who is intrigued by my work, but isn't sure it's going to sell, can still take a chance without breaking the bank.
Another reason for a low minimum is that I do wholesale shows. At a wholesale show, after a buyer has looked at your work and has decided it might fly, the first question is usually, "What's your minimum?" If it's not too high, that's often enough to get the order-writing process started. And often, once they start to put together an order, they will double or even triple what your minimum is. It's getting over that hump that's important.
When my work is more widely known (and hopefully highly desirable even though it's still acknowledged as "hugely eclectic and personal"), maybe I will insist that stores jump through more hoops to get on board with it. But for now, this is working for me.
Conversely, my wall hangings represent a HUGE investment of time, and I know marketing them will take longer than selling jewelry—simply because they cost more and because they are even more unusual. My minimum number for wall hangings is three, with no minimum dollar amount.
The fun thing about minimums is, they are rules YOU make. And YOU can choose to break them. If I feel a store is strongly committed to my work and demonstrates that commitment, then I can offer to sell or consign ONE wall hanging.
A store can demonstrate that commitment in several ways. They can buy a good display of my low- to mid-range work (jewelry and sculptures). They could offer a solo show featuring the wall hangings (and buying the "Baby" pieces such as jewelry and/or sculptures.
This works because of a display theme called "papa, mama, babies". This type of display has one great big ol' expensive piece called "Papa" (in this case, one of my wall hangings) that is dynamic and dramatic, but probably won't sell quickly. This piece is supported by pieces called "Mama" pieces—mid-range work that echoes the "Papa" piece (in this case, my sculptural pieces). A few of these will sell more often than the Papa piece. Finally, there are the "babies"—related work but priced much lower to sell faster. People are attracted to the Papa piece, consider the Mama pieces (perhaps even buy them), and hopefully swoop up a lot of the much more affordable Baby pieces, for themselves and as gifts for others. Being able to offer such a "tiered" display can be a powerful close for your sale.
Finally, once you've thought about your minimum order policies, there is the "reorder" minimum to consider.
The first minimum order a store buys is also known as an "opening order" or "initial order". Subsequent orders are "reorders". Some craftspeople also request a minimum dollar and/or item amount for reorders.
Again, there are pros and cons. If your reorder minimum is very high, then, like a high opening order, the threshold may be too high for the store buyer—especially if your work sells slowly or seasonally.
But if it's very low, you have your nuisance factor to consider again. Are you willing to make, pack, ship and invoice for ONE item? If you are making high-priced items, the answer is probably a whole-hearted "Yes!!" If you make inexpensive things, then going to all that work for a $10 or $25 order may seem pointless.
On the OTHER other hand, maybe your product "turns" quickly. This refers to how quickly it sells. Items such as cards, bookmarks, lip balm, etc. might sell so fast, the store reorders 3-4 times a year, or maybe even every six weeks. A low reorder minimum encourages these sales, and can even out your income over the year. Some artists who make extremely popular and affordable work even have "minimum number of orders a year" policies, or tie exclusivity to how many times a year a store orders. ("If you order less than twice a year, then I can sell to another store in the area who commits to ordering more often.")
And on the other other OTHER hand (you knew this was coming, right?) my work does not usually turn quickly. Once it hits a store, the people who love it tend to buy it. Soon everyone who wants it, has it. What works best for many stores is to order my work once a year, or even every 2-3 YEARS. Exceptions seem to be areas where my work is already well-known and collected, and areas that have a high influx of new buyers (such as university towns, museum stores, etc.) This is absolutely fine with me. YOU might hate it.
There are no right or wrong answers about minimums. What I suggest is, do what you are willing to do to generate orders and reorders. When you are so successful you can't be bothered with teensy orders, revisit your minimum order policy.
Even then, know that during the economic downtown a few years ago, many big-order, big-name stores and galleries had to cut back heavily on their purchasing. Some went out of business altogether. Many of us got by on smaller orders of lower-priced items from smaller stores that could handle the down-swing more easily.
In the end, all of these policies are your best-guess of what works for you. And what will build strong reciprocal relationships with your wholesale customers. Some artists find being firm and consistent is the best way to do business. Others find being flexible is more rewarding.
Do the experiment. Start out with what feels right (or what you'd LIKE to be your business model.)
And as always, be willing change when it stops working for YOU.
