[Question] Best way to go about introducing a wholesale option?

[Mark Atkinson]

Hi Guys,

Some of you may have already seen the whole Bafokke Shirts saga and read all the debates relating to it all.

My question is this: What is the best way to introduce a wholesale option for the shirts? There has been a whole load of interest shown and I have had requests from more than one retail outlet wanting to resell the shirts.

My problem is that initially we priced the shirt too low. Although, I'd say that pricing it so low has actually benefited us more than it's done harm. At the moment, the price is too low to offer a wholesale price below what we're selling the shirts at already.

Anybody got any creative ideas on how I can raise my prices without upsetting the consumer?

The best I can come up with is to run it at the current price for a month or two, making a big fuss about it being a "Limited offer" or an early-mover advantage of sorts, and then raising the prices and introducing a wholesaler price at around (or just below) what we are selling the shirts at now.

A further question, what sort of margins are the norm between retail and wholesale prices in this sort of industry? (clothing/sportswear/fan stuff)

I've been pondering these matters non-stop for the past 2 weeks, and am a little bit stuck.

Any advice would be much appreciated.

[IanF]

My problem is that initially we priced the shirt too low. Although, I'd say that pricing it so low has actually benefited us more than it's done harm. At the moment, the price is too low to offer a wholesale price below what we're selling the shirts at already.

Anybody got any creative ideas on how I can raise my prices without upsetting the consumer?

The best I can come up with is to run it at the current price for a month or two, making a big fuss about it being a "Limited offer" or an early-mover advantage of sorts, and then raising the prices and introducing a wholesaler price at around (or just below) what we are selling the shirts at now.

A further question, what sort of margins are the norm between retail and wholesale prices in this sort of industry? (clothing/sportswear/fan stuff)

I've been pondering these matters non-stop for the past 2 weeks, and am a little bit stuck.

Any advice would be much appreciated.

Hi Mark,
If printing T shirts works like printing the one thing you could do is increase your order size to get your prices down, you then have the risk factor of dead stock. One thing I learnt from selling running logbooks was to sell them in my shop at the price the retailer would sell unless the customer bought more than 20. I thumb sucked a 100% markup. But we only sell about 200 a year and the retail guide is R15 per book. Have you ever read up about YKK zips when they started they sold zips at a price they thought they would get the costs down too in 5 years plus a profit. But you need to have capital and faith to use that model.
Well done for creating that demand.

[Mark Atkinson]

Hi Mark,
If printing T shirts works like printing the one thing you could do is increase your order size to get your prices down, you then have the risk factor of dead stock. One thing I learnt from selling running logbooks was to sell them in my shop at the price the retailer would sell unless the customer bought more than 20. I thumb sucked a 100% markup. But we only sell about 200 a year and the retail guide is R15 per book. Have you ever read up about YKK zips when they started they sold zips at a price they thought they would get the costs down too in 5 years plus a profit. But you need to have capital and faith to use that model.
Well done for creating that demand.

The problem is we already get extremely good prices from our manufacturer, and we would have to order quantities of a couple thousand in order to qualify for any further discount. This is not feasible right now.

To me it seems like the only way is to raise our prices in order to offer the shirts to resellers at a discounted price. See currently our markup is not quite 45% on selling price. To discount any further for retailers would mean it's not really worth our while.

Initially we had decided on only selling the product through the website. We did not foresee such demand from resellers and have had to rethink our strategy.

Thanks though Ian. By the way "IanF" wouldn't happen to have any correlation the the DJ "IanF" would it?

Anybody got any creative ideas on how to raise prices without affecting our goodwill?

[BusFact]

without affecting our goodwill?

What goodwill? Who will be affected?

I would imagine most of your customers to-date are private sales. Congratulate them on having received the benefit of your opening special where by they received wholesale prices. They have 10 days to still receive these prices if they want to but some more after which only the retail price will be available to them.

Those enquiring for wholesale prices: Advise them that the current price is the whole sale price and that the new retail price is effective immediately for all other new customers.

So yes, your best option is to raise the retail price.

[Mark Atkinson]

What goodwill? Who will be affected?

I would imagine most of your customers to-date are private sales. Congratulate them on having received the benefit of your opening special where by they received wholesale prices. They have 10 days to still receive these prices if they want to but some more after which only the retail price will be available to them.

Those enquiring for wholesale prices: Advise them that the current price is the whole sale price and that the new retail price is effective immediately for all other new customers.

So yes, your best option is to raise the retail price.

The +- 1000 people online who have already seen the shirts advertised at the current price. Many of these people are potential customers, and many are already customers. (I'm more worried about the potential customers, as I don't want to negatively influence the possibility of them buying the product by raising the price.)

I guess it has to be done, though. Thanks, once the pre-order phase is up we will most certainly look to do it. I think it will do more good than harm in the long run. Having retailers stock our shirts means a whole heap of exposure and sales that we might not get otherwise.

[eitai2001]

You need to perform a sensitivity analysis. Put some thumbsucked RRP together and then go do some market research in the street and see what comsumers would be willing to pay.

[Dave A]

Set a deadline for the "launch special" and then mark up your retail price. And don't worry about making it sooner rather than later - there's nothing wrong with creating a sense of urgency

[Mark Atkinson]

Set a deadline for the "launch special" and then mark up your retail price. And don't worry about making it sooner rather than later - there's nothing wrong with creating a sense of urgency

My thoughts exactly Dave! I will do just that.

[Pap_sak]

Hi Mark

As a rough guide (although this is for importers - but could work for you as well), you take your delivered cost (cost + taxes + transport of the product) TO the place you going to distribute from and mark up at 30-35%. The retailers would then take this wholesale price and mark this up at around 80 - 100%.

So landed cost R100, you wholesale price would be R130 and would retail in the shops for around R260 (or R259,95 lol).

This is how it works with a lot of distributors - maybe you could get a better slice as the "brand owner" but just remember, the higher the retail price, the less it is going to sell.

Retailers are paying anything from R80 - R250 per m2 - profit margins HAVE to be quite large for us to be tempted.

[Mark Atkinson]

Hi Mark

As a rough guide (although this is for importers - but could work for you as well), you take your delivered cost (cost + taxes + transport of the product) TO the place you going to distribute from and mark up at 30-35%. The retailers would then take this wholesale price and mark this up at around 80 - 100%.

So landed cost R100, you wholesale price would be R130 and would retail in the shops for around R260 (or R259,95 lol).

This is how it works with a lot of distributors - maybe you could get a better slice as the "brand owner" but just remember, the higher the retail price, the less it is going to sell.

Retailers are paying anything from R80 - R250 per m2 - profit margins HAVE to be quite large for us to be tempted.

Interesting. Well at the moment our plan is as follows:

We're going to let the pre-order phase run through, the launch date being 10 September. We are then going to maintain the current price at R270/shirt until 30 September as our "Launch Special".

Following that, we are going to raise the retail price to +- R350, and offer the shirts to retailers at a price of around R250 per shirt. (Taking the cost + transport into account, this is, as you suggested, +- 35% on cost). If retailers wish to add on markup above the retail price, that's their own prerogative. Our market research (albeit limited) has suggested that, for the time being at least, people won't pay more than about R350 for the shirts, particularly online.

Hence, we have tried to compromise as far as possible, to give retailers a decent profit as well as make it feasible from our end.

What do you think?

(Btw, I did try to call you last week. You were on holiday though. Lol)

[Pap_sak]

Holiday was great!

Yeah, see you being a little stuck between a rock and a hard place, your cost are quite high, but what you feel as a fair retail price is not much higher. And I tend to agree with you, R350 is about as high as you can go. Retailers do take smaller margins on certain item, like tennis balls - but these are generally "stock" items that move out the door pretty quickly. Even some brands have lowish margins, like your basic Converse takkies - but again this moves pretty quickly and is a quite a big brand and they can be found in Markams, Edgars ect.

Have you looked at any other places that offer sublimation and try get your cost price down? Secondskins are quite big down here in the Cape and do quite a bit for larger brands. http://www.secondskins.co.za/ might be worth getting a quote.

You might find, at the end of the day, selling on the internet works best for what you do, it seems to have work for the laughitoff crowd.

[Mark Atkinson]

You see, all this was factored into my original plan not to sell to retailers. There are just so many variables to consider.

We are hoping that our shirts will move quite quickly too, though. I have spoken to 2 other retailers who contacted asking me if they could resell the shirts. Both of them seem to be quite keen to buy them at the suggested prices, so I think we will probably go ahead with that plan.

I think +- R100 per shirt profit for the retailer is decent, particularly if they become popular. I have had tons of people asking me where they can buy the shirts offline. Unfortunately, if retailers don't see it as enough of a profit margin, there is really nothing we can do. They can always attempt to mark prices up even further.

Regarding our costs and suppliers, to be honest I don't think we could do much better. The great thing about our supplier is that we are provided with a finished product. We don't deal with label companies, we don't need to source materials, nada. They import all their own stuff and at the end of the day, we get our product, complete and with minimal input from our side. We have actually asked for quotes from many places. Most say it's impossible to do. Others are priced much higher (30-35%) than what we already pay.

Our supplier gives us good prices and an outstanding quality (the shirts really do look very, very good). The thing with sublimation is it's a slow process that produces high quality products, hence the cost is higher. We do not wish to sacrifice quality for price whatsoever.

So at the end of the day, I am indeed stuck between a rock and a hard place. :? Nevertheless, we will continue forward with our plan and introduce the wholesale option to those who wish to use it, seeing as we have had interest expressed on the matter. Hopefully the shirts will move quickly, retailers will be happy, we will be happy, and the customers will be happiest of all.

Otherwise, we will simply continue with the online sales. Either way, I'm happy. :P

[Pap_sak]

Well, you have a great idea, so am sure you will make sales, and yes, I am sure some retailers will be happy with that margin - in fact, for some retailers (I am thinking food) that is a great margin - maybe the local SPAR would take a few? Who knows, if your orders pick up, maybe you can get the costs down at a later stage.

All the best.

[Mark Atkinson]

Thanks for the feedback, Pap_sak.

@ms123: It's easier said than done. Our product is not just any product. It is rather unique so we have found that it markets quite easily.

Also, we prefer to make and build on our own business model as we go - it's how we roll. I like to explore different things rather than to choose somebody else's idea of a "good" business model. Of course, I might (and probably will) go wrong plenty times along the way, but I can bet you that I'll pick up on a whole lot more techniques and learn a huge amount more that way.