Posts
Everyone wants or dreams about having their very own business. One of the most exciting times in business is; developing your financial plan, strategies, incorporating, initial launch and the first 4 years of development. I found it to be the one of the most exciting and rewarding times in my life. You're building the foundation to your future and your businesses future with every step that you take in the process.
So you are thinking about becoming a wholesaler. It can be a very rewarding career especially today. Why today you might ask; because with gas as high as it is there is a greater need for localized distribution. I want you to understand some of the parallels first.
Rock and a Hard Place:
These 2 facts will always be there so as part of your calculations must include them and have them built into your business plan model. Not to side track our conversation, but a good software for building a strong business plan can be found at Paloalto the name of the software is business plan pro. I do not remember the cost and prices always go up. I can say I have used it and feel it is a good tool for anyone starting out in business. You will find it is a good discipline and will aid you in writing up a business plan that is presentable.
Back to the subject of becoming a wholesaler.
There are certain questions you want to ask yourself before jumping into becoming a wholesaler one what products do you want to wholesale? Costume jewelry, hair accessories, novelties, perfumes, cosmetics or what...? These and many other products carry high markup ability, something to think about. Know what product you “click with” a car salesman can not always jump in and sell stocks. So it is important to know what works for you and as the owner of a new wholesale business you will be the front man.
When you are researching what products fit you best you will want to review mark up ability and market demands. With fashion costume jewelry there is most always room for a new supplier as it is a fashion forward business and yes there is and can be a very healthy mark up involved with costume jewelry along with most of the other product categories that I listed above. Another important area to have in mind for your business plans product development is handling; each product has its own need for space usage and handling. Handling, space, and shipping are 3 components that are important to consider when picking out what product you are going to wholesale. For an obvious example rhinestone costume jewelry on one 42 X 48” by a standard 54” in high pallet of space you can have well over 150K of merchandise whereas using the same space for lets say coffee mugs you might only get $600.00 worth. So what product you pick out to wholesale has a space usage cost involved. Handling is another issue that you need to consider in choosing what product you want to wholesale. With the mugs you might only have 40 cases on the pallet and with mugs you are only picking cases and not dozens or pieces. Whereas with rhinestone costume jewelry you would be picking pieces and or dozens most of the time. With this example you can clearly see it is cheaper handling coffee mugs. Shipping here is an area that is always a kick in the pants. One thing you will want to consider once you are up and running is a shipping clerk if focused they can save you a bundle and your time is more valuable then doing it yourself...anyhow shipping a pallet of mugs cost depending on where and what the rates are at the time $75.00 per pallet and you have had no repacking expense. The only additional expense is shrink wrapping and time. With rhinestone jewelry there is repacking, boxes, tape and some other expenses in addition to your shipping expenses but using the same pallet of space you shipping expenses could range estimated 10Kto 20K with lots of little packages and handling to be added into your cost factoring.
The next part of the criteria you need to consider is markup see with the mug example the markups structure is must different then it is with rhinestone jewelry. Mugs are a very basic item that take up a lot of shelf space and slow to turn on the counter. The mark up ability is low for 90% of the retail units you would offer the goods to, if you are ranging an average of 42% markup (of the selling price) you should be OK, if you like working on the cheap. There are ways of milking this products pricing. With the rhinestone jewelry example the markup is or should be 66% of the selling price or in other words 3 times your cost. So you have turned $576.00 of mugs into $817.00 and rhinestone jewelry into 450K this is exactly why it is important to do your research before jumping into a product to wholesale.
When costing out a product to wholesale I always suggest adding in “Murphy's Law”. Never use actual cost if you do you'll be lost. The things that you can count on;
In total you would be safe to add 20% into your cost to cover the hidden cost of being in business.
With this example if 100 parts of item x cost 350.00 dollars say it cost $420.00 and from there work on your markup. Now you might be asking why figure in dead inventory? Well you are going to make a mistake picking out goods I will guarantee it ain't no one hits 100% of the time. Just hope you keep it down to a roar.
Who are you and how do plan on conquering the market that you are planning on?
How are you going to separate yourself from the rest of the pack. In other words what reason is there for a retailer to buy from you? For that matter what reason does the consumer have to buy the product that you are going to wholesale? This is what makes the difference between you and the rest of the pack.
What type of programs are you going to go into the market place with?
Each of these are an animal of a different color so to say and your program and pricing has to adjust to each one.
One method that you should use to separate your self from the rest of the pack is through packaging and display presentation. Packaging is a key area of success. Here is an example from a true event that will better express this thought to you.
When I started out I was selling mens suits and sport coats. One of the accounts that I had opened was S. Klein's in New York at the time they where a leading discounter. With our line a buyer picked out the fabrics that they wanted the coats or suits to be made in. The buyer from S Klein's would spend some time picking out the fabrics but always insisted that he pick out the buttons. This was odd to me because not one other buyer I worked with even took interest in the buttons. I finally asked him why he spent so much effort on buttons? His reply says it all “What does the customer see when he is looking at a rack of suits? He sees the shoulder, the sleeves and a tag. I have to catch the customers attention and give him a reason to pick that suit up off the rack. It is the button that creates the attention” I was amazed because that was the secret to his success being the mens suit buy. S Klein's was doing 1.5 million per year in suits and sport coats in 1 store Union Square. This was back in the late 60's and that was one heck of a volume for one department in one store then. Millions of dollars are spent each year by cereal companies on the packaging of their cereal boxes just so they catch the eye of the customer. This is why I am pointing out to you to pay close attention to packaging and display development.
What type of sales presentation are you going to make?
Are you going to hire sales representatives?
If you are going to hire in house sales people you will need to establish policies to cover what if...
If you are going to commission territory representatives you will need to define what is a house account % of commissions and a lot more.
If you are going to commission and appoint representatives by account there you will need to define what accounts and commissions etc...
There is so much more to help you with becoming a wholesaler and so many other tricks to the trade. If you want help please feel free to contact me. I do offer consulting services if you need them click here.
Other types of business formula
For more on wholesale and how to set up a business
So you are thinking about becoming a wholesaler. It can be a very rewarding career especially today. Why today you might ask; because with gas as high as it is there is a greater need for localized distribution. I want you to understand some of the parallels first.
Rock and a Hard Place:
• your vendors will always want higher prices
• your customers will always want lower prices
These 2 facts will always be there so as part of your calculations must include them and have them built into your business plan model. Not to side track our conversation, but a good software for building a strong business plan can be found at Paloalto the name of the software is business plan pro. I do not remember the cost and prices always go up. I can say I have used it and feel it is a good tool for anyone starting out in business. You will find it is a good discipline and will aid you in writing up a business plan that is presentable.
Back to the subject of becoming a wholesaler.
There are certain questions you want to ask yourself before jumping into becoming a wholesaler one what products do you want to wholesale? Costume jewelry, hair accessories, novelties, perfumes, cosmetics or what...? These and many other products carry high markup ability, something to think about. Know what product you “click with” a car salesman can not always jump in and sell stocks. So it is important to know what works for you and as the owner of a new wholesale business you will be the front man.
When you are researching what products fit you best you will want to review mark up ability and market demands. With fashion costume jewelry there is most always room for a new supplier as it is a fashion forward business and yes there is and can be a very healthy mark up involved with costume jewelry along with most of the other product categories that I listed above. Another important area to have in mind for your business plans product development is handling; each product has its own need for space usage and handling. Handling, space, and shipping are 3 components that are important to consider when picking out what product you are going to wholesale. For an obvious example rhinestone costume jewelry on one 42 X 48” by a standard 54” in high pallet of space you can have well over 150K of merchandise whereas using the same space for lets say coffee mugs you might only get $600.00 worth. So what product you pick out to wholesale has a space usage cost involved. Handling is another issue that you need to consider in choosing what product you want to wholesale. With the mugs you might only have 40 cases on the pallet and with mugs you are only picking cases and not dozens or pieces. Whereas with rhinestone costume jewelry you would be picking pieces and or dozens most of the time. With this example you can clearly see it is cheaper handling coffee mugs. Shipping here is an area that is always a kick in the pants. One thing you will want to consider once you are up and running is a shipping clerk if focused they can save you a bundle and your time is more valuable then doing it yourself...anyhow shipping a pallet of mugs cost depending on where and what the rates are at the time $75.00 per pallet and you have had no repacking expense. The only additional expense is shrink wrapping and time. With rhinestone jewelry there is repacking, boxes, tape and some other expenses in addition to your shipping expenses but using the same pallet of space you shipping expenses could range estimated 10Kto 20K with lots of little packages and handling to be added into your cost factoring.
The next part of the criteria you need to consider is markup see with the mug example the markups structure is must different then it is with rhinestone jewelry. Mugs are a very basic item that take up a lot of shelf space and slow to turn on the counter. The mark up ability is low for 90% of the retail units you would offer the goods to, if you are ranging an average of 42% markup (of the selling price) you should be OK, if you like working on the cheap. There are ways of milking this products pricing. With the rhinestone jewelry example the markup is or should be 66% of the selling price or in other words 3 times your cost. So you have turned $576.00 of mugs into $817.00 and rhinestone jewelry into 450K this is exactly why it is important to do your research before jumping into a product to wholesale.
When costing out a product to wholesale I always suggest adding in “Murphy's Law”. Never use actual cost if you do you'll be lost. The things that you can count on;
• returns – 2-3%
•
- damages - 2-3% •
- unexpected handling – 2% •
- dead inventory – 5% •
- then unexpected rising prices COGS and supplies – 5%
In total you would be safe to add 20% into your cost to cover the hidden cost of being in business.
With this example if 100 parts of item x cost 350.00 dollars say it cost $420.00 and from there work on your markup. Now you might be asking why figure in dead inventory? Well you are going to make a mistake picking out goods I will guarantee it ain't no one hits 100% of the time. Just hope you keep it down to a roar.
Who are you and how do plan on conquering the market that you are planning on?
How are you going to separate yourself from the rest of the pack. In other words what reason is there for a retailer to buy from you? For that matter what reason does the consumer have to buy the product that you are going to wholesale? This is what makes the difference between you and the rest of the pack.
What type of programs are you going to go into the market place with?
- •
- Service •
- Guaranteed sales •
- Consignment •
- Straight sales What type of accounts are you going to pursue? •
- Gift •
- Grocery •
- Dollar Store •
- Discount Store •
- Department Stores •
- Mass Merchants •
- Drug •
- Mom n Pop's
Each of these are an animal of a different color so to say and your program and pricing has to adjust to each one.
One method that you should use to separate your self from the rest of the pack is through packaging and display presentation. Packaging is a key area of success. Here is an example from a true event that will better express this thought to you.
When I started out I was selling mens suits and sport coats. One of the accounts that I had opened was S. Klein's in New York at the time they where a leading discounter. With our line a buyer picked out the fabrics that they wanted the coats or suits to be made in. The buyer from S Klein's would spend some time picking out the fabrics but always insisted that he pick out the buttons. This was odd to me because not one other buyer I worked with even took interest in the buttons. I finally asked him why he spent so much effort on buttons? His reply says it all “What does the customer see when he is looking at a rack of suits? He sees the shoulder, the sleeves and a tag. I have to catch the customers attention and give him a reason to pick that suit up off the rack. It is the button that creates the attention” I was amazed because that was the secret to his success being the mens suit buy. S Klein's was doing 1.5 million per year in suits and sport coats in 1 store Union Square. This was back in the late 60's and that was one heck of a volume for one department in one store then. Millions of dollars are spent each year by cereal companies on the packaging of their cereal boxes just so they catch the eye of the customer. This is why I am pointing out to you to pay close attention to packaging and display development.
What type of sales presentation are you going to make?
- •
- Hard sales (high pressure sales) •
- Soft sales •
- Show n tell
Are you going to hire sales representatives?
If you are going to hire in house sales people you will need to establish policies to cover what if...
If you are going to commission territory representatives you will need to define what is a house account % of commissions and a lot more.
If you are going to commission and appoint representatives by account there you will need to define what accounts and commissions etc...
There is so much more to help you with becoming a wholesaler and so many other tricks to the trade. If you want help please feel free to contact me. I do offer consulting services if you need them click here.
Other types of business formula
For more on wholesale and how to set up a business
