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Selling via a 'Middleman'
Barksavon - 10/1/19 at 10:56 PM

I'm trying to start a business making wrought iron products such as log baskets, candle stands, fireguards etc etc.
I've been to see a local gift shop with a view to getting some of my products in the shop. They were very positive and seemed keen to take some items, they want me to provide a 'cost' price list.
When I asked what sort of mark up they would be looking at they said 100%. I have never been involved in making / selling before and a 100% mark up on what I sell my products to them for seems an awful lot....
Does anyone have selling experience who can tell me whether this sounds right.
Thanks


Dingz - 10/1/19 at 11:45 PM

Probably their standard mark up. I worked for a company supplying parts to car manufacturers, their markup on spares was 10 times!

[Edited on 10/1/19 by Dingz]


nick205 - 11/1/19 at 09:04 AM

My employer designs and manufactures custom electro-mechanical products for their customers.

We generally gather the material costs and multiply them by 3 to reach the selling price (roughly 67% profit margin).

Typically on volumes of 250 to 500 finished articles.

I've been told that warehouse type shops selling IT equipment can work with profit margins as low as 5%. Hearing of a gift shop (idependent shop I'm guessing) wanting to work at 100% profit margins doesn't surprise me - they'll have business expenses to pay (property lease, wages, utilities, taxes etc.).

[Edited on 11/1/19 by nick205]


steve m - 11/1/19 at 09:19 AM

Does it really matter what the mark up will be, as its up to them to sell the items, not you, and they can charge what ever they want

However, if there prices are too high, they wont sell, so a review of prices will need to be done

What would be better for your business, is to make up some samples, with little sticky labels, with your details, email address etc, and let the public come direct to you, but by looking in the shop, also make sure you are open for bespoke items as well,

steve


Barksavon - 11/1/19 at 11:41 AM

Having googled 'retail mark up' it appears 100% is normal.
I agree with you Steve in respect of selling direct to the public and have already asked about labeling my products in the shop. They were okay with that but clearly wise to the fact that customers may then see something they want in the shop but then come to me direct.
I'd much rather cut the middle man out but they have the potential customer base at the moment so I need to make up my mind... Try to sell direct (markets craft fairs etc) approach suitable shops to sell through or combine the two....
Thanks for the replies very useful info.


peter030371 - 11/1/19 at 12:11 PM

100% is normal for this sort of thing. In the past we used to work out our costs price and sell it the the shops for twice that, they then doubled it again. If the buyers came direct to us we charged the same as the shops. The shops were happy with that and if the customer needed support, advice etc then that is why they paid us the extra to us (and is what the shop should also be doing). I would also expect the shop to have a minimum order value with you i.e at least xxx per shipment.

However nothing is set in stone and if you think that is going to price your products to high you could discuss sale or return with the shop i.e. they don't pay you for the stock they hold (its still yours at that point) until they sell it. They have nothing to outlay other than a little space so may be happy to reduce there mark-up in this case. you would have to agree what the stock level is though, they could 'demand' that you can only sell stuff if you fill the shop up for them!


Mr Whippy - 11/1/19 at 12:52 PM

I use to work for a company who made diamond cutter oil field drill bits, their mark up was around 1200% on cost to produce depending on how much we could get out the client, I believe perfume is much the same but it's all the greedy rich gits at the top who cream in the money, everyone else gets the scraps


nick205 - 11/1/19 at 12:58 PM

quote:
Originally posted by Barksavon
Having googled 'retail mark up' it appears 100% is normal.
I agree with you Steve in respect of selling direct to the public and have already asked about labeling my products in the shop. They were okay with that but clearly wise to the fact that customers may then see something they want in the shop but then come to me direct.
I'd much rather cut the middle man out but they have the potential customer base at the moment so I need to make up my mind... Try to sell direct (markets craft fairs etc) approach suitable shops to sell through or combine the two....
Thanks for the replies very useful info.



Ultimately selling through a "middleman" should save you time and effort in attending multiple events yourself. In effect they're doing that work for you. If your stuff sells then I'd not worry about their profit margin. If your stuff doesn't sell then is the time to look at alternative routes to selling it.


steve m - 11/1/19 at 05:08 PM

There's always those stalls at kit car shows, the type of stalls that sold wicker chairs and the like, It used to wee me off, as I was at the show to see cars and the like, but of coarse we have to include the baby carrying and pushing community and families, and there bloody dog!, that wound me up as well !

Why would anyone want to go, and pay to go to a car show, with kids in pushchairs, and with a dog ???


Barksavon - 11/1/19 at 07:24 PM

Steve...fear not i won't be trying to sell a wrought iron candle stand at stoneleigh, your last reply made me grin.
Thanks for all the advice , for someone who has never ventured into the world of retail or working for themself it really is helpful


Dingz - 11/1/19 at 11:50 PM

Good luck, but make sure you are charging them enough in the first place!


02GF74 - 12/1/19 at 08:54 AM

Firstly the world, well certainly the UK, has moved on from candles so you may want to consider making chandeliers for electric bulbs.

How serious are you with the the business?
My suggestion would be to come up with a portfolio of say 5-10 products that are your standard ware and then make reference to the custom work.

Then get feelers to see what the demand is and what customers are willing to pay.

Two ways, get a Web site, this will advertise to a huge number of customers, apart from the the candle kickers.

List on ebay.

Try car boot sales but these are frequentled by people who won't pay decent money.

Have a leaflet made could be a small booklet and get it in the shop, garden centres too.

So to answer your question, yes 100% is gutting, but look at it S an opportunity to advertise.

If it sells, you can renegotiate or go elsewhere, if it don't, then either too expensive or no demand.

Good luck.

BTW I'm no seller so don't take what I've written as gospel.

[Edited on 12/1/19 by 02GF74]


gremlin1234 - 12/1/19 at 10:25 AM

quote:
Originally posted by 02GF74
Firstly the world, well certainly the UK, has moved on from candles so you may want to consider making chandeliers for electric bulbs.


world has moved on from electric bulbs to LEDs and you can incorporate these in all sorts of interesting ways and lighting effects


Barksavon - 12/1/19 at 01:22 PM

Have done a lot of what you suggest (02gf74) leaflet with my products in draft printed and should be done next week, will be taking them to shops and garden centres
100% Mark up is hard to swallow, they will actually be making more than I am !!!! but as you rightly say it will give me an idea as to whether there is a demand for my products and some advertising.
Considering the website route.
Thanks again for the replies
Ian


danro - 12/1/19 at 04:27 PM

I manufacture steel products.
Standard markup for retail shops is 100%.
My wholesaler pays 36p on the pound of RRP. He marks it up to 50p on the to sell to the shops.
I also sell direct via my website and it all levels out - the Wholesaler spends most with me for little markup but a "good chunky order"
Shops are smaller orders but generally bigger than the website orders and website orders give the greatest margin but are small in comparison and need much more effort, posting etc.
PM if you want to discuss anything I've been doing it 10 years or more now aimed at quite a niche market.
If you want advice on a website I'm happy to share my experiences

Hope this helps

Danny

[Edited on 12/1/19 by danro]


Barksavon - 13/1/19 at 01:02 PM

Thanks Danny very useful info and a very generous offer which I may well take you up on re setting up a website. I'm certainly not in a position to go to a wholesaler......but you never know in the future.
Thanks again
Ian