Last week I introduced the next topic in my business series as Selling Wholesale. I had been debating about how to move forward and which topic to broach first, when, lo and behold! Yesterday I received an email from Arts Business Institute with their thoughts on this very subject!
The theory of their blog post compared the risk and potential of craft sales to the risk and potential of selling wholesale. At a craft show, it can be difficult to predict what your sales will be. If you have products remaining, you know what your sales potential of that product is. But if you sell out, you have no basis upon which to calculate your potential future sales. Using an 80/20 rule (80% of your sales come from 20% of your products), knowing your potential can help you plan how much product to make with a level of accuracy an unknown cannot. Because you may never know if you could have sold more, you will never know how much money you could have made.
Also, you have no potential of unsold product as well as the cost of additional inventory.
Selling wholesale, particularly at wholesale trade shows in their example, you only have to make one item to showcase as sample inventory, from which you will sell. If you get orders, great! Your return on investment (ROI) is great. For example, your sample costs $10 to make. You receive an order for 100 units. Your ROI is as follows:
1 (sample) x $10 (cost) = $10
100 (units) x $10 = $1,000
ROI = Sales divided by cost
ROI = $1,000/$10
ROI = 100
In other words, for every unit made, you receive 100 in return.
If you make no sales from an item, you're only out the cost of one item, compared to the cost of all unsold items you would have from a craft show.
In essence, it's much easier and less expensive to change your product line when selling wholesale. Because you can gauge if something doesn't sell, you only need to product one item to replace it in your inventory. And you don't have excess inventory left to sell.
Another point that I like is: every product is sold before it is made. Every dollar spent on supply inventory for an order will become a return on that investment.
The last point made in the article refers to repeat sellers. Happy customers will return again and again. And what better customers than those that make purchases in bulk!!!
Many of us hope to make money while producing art. But if we're serious about making money in addition to making art, we need to spend a proportional amount of time running our business. Why not run the numbers and give wholesale a try?
Until next time,