We started our online shop 9 weeks ago and have had a lot of interest in wholesale, which we knew was a goal from the beginning. We’re in the garment decoration business, targeting the US and Canada. Most of our products are priced around $8.99 and $9.99 USD.
1 - How do we set a fair wholesale price for our products that still covers our costs ($4-5 per product) and leaves room for profit? I’ve heard retailers expect a 50% discount, but that would barely cover our expenses. Our customers typically sell what they make for around $45-70. We’re considering offering a 5% discount per item, bringing the price to $9.49 for our most expensive item. What do you think?
2 - What’s the simplest way to do this on Shopify without paying for an app? Could we create a wholesale page and a simple form for customers to fill out? We would draft the order and send a direct link to the checkout page. If we start getting consistent wholesale orders, we might consider using an app.
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A 5% discount is just a small bulk discount. Honestly, I’d expect that as a regular customer if I was buying in bulk.
For wholesale, you also need to keep in mind that retailers take on the work of selling and offering support for your product. They need to make a profit too. Of course, you still want to make a good profit, but your wholesale prices should be lower because the retailers are handling everything for you.
If your retail price is $9 and your cost is $5, I’d say your wholesale price should be around $7 or $8. Also, don’t forget to set a minimum order quantity.
One thing to watch out for is not selling your product too cheap through retailers. It could harm your own sales, so maybe add a minimum resale price and terms about advertising and SEO.
@Reese
Thanks for your reply! That makes a lot of sense. It’s clear now that we need to focus on bulk orders with a price break, not true wholesale. We already have a minimum quantity of 30 pieces per design. If we did get to offer our product for $7, would that still be considered wholesale or just a price break?
You’ve priced your products wrong. Normally, you want to price your product at 2-2.5 times your cost for wholesale. Then retail it at 2x the wholesale price. That’s the industry standard. Retailers have risks and expenses, so they won’t sell at just a 5% margin.
If you don’t change your prices, you won’t have enough margin to succeed. You need to rework your costs and increase your prices. Otherwise, your business won’t survive.
I run into this issue often and I think it’s mostly about using the right terms.
You mentioned a ‘discount,’ but what you’re really talking about is trade markup. The markup is the difference between the wholesale price and the retail price—it’s basically the profit margin. In the garment industry, a 50% markup sounds fair.
For wholesale pricing, consider your costs and desired profit, then set your retail price at double that amount. Don’t make your wholesale price too tight, because you’ll need to give room for bulk discounts.
You might need to double your prices if you want to start wholesaling. Just make sure you’re clear about your price and what you’re selling.
About selling wholesale online: you could use website plugins to offer different prices based on quantity, or just stick to taking orders through spreadsheets and email until you’re ready to invest in a proper wholesale setup.
@Brett
Got it! We’re not in the US either, but from the comments here, we see we can’t do wholesale at this point. We’ll stick with price breaks for bulk orders. Thanks for the insights!
This is somewhat related to my business in the bakery industry. I’ve spoken to many bakery owners and there’s no strict rule for markup.
At our bakery, we offer minimum purchase orders and give discounts, which helps customers while still protecting us.
For example, we make empanadas, and our cost per empanada is $0.92. We sell them for $3.25 retail and wholesale for $2.00, which is low, but we set a minimum order of $200. This way, it’s worth it to us, and it helps our customers make a good profit too.
So, no fixed rule, but setting price minimums has worked for us.