What should my wholesale minimums be?

Posted by Kathleen Fasanella on Jan 7, 2010 at 3:07 pm / Sales and Marketing / Trackback

From yesterday’s post came this observation:

I worked for a very indie designer who had to cut her flexible minimums policy after buyers would take advantage by purchasing basically one-offs for themselves at trade shows at wholesale cost, but pass on the line as it wasn’t a fit for their store…any thoughts?

I used to agree with your indie designer but a few things have changed my mind.  Context: we’re talking about more expensive, innovative (read: risky) products, not a commodity item like tube socks sold in shrink wrapped multi-packs. When retailers buy a single item -presumably even for personal use- what are we really upset about? These are small numbers, so it’s not money really. I think designers are upset that buyers are “taking advantage” of wholesale access, proximity and relationships. If it’s a personal buy, we feel it’s only fair that buyers should pay retail like everyone else. Drilling it down, resenting the transaction is an emotional response, not a business one.

There’s a couple of reasons I think retailers should be able to buy single items even for personal use. Buyers are representatives of products. That they choose to wear yours is an affirmation. I realize affirmation doesn’t pay the bills but they need to test products, why should they pay retail for the privilege? Were this a perfect world and we had the money, some of us would prefer to gift them entirely so it can’t be the money. I know one retailer I would definitely gift. And yes, after trying it out, they may find there’s something off about it; it doesn’t wear well or fit right or something else so it’s not a fit for their store and they aren’t comfortable telling you why. Or maybe stylistically it’s just that; it’s not a fit for their store. They buy it and wear it around, gauging responses from customers and friends but the trend doesn’t resonate with anyone.

When we buy sample fabrics in small quantities for prototypes, how are we doing anything differently? The only difference I can see between buying sample yardage and retailers buying single units is that sample yardage sales are sanctioned, permitted owing to sales policies of the vendor in question. Because it’s sanctioned, we feel entitled to it. But think about that for a moment. In part, we use the process of sample ordering to gauge the transaction quality of a future supplier, a test run of order fulfillment. If sample purchasing goes poorly, why would we order yardage even if the fabric is great? We should not presume that retail buyers are doing anything less than we would given half the opportunity.

Returning to what I presume to be resentment that buyers are taking advantage of their proximity to wholesale buying (and) relationships, don’t we all hope and aspire to do this? Yes we do. We hope to meet that pivotal contact in an elevator, develop a relationship and later use our proximity to personal advantage for either ourselves or someone we know. Even if we can’t use the contact, we leverage our access to influential people to increase of our standing with peers. And it works on a personal level beyond business. I met Jerry Hall’s best friend from high school. She complained that everyone wanted to be her friend because Jerry always came to her birthday party in podunk Texas.

The problem with relationships (as opposed to product) is that the costs or value of the elevator encounter outcome cannot be quantified. Lacking financial context means we can only assign a value of zero. The contradiction with buying single items at wholesale is that we can assign value, usually in terms of loss meaning the retail mark up we feel we are “owed” on the single unit sale. It only makes sense to resent this loss because it’s been proven we assign more weight to losses than we do to potential gains -the whole reason people throw good money after bad. It logically follows that we also assign more value to favors we do for others than they assign to the value of the favor we’ve done for them. This is called gratitude decay:

Flynn asserts that immediately after one person performs a favor for another, the recipient of the favor places more value on the favor than does the favor-doer.  However, as time passes, the value of the favor decreases in the recipient’s eyes, whereas for the favor-doer, it actually increases.  Although there are several potential reasons for this discrepancy, one possibility is that, as time goes by, the memory of the favor-doing event gets distorted, and since people have the desire to see themselves in the best possible light, receivers may think they didn’t need all that much help at the time, while givers may think they really went out of their way for the receiver.

Returning to my example of the value of proximity -being able to buy at wholesale and the loss of retail margin we fight to regain- versus the proximity of an elevator encounter with a pivotal person -no dollar value determined and a possible favor that decays- it makes psychological sense that we are more resentful over the loss of a retail margin we’re “owed”. We feel we’re being taken advantage of. This is why I said above that you must be mindful of separating what truly amounts to a personal emotional reaction versus a saner business mindset. It may be to your advantage to sell single units at wholesale even if you suspect the item is for personal use.

As a practical matter, it costs you more to sell single items at wholesale. You may decide to exact a surcharge on single orders that covers the cost of fulfillment. A lot of suppliers do this. If you buy less than the established minimum, they charge a little extra. Again, the point of the surcharge is not to attempt to recoup the loss of what should be retail mark up, but to cover the hard costs of processing, packaging and shipping a single unit order. You could couch it in terms of discount. That’s what I do. X discount for given quantities -at the outset. The one exception I have is one buyer who gets the full discount even though he only order four books at a time. Sure it costs me more to service the account but he makes up for it by ordering much more frequently than any other customer I have.

You’ve surely noticed by now that I haven’t actually said what your minimums should be. That’s because I can’t. No one can, not if they’re being honest with you and themselves. People can only tell you the sum of their experience as it applies to their product, their price points, their customers and their experiences (beware the perils of narrative fallacy). Your minimums should probably be lower than you had imagined. In this economy, it would pay to have a greater variety of your products available in small shops and they will order more frequently if they have this option. Particularly if you have no minimum on reorders (recommended).

There was something else I meant to mention in this post that I can’t remember right now (too many distractions) so I will make a note at the top of the page if I amend this entry to include it. In the meantime, feel free to post your queries in comments to see if we can come up with minimum figures that are more tangible.

13 Responses to “What should my wholesale minimums be?”

Comments RSS feed

Marguerite Swope
January 7th, 2010
5:44 PM

I’m with you on this, Kathleen. Just today I was revisiting my minimums as I prepared a new brochure. I don’t have them, and I decided I like it that way. I’m happy if individuals want to buy my clothes at shows–I want people wearing my clothes. I have one gallery that doesn’t sell clothes, but the owner always buys about $300 at my shows for herself to wear. I like that. I usually sell around $1000 to personal shoppers at shows. Of course, everything is made here in my studio, so I don’t have production minimums to make.

On the other hand, I like to shop at the wholesale shows (or barter which I like even better), so why wouldn’t I let people shop with me?

That comment on gratitude delay was very interesting. I’ve been on both ends of that and what he says is so true. Something to think about.

Marguerite

Pascale
January 7th, 2010
6:19 PM

Your blog is superb and the commentary insightful. What is so fascinating is that your insights apply to every endeavor and discipline.

Teresa
January 8th, 2010
12:31 AM

I have a minimun on my items because if I sold at wholesale to anyone who asked I would take business away from the retailers and galleries that carry my handwoven, hand dyed garments and yarns. I need to have those galleries and stores stay in business. It is part of my food chain. I also need them to carry my items and why should they carry something at retail if I sell at wholesale to anyone?

kathleen
January 8th, 2010
5:08 AM

have a minimun on my items because if I sold at wholesale to anyone who asked

I never said and will never say, to sell wholesale to anyone. I regret my entry was not interpreted as I intended it to be.

Barb Taylorr
January 8th, 2010
7:11 AM

Great post, I agree that there can be more to gain by allowing people to buy one-offs than you are likely to ever lose. Store owners know other store-owners & if it’s not right for thier customers it may be perfect for their friends who were not at the show. Networking is more than just talking to people.
In regards to minimums, isn’t there a relation to lean production here? If you don’t want to fill your warehouse with goods that you have no orders for, it follows that you need to respect that same concern for your customers. If you have set up your manufacturing in a way that allows you to build to order & deliver quickly, you should be able to fill smaller orders, and encourage customers to reorder as needed. That keeps their shelves full of the colors and sizes that are selling!

Carla Dawn
January 8th, 2010
9:39 AM

Interesting post, really each company has to figure this out for themselves, selling individually at wholesale may make sense for some, but not others. When I wholesaled, I would allow personals only within an order of the same, but my minimums were very low on many items (as low as 3) usually based on cuttings- I did not want to be left with odd-one off skins at the end of a run and since I offered fabrications that changed continually this made sense. I generally did not sell personals to buyers who did not carry lines like mine. Or to any “buyer” out of the blue, unless the item could be added to an existing cutting and was 100% pre-paid (with a surcharge) . Never, ever wholesale terms. Otherwise I got their info so they could be informed of any sample sales.

Marguerite Swope
January 8th, 2010
9:57 AM

When I say I sell at wholesale at shows, these are trade shows not open to the public. My sales are to other vendors or stores. I consider it a professional courtesy and expect the same in return. We all shop each other at shows. In no way are we competing with our stores–$1000 is a lot of personal sales to me, but in the grand scheme of nationwide sales, it’s nothing and doesn’t hurt my stores.

Marguerite

Marie-Christine
January 12th, 2010
4:18 AM

That makes a lot of sense. Yes, gratitude decay is a big factor in balancing being able to buy someone else’s products at wholesale vs them buying yours. But I completely agree that if I were to spend a lot on a product (especially from someone I didn’t know very well) I’d like to be able to give it a good test run. Can I wash the blouse, is shrinkage appropriate, does the bag wear well more than a month, can I put the library books in it? Some quality problems leap out at you, some are only evident in wearing. Radically new designs especially need to be tested in real life (I don’t do capes because I like backpacks, etc).
It’s true that someone who buys your stuff may well also recommend it to someone else who does buy it, and you may never know. It may even be that someone sees your stuff on them and orders it because of that, then you’ll really never know. Good reputation isn’t something you can follow and quantify, it needs to be reflected in all actions all the time.

Morgan
January 15th, 2010
2:21 PM

another incredibly insightful musing on this ever-changing industry. i can’t express how invaluable everything on the site is….!

Kate Rawlinson
January 16th, 2010
2:03 PM

Just out of interest, have you also changed your position on buying fabric wholesale for personal use? I noticed that in the book you say you shouldn’t buy fabric from your wholesale suppliers to make clothes for yourself, but what if those clothes are effectively samples?

Timo Rissanen
January 20th, 2010
9:19 AM

Great post! Whilst I didn’t have minimums, I used to offer a discount for orders that were (I think – this was six years ago) for orders placed in a 1-2-2-1 ratio, as in S-M-L-XL (or alternately, XS-S-M-L – I used to sell a fair bit to skinny boys). I think the discount was 5% and I had quietly added it to the wholesale price, of course. Most retailers went for the discount. I did this after the first season to discourage bitsy ordering, of which only really one retailer was guilty of. She certainly didn’t order for herself as this was menswear, but it used to kill me to walk into her store and see how my things were merchandised (or rather, not). It was a mess and the shop is but a distant memory now. On more than one occasion, I filled a single-garment order with the sample; never got one returned, even when the size was wrong. Of course this was years before I found Kathleen and the book. I might still be doing what I did then had I come here earlier – though no regrets about where life has taken me since!

Diane
February 2nd, 2011
8:24 AM

It sounds like a confusion of “personals” with “minimums”. If a line can afford to offer personals I say, great, exposure especially on fashionable folk is a big plus. Whether one can do personals is often a function of ones CFO or factor and shipping policies. What I would really appreciate input on is the full range of terms and minimums. This information is almost impossible to obtain. When my company did not impose minimums we often bore the brunt of nasty returns from stores enraged that another store carried our line. When buyers are simply “cherry-picking” it is hard to avoid conflicts. However when we began to have minimums we were faced with ugly scenes at trade shows as buyers would actually become verbally abusive and storm out of our booth over minimums. Of course other lines have minimums but I feel like a spy ferreting this information out. Why the secrecy?

Kathleen
July 12th, 2012
7:51 AM

Just out of interest, have you also changed your position on buying fabric wholesale for personal use? I noticed that in the book you say you shouldn’t buy fabric from your wholesale suppliers to make clothes for yourself, but what if those clothes are effectively samples?

I don’t know if I ever responded to this or if I did and the comment went ::poof:: but I’ll give it a go now.

I see the conflict as a matter of ethics. Namely in misleading another party with your intent. Designers typically buy samples for two reasons. One because they’re thinking of using it for their line. The second reason amounts to a tangle of unexamined impulses -because it is pretty, a source of design inspiration, dream of changing their line’s focus to use stuff like this or maybe just because they want to pet it.

If you want to buy a sample for personal use, say so! If you’re an existing customer, they will probably permit it. As a practical matter, most designers don’t make stuff for themselves or have things made for themselves. Aside from one-man/one-woman operations (who then wouldn’t be an existing customer), it is a rare thing.

Leave a Reply

Archives

Categories

The Entrepreneur's Guide to Sewn Product Manufacturing

Often described as the garment industry “blue book”, the most highly rated book in the business is guaranteed to get you off to a solid start or your money back. Many service providers require you read this before they’ll work with you. Learn more »

Subscription Options

RSS Feed Google Reader My Yahoo My MSN Technorati

Subscribe by email: