Fibrefaerie Studio will exhibit and sell local handmade artists and craftspeople's work on consignment. But first, here's why ...
Why use a wholesale business model for local artists and designers?
Part of the beauty of the wholesale model for the artist is that it creates repeat business. And repeat business is what grows businesses. Just as fine artists may seek to cultivate collectors, the artist who is wholesaling seeks to cultivate galleries, shops and retailers who will become ongoing accounts.
Business relationships thrive between wholesalers and retailers as they are making money together. These relationships work when each realises the value of the other, one for the creation and production of appealing product, the other for the art of selling and all the responsibilities that entails. It can develop an artists’ product lines to hundreds of wholesale accounts, and turn studio production volume into regular income on a consistent basis. Also, with regular receivables to show, the artist is also more likely to get a business loan to grow their small business, too.
But how do you find the right wholesale price point for your product?
Selling your products wholesale does not mean halving your price per product. Wholesale product lines should be designed and priced so that they are profitable for the supplier at a wholesale price. Here is a basic formula for calculating your wholesale price.
WHOLESALE PRICE = (COST PRICE : Labour + Materials) x 2
E.g. Handmade earrings ($10 for 1/2 hr labour + $2.50 materials cost) x2 = $25.00
Multiplying your costs by 2 takes into account your overheads and a small profit, so your business will be in a liquid state. Your labour costs are up to you, but the best way to do it is to think about what you would pay yourself per hour to make the product, or how much you would pay someone else. In an ideal world we would charge more than minimum wage, but in the craft world we think about it more flexibly, as often things can be stitched while watching tv with family or while listening to music in a home studio while dinner simmers in a crock pot etc. But it is still important to charge something for your time and to not undervalue your craft.
Your wholesale price can often be marked up between 2 – 3 times to find the retail price, depending on the retailer’s policies. The artist rarely sets the retailers’ price on their items, and in fact it is illegal for a supplier to demand a retail price.
Generally, to find the retail price, you use the below formula. However, this depends on a number of factors, and is solely the responsibility of the retailer. Marketing costs, expected losses, shop overheads, sales staff time and expertise and a small profit must all be accounted for and retail businesses usually spend a lot of time working out their markup and margins to make sure their business stays profitable.
RETAIL PRICE = Wholesale Price x 2
E.g. Handmdade Earrings $25.00 x 2 = $50 sale price.
Then, there is the added cost of GST … if the supplier is not registered for GST but the retailer is, then the wholesale price must not include GST but the sale price must charge the consumer, so the final product price for our example of handmade earrings will be around $55.
RECOMMENDED READING
There are some great articles listed below on how to price your crafts and why it is important to value your work and other handmakers and their crafts.
The formula to price your wares
Craft Victoria’s guidelines and explanations - from craft to consumer