4. Establish a Wholesale Pricing Policy
Pricing is one of the key elements, if not the most, of creating a profitable wholesale company. You can keep whatever profit margin you set for yourself when selling directly to consumers on your own website or in your own retail store, which can often be north of 50%.
Industries usually offer retailers a 50 per cent discount off their normal retail price with wholesale. The steep discount is to encourage retailers to sell their goods to their customers while maintaining a certain profit margin. Below is an example of a balanced pricing strategy in which a wholesale company will maintain a profit margin of 50 per cent on wholesale orders and a profit margin of 75 per cent on direct customer sales.
Therefore, to build a profitable wholesale company, you’ll need to be able to give those who are willing to wholesale your product a big discount off your retail price. Often this can pose growing risks to small businesses like not being profitable.
Fortunately, there are ways you can reward your wholesale commodity to minimize the risk of being unprofitable. Another approach is to offer a discount depending on the quantity of sales orders. Through this way, retailers are encouraged to place larger orders through order to get a better margin when reselling the goods. Many wholesale undertakings also set minimum order quantities (MOQs) that retailers need to buy to carry their merchandise.
If you want to sell the product and have it sold by several different outlets, you can often run into difficulties when it comes to quality, with rival retailers undercutting each other. This is why developing an MSRP (Manufacturer’s Suggested Retail Price) is an important factor of the pricing plan for wholesales.
An MSRP is often part of a contract which a company gives to a seller who wants to sell their goods. It means that the seller adheres to the agreed retail price so that the quality of the product is the same everywhere it is sold in stores or online. The MSRP is usually located on a wholesale shelf alongside individual items, or on a selling sheet or promotional brochure sent to prospective retailers who wish to sell your promotional.
One thing to consider when setting up an MSRP agreement is whether or not you want to encourage consumers to discount during holidays like Black Friday and Cyber Monday or designate other dates on your own website that you may like to discount the product.
As a wholesale provider, you can set the rules that your retailers will comply with, but maintaining a reasonable market balance is key to the success of your retailers. When your retailers can make a profit selling your stuff, they’ll keep coming back and placing bigger orders.