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Wholesalers Selling At Retail

Are you a wholesaler selling your products for retail, as well as wholesaling your product to retailers?

Many independent, small wholesale companies sell their products at retail cost to consumers while also trying to gain retail accounts. This makes sense. What doesn’t make sense, though, is when wholesalers lower the suggested retail prices they sell their products for to conusmers and then expect their retail accounts not to blink. For example – if you have product that wholesales for $20 and is suggested to retail at $40, your retail accounts will strive to sell your products at $40 in order to cover their investment, overhead expenses and more. You, on the other hand, can afford to mark your products down from $40 since you base your profits on wholesale mark-up. Unfortunately, in doing this you may lose the respect from retailers that you should want and definitely need.

Retailers are more savvy than ever and do their homework when it comes to their competition. They want to know who else is selling what they sell, who their local competition is and who is selling the same things they do online. If that happens to be you, you can be sure they will take it up with their sales rep or you directly if your retail costs are lower than your suggested retail prices. Be aware of this and be respectful of this if you are in fact a manufacturer or wholesaler…. disrespecting this can equal a loss in retail accounts. In addition to retailers having their eyes on you, their customers are often bringing attention to them regarding where they can find a better deal. Be careful they aren’t surprised to find out that their competition is also where they buy their product from!

It doesn’t make sense for you to sit on your own inventory forever, so we don’t suggest you never mark your products lower than suggested retail. What we do suggest, though, is that you are honest and upfront with your sales reps and retail accounts so they know when you plan to mark your products down. Possibly you have a seasonal sale for a limited amount of days? Let them know. Maybe you want to make some permanent markdowns after 6 to 8 weeks into the season. Let them know this, too. By making them aware of this, they can be better supported and aware of what their own marketing strategies should be. If you do it with respect, hopefully they will return the favor and respect your marketing plans, as well.

Ultimately your strategies should reflect your business goals and your position on retail partnerships. But being aware of these price point issues and potential conflicts can prepare you for discussions that may have caught you blindly otherwise. As your business grows, your marketing strategies and retail support will alter, as well. But while you are growing, remember to respect this very valuable issue along the way (and always).


Comments

  • Shop*Front
    July 14, 2009

    great post – such an important issue. retailers should never feel like they’re in competition with a manufacturer. if a wholesaler is offering a discount on their website, they should also offer retailers a percentage off of wholesale so they can pass along the same discount and maintain a reasonable margin.

  • Wonderful information, Nicole! We have always made sure to keep our prices at retail so that our retailers feel they have a real chance at making a profit. It just makes perfect sense, the more they sell, the more you’ll sell in the longrun. It can be tempting to get a little greedy but it is so not worth it!

  • Maria Hogan
    July 15, 2009

    Hi Nicole-

    This was a great article, and something we have always debated about. We have tried to remain To-the-Trade, and certain items will always be only available through a retailer. But there are items we have excess inventory in we believe selling direct to consumer might be advantageous.

    You made some good points and suggestions – some things we have not thought about!

    Thanks for the information.

    Maria

  • Ted Hurlbut
    July 15, 2009

    Retailers need to be alert to this all the time. if wholesalers really want to be retailers, then they’ll quickly find retailers won’t carry the line. Any wholesaler that doesn’t honor a level playing field needs to be thought of as a competitor, not a partner.

  • Megy Karydes
    July 16, 2009

    This is a great article and one I wish more wholesalers took seriously. I work with many manufacturers and often advise them to think long and hard on selling direct to consumers if they are also wholesaling. That’s not to say they shouldn’t, but they need to consider how to handle this so as not to be perceived as competing against their own customers. I’ve had clients who wait a season before selling their own inventory (so they let their retailers “show” the line first), I’ve had others make sure their retail prices are higher so they can support their retail customers and others have even gone as far as starting a new “company” under a different name and selling their own products direct to consumer.

    Whatever decision is made, I think more wholesalers need to consider their options and how their decision will impact their wholesale customers. It can be done, it just needs to be thoughtful…and you should be prepared to explain it to your retail customers, too.

    Thanks for the article, Nicole. Timely, too, considering the summer gift show circuit is in full force right now!

    -Megy Karydes, President
    Karydes Consulting
    http://www.KarydesConsulting.com

  • Sandy
    July 17, 2009

    We are producers that sell wholesale and retail. When we have a retail product website, we will list the stores that carry this particular product. My husband has gone so far as to call customers who have ordered via our website to tell them they can buy our product at the local gift shop (where we have wholesaled it). That way the customer can save shipping costs, our wholesale customers can make a sale, and we have still sold the product to the end consumer. Works good, in my opinion!

    GiftRepSandy
    http://www.IdahoGiftsWholesale.com

  • Kristie
    July 28, 2009

    Great article and so very true. It is important for wholesalers to be supportive of their retailers and not undercut their pricing!

  • Grace
    August 20, 2009

    Thank you for a great article. I am a new online retailer (just finishing my second season) and I wish I found your site when I first started. I am just now buying for the fall 2010 and I’ve had to deliver the message to some reps that I do not like competing with the wholesaler. And another topic: the harder conversation with the rep is the issue when their larger accounts deliberately undercut the MSRP making it difficult for smaller boutiques like me to compete.

  • Michele
    August 21, 2009

    With the recent ease of online retailing, I wonder if wholesalers and retailers will eventually become one in the same.

    Thoughts?

  • Lara
    August 25, 2009

    Thank you so much for a great, informative article! I sell my products wholesale and retail, but have always tried to make sure that I am not competing with my brick and morter retailers. However, I am now getting more drop shippers who want to sell my products and I am beginning to compete more directly with them (they sell retail as do I). Any thoughts on how to handle this situation?

  • perica
    May 12, 2011

    Great article with useful stuff which I can use for my online shop, thank you for effort and that you are able to share it online. regards

  • Maree
    June 17, 2012

    arrgh.. I’m having a difficult time with this issue. One of my many wholesalers is now my direct competition. He sells his items for the price i buy them from him wholesale, and he offers free shipping. I have written him emails about this, i mentioned to him ‘if he would like to keep my business, maybe he can offer me a discount’.. He wasn’t interested. My brain is in the midst of revenge… but i dont know what to do. Any suggestions???? I hate losing. 😉

    • Nicole Reyhle
      June 22, 2012

      Maree,

      This is a difficult issue. Without knowing much more than what you have said, it sounds like this wholesaler simply isn’t playing fair. I would suggest not buying anymore of his product and phasing out what you currently have in stock (through markdowns or bundle selling if possible). Again, without knowing a tremendous amount about your business and this wholesaler, it’s hard to give an exact answer. But this would be our suggested route. Good luck!!!

      Nicole, Retail Minded

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