Selling your handmade product wholesale is a great opportunity for you to establish your brand, and grow your business, but pricing your products for wholesaleis a very different business than selling direct to customers.
How you price your wholesale items is extremely personal and depends completely on you. However, you need to know some things to get it right.
1. Example Of Wholesale Pricing Formulas
Here are some formulas you can use to compute your wholesale and retail prices:
1. Materials + Labor + Expenses + Profit = Wholesale x 2 = Retail
2. (Labor + Materials) x 2 = Wholesale x 2 = Retail
3. Materials + Labor = Item Cost x 2.2 = Wholesale x 2.2 = Retail
4. (Materials x 3) + Labor = Wholesale x 2 = Retail
Personally I always recommend using option 4, or some variation of that so you are just marking up your materials, not your labor cost.
If you have calculated your labor costs of running your business correctly you should never need to actually mark up your hourly rate. If you keep reading this article through I’ll even show you a tool that can do that for you for Free so you can always manage to price your handmade goods correctly.
To make the best wholesale price for your product, you must consider several important factors such as labor, cost of goods and materials used to create your product, your rent, utilities, supplies, phone and profit, the margin needed to reinvest in your business.
2. How To Price Your Wholesale Products?
A good rule of thumb is that retailers will double your wholesale price.
1. 1 handmade jewelry: Wholesale price: $150(x1)= $150 vs. Retail price $200(x1) = $200
2. 6 handmademittens: Wholesale price: $35(x6)= $210 vs. Retail price $85(x6) = $510
3. 8 handmade floor rugs: Wholesale price: $45(x8)= $360 vs. Retail price $65(x8) = $520
4. 16 handmade wallets: Wholesale price: $10(x16)= $160 vs. Retail price $15(x16) = $240
In the example of the wholesale pricing formulas, it is suggested that the retail price should be a double of your wholesale price. However, it’s not fair to a retailer if their customers can find your product online for less than what they are selling in their store.
That is why it’s so important to plan both your wholesale and your retail price from the beginning. You can see in the example above that each item price is not doubled as specified on the formulas, so you need to tweak the numbers in order to make them work as wholesale and retail prices.
3. How To Make Your Pricing Profitable?
Profit is important to make your business grow. In order for a wholesale agreement to be profitable, your mark up should beat least 2-3 times your cost. A few ways to be able to do this are:
1. Find the best rate on supplies. Also, there are ways where you can get free supplies for your craft projects.
2. Find a good inventory and pricing craft software. Automate your crafting process as much as possible to lessen the time you have to spend on each item. Develop a batch process or assembly line method if you can.
3. Buy supplies in bulk.
4. Understanding “Perceived Value”
If your products are not selling at a 3x markup even if you have reduced your materials costs as much as possible, then you should be working on your perceived value. Your perceived value is how much you customers think your items are worth.
Here are some tips if you want to increase your products’ perceived value:
1. Improve your craft photos. Use a lightbox using a good camera and some quality lighting, or hire a photographer.
2. Use models for your handmade wearable items. These will help sell your products and are perfect to use as advertisements and in magazines.
3. Show the item in use. Organize the items in collections to give your potential customers an idea of how they can use them. Not only does this increase the perceived value, but it also creates a need. Give your customers a reason to need your products, and you create that little nudge to buy it.
Additionally, take a cue from designer brands. Many commercial brands carry the exact same type of item, but how they justify the higher price tag is through perceived value.Your product may have different features or a different appeal, so the price may not be exactly the same, but it’s a good place to start.
Now at the start of this article I promised you a tool that will help you with pricing and calculating the costs for your handmade business. You can download your free copy of the crafting and jewelry pricing calculator from our blog and easily calculate the finished prices for all kinds of products for both Wholesale and Retail.
I hope this helps. Happy wholesaling!
Article written by Gary Capps of CraftMakerPro.com.
Craft Maker Pro software is designed to help the small handmade business organize their inventory, pricing, customers, invoicing and more so they can spend more time on creating and less time on admin.