I offer chocolate for sale at markets, and from my kitchen (no retail store, yet), and also sell wholesale to local retailers. Does anyone have any advice or recommended reading on how to best price wholesale vs. retail?
Hi Brian, what I do is work out a realistic wholesale price, then when we retail direct, we match the price that our wholesale customers set when they retail. This means that we are not undercutting the retailers (which would discourage them from stocking our product). So the bottom line is work out what the realistic (profitable) price is for wholesale and go from there by talking to the wholesale customers.
That makes sense. But each of my wholesale customers has a different price! One just adds 50%, another just eyeballs it and charges what they think they can sell it for, and others use a different formula.
On my wholesale pricing sheet I give them my retail prices, which is what generated some concern from a new partner -- that I undercutting them. (I don't believe people are comparison shopping for my chocolate just yet; right now I think more people are 'discovering' it at the various retail outlets.) They suggested I either reduce my wholesale prices or raise my retail prices.
If your wholesale customers aren't complaining and you don't feel that it is costing you wholesale sales, then I would probably leave things as they are. If you think that people are choosing not to stock your product because you retail at a low price, then I would push up your retail price a little.
I think that showing your retail price on the price list is a good thing. At least no-one is going to get a nasty shock and be able to complain that they didn't know your pricing scheme. If it causes questions, then can address them directly and reconsider your retail pricing.
Although I do not work in the food industry yet, and our marking up may be different, usually the wholesale is 50% off the retail price! That's it! All customers should receive a "suggested retail price" information from their vendor (in this case, you) and follow that pricing if they want to.
This will keep you from going insane trying to figure out what wholesale cost to have based on the retail prices your wholesale customers are setting up at their stores.
I'm finding the whole pricing strategy to be a challenge, and I've heard as much from others. Wholesale strategies get your product more widely distributed, for less money because you don't have all the overhead of your own store, marketing, etc. And if you've got your own store (something I'm working towards) then you've got those costs anyway, so...
Andre noted that retail is usually double the wholesale price, which is one way of figuring it. I also have retailers who add 50% to the wholesale price (retail = 1.5 X wholesale) and others who simply "eyeball" the product and charge what they think they can, often more than double the wholesale cost. Obviously there's no way to accomodate all those approaches.
So here's where I'm headed, for those of you keeping score at home. I'm not moving my wholesale prices, which are set where I can still make a profit, but I am going to start setting and enforcing minimum orders. I'll also remove my retail (web order) pricing from my wholesale price list and replace that with a MSRP that's closer to what others are charging. (Obviously they can find my retail pricing on the web, and I'll address that issue with retailers who express concern.) When I get to my own retail space, I'll revisit my own retail pricing to better reflect the realities of my new overhead, which will benefit my customers by giving them a more convenient way to purchase my chocolates.
Thanks everyone, and I hope this helps some others, too!