Glass Tips from Verrier: Commission Rates

Showing posts with label Commission Rates. Show all posts

Wednesday 10 March 2021

Craft and Wholesale Pricing

Craft fair pricing

Image credit: craftprofessional.com

An important element to be considered in setting prices for pieces at a craft fair that are also consigned to a shop, is that the price the shop is selling your item at, is also the price you should be asking at craft fairs. Without doing this you risk losing the consignment arrangement with shops and stores.

Also remember that when attending craft fairs or pop up shops, you are doing the setup, travel, marketing, sales, etc., that the shop is doing in a commission arrangement. That cost needs to be reflected in your price for the item at a craft fair, even if different work is being offered. Especially if the craft fair is in the region of any of the shops or galleries you have placed similar items, you need to be fair to the shops in your pricing to be able to continue supplying them. The same principle should apply to your online sales.

Some people solve this problem by having a craft fair range and a consignment range. The craft fair items can be offered at a slightly lower price, if you must. But remember to factor in the costs of craft fair and pop-up shops even when pricing craft fair lines.

Wholesale pricing

Image credit: erplain.com

Also note that your price on consignment needs to be high enough that you can take wholesale orders without losing money. Wholesale orders are where the buyer pays you for the work in advance or upon delivery without taking a commission. They normally expect to buy at a lower than commission price and multiples of the work you are offering.

Maybe you feel you do not want to do wholesale work. Stop a moment to consider that instinctive reaction. Wholesale means you have made the sale already without having to wait for the ultimate sale to occur, as you would on consignment. You do not have the administration of keeping track of stock in various galleries. You have certain, and almost immediate income. All these things make wholesale attractive.

It is the expectation that the wholesale price will be half or less of the retail price. To make the piece affordable to the wholesaler and for you to still make a profit, you need to add something to the consignment price to enable the items to be sold by the wholesaler and the consignee at similar prices. This is most often less than the full difference between wholesale and consignment prices because you receive the money up front. Cash can mean quite a lot. You also need to have enough cushion to be able to give a discount on orders for multiples of the piece. And that means you need to set the minimum order number to get that discount.

The bottom line (as they say in accountancy circles) is that you need to set the wholesale price first and then work back to the consignment price and retail price.

The wholesale price should be about 10% above the absolute minimum price where you can make the desired profit. This enables you to offer that amount of discount for orders of multiples of your work. This then implies the retail price is twice the wholesale plus taxes. The consignment price will be about 70% to 60% of the retail price (based on 30%-40% commission levels). More realistically, you can visualise the consignment price to be 10% to 20% higher than the wholesale price, leaving the shop to add their percentage on top of your price.

Image credit: seobook.com

Selection of a gallery or shop in which to place your work is a complex interaction of commission levels; the value you place on your time in preparing for and attending craft fairs or putting your work online; the perceived prestige of the shop/gallery; the potential relationship between you and the outlet; and the relationship of the consignment, wholesale and retail prices.

Wednesday 3 February 2021

Consignment Terminology .

You need to communicate clearly, and in writing, with a consignment sales agreement to ensure the best chance of building a positive experience that works for you and the shop owner. This means that you need to know the terminology used and required in consignment agreements.

Meet the taxation requirements

Make sure you have complied with the legal requirements in your jurisdiction for selling. In the United States, for example, you need a tax identification number. In the United Kingdom, you do not need anything other than your personal tax number, unless you are selling so much that you are employing other people.

Written contract

You need more than a verbal agreement. Ask for their consignment agreement and take it away to consider the terms. It is not pushy to do this; the shop owner would do the same. If the gallery/shop does not have a standard contract, you need to develop one and negotiate it with the owner. The important elements are the commission rate, payment terms and frequency, insurance, breakages & theft, inventory arrangements.

Commission rate

A direct sale to the shop is normally marked up 100% of your price plus taxes to give the retail price. So, the commission taken should be less that than that. If the shop wants 50% commission, counter with direct sale at that level of commission. It would be exceptional circumstances only that 50% commission would be acceptable to you. 30% - 40% is more usual. The agreed rate should be written in the contract.

Payment terms

How frequently will you be paid for the work sold? This needs to be included in the agreement. Associated with this is inventory.

Inventory

You need to provide an item and price list for the gallery and one for yourself. It should state the name of the parties at the head. It is essential to list the date delivered, the number and description of the items. Each line of work needs to have the item price to the gallery and the total price for each line. This list gives the sums you expect to receive upon their sale. It is possible you will want to include, by agreement, their commission and the retail price, although the gallery may change the retail price at any time. If they want to reduce the price, that will come from their commission. The price on the consignment form is not to be reduced, even though they ask for it. If they want to increase the price, they will keep the additional sums – in which case, of course, you should be thinking about increasing your price to them.

Exclusivity

What about choosing between galleries with different commission levels when you would like to be in both? How do you choose?

Generally, shops and galleries expect to have an exclusive arrangement for their area. This means that you can’t have your items in different outlets in a defined area. What is that area? If you are comfortable with the area restrictions, you then can approach the decision about commission levels.

Suppose you have different shops offering to take your work, but at different commission levels. What do you do?

First, you do not reduce your price to the higher commission place. You set a fair price for your work in the items. That is a price at which you can make a profit. That is what you deserve. So, you place the items in either place at your single, set price. That may make your product more expensive in one shop than another. That is not your problem. That is the owner’s decision. You can see everywhere that there are different prices for the same product. Usually, there is a perceived difference in quality, service, prestige, etc., between the places.

Reporting

The reciprocal of this is the listing by the shop of items sold and resulting sums due. The frequency of this reporting needs to be in the agreement.

Loss, theft, breakage

The fact that the work on consignment remains your property until sold needs to be in the written contract. This may affect who insures your work in case of breakage or theft. The division of responsibility needs to be written in the agreement.

Management of stock

The shop should have a system to keep track of sales and stock. Ask about it.

Stocking

Agree restocking arrangements to be responsive to sales. An agreement on removing items due to lack of sales, or your requirement to have the item in your possession is needed.

Promotion

You hope and expect the retailer to promote your works, but you must also promote the retailer in your social media and your direct selling venues. Participating in events related to your work is one of the ways to assist in promotion too. Some element of this needs to be included in the contract.

Wednesday 2 December 2020

Consignment Rates

The most common comments about the rates for consignment of pieces to a gallery or gift shop are that they are not fair. They are too high. The gallery is greedy. And so on. How do you judge whether the commission rates are fair? What are the factors that should be considered?

Time

How much is your time worth?

Think about the amount of time used to prepare, promote and attend craft fairs, pop up shops, or prepare for and administer online selling. Could you be using that time to make more things, or be with your family? How much would it improve your quality of life to have to do less selling?

Costs

What are the costs of attending craft fairs?

You have to acquire display materials, whether you make or buy them. You must travel to the event. You have to be prepared to accept breakage risks from repeated movement of the pieces. You must pay for the space at the craft fair.

Customer base

Is the shop’s market different than yours at craft fairs or online marketplaces?

Shops have a different clientele than craft fairs or online shops. They spend effort in attracting customers. They know their clientele and what kind of things will sell to them. They are aware of the pricing levels needed for their visitors.

Decision

Answering these questions about time, costs and customer base will give you an assessment of whether consignment commission rates being offered are fair.