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.

Maintaining Consignment Relationships

Stay in communication.  There are several ways to do this.

photo credit: Careers in Sport 

Get on their newsletter list and put them on yours.

Check with them occasionally as a reminder you are around.  Some pretexts for making contact are: you may need to be paid or want to know what is selling or not; to check on stock levels; you may also offer promotional opportunities and want to know what they would like to be put forward.  But do this remotely (email, telephone, etc). An in-person visit should be done by appointment.

Make sure you can restock when the shop needs it. And inquire regularly if more stock is needed.  Find out their delivery hours and stick to them. Restocking requires an inventory list.  This is also the time to bring any new lines you have developed.  Ask if it is OK to bring it before visiting.

Remove old stock. Placing new or seasonal items in the shop can help with sales.  You can get advice from the shop.

Promote the shop.  Use your social media, include them in your list of outlets.  This mutual promotion gives rewards of increased visibility and with determination, sales.

Be inventive. Create ways of communicating your continuing interest in the mutual business benefit both parties receive.  Use anniversaries, local events, things unique to their business, etc., as occasions to be in touch without any commercial objective.  There are lots of creative ways to be in touch.

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.

An important element of maintaining relationships with your galleries is keeping in contact, being interested in how their business is, and responding to their communications.

Other posts on consignment:

Consignment

Consignment Agreements

Consignment Rates

Consignment Venues

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.

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.

Other posts on consignment:

Consignment

Consignment Agreements

Consignment Rates

Consignment Venues

Consignment – meeting the owner/buyer

When approaching the retailer keep several things in mind:

Prepare for the meeting

• Make an appointment, as the retailers’ focus is on selling. Buying is done in down time from the sales.
• Explain how you came to select the shop – this can include recommendations from people already represented by the store.
• Provide a brief description of the kind of work you do.  If you sell at other locations – craft shows, online, etc. – include that and be prepared to say how well they sell.
• Be prepared to talk about the inspirations behind your work.
• Prepare yourself with the points you want to make about your work and its relation to the shop’s offerings.
• Remember that you are providing retailers with unique items that fit with their customers interests and needs.
• Be prepared with suggested retail price ranges for each line, remembering the commission the shop takes.
• During the meeting, the retailer will be assessing both your work and the potential working relationship.
• Be prepared for the retailer to ask for time to consider whether to stock your work.

Bring a range of materials to support your presentation.

• Take a small but representative sample set of your work in its packaging.
• Back up the samples with good photographs, which are essential, especially if the pieces are too large for practical transport.
• Bring business cards, a resume relevant to the shop, marketing materials, photographs, and samples you are prepared to leave with the shop if asked.

Presentation

• Dress to make a good impression. You are presenting yourself as well as your work.  You don’t need to be super smart.  Dress neatly in a way that suits your personality.
•  Present your work at its best along with its packaging.

Follow up

Follow up is essential. A week or so after the meeting contact the premises with further information or even questions.  If the response is to decline to carry your work, ask for feedback about your work and its relation to the shop’s offerings. This will assist your future presentations.

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.

Other posts on consignment:

Consignment

Consignment Agreements

Consignment Rates

Consignment Venues

Consignment Venues

Credit: getlstd-property-photo

Finding suitable shops and outlets

Shops and galleries want stock that meet or exceed their customer expectations of quality, style, function and price.  In other words, they are looking for work that will fit with the other products already on show.  These shops generally will be those that already sell hand crafted work. You need to show how your work fits with or adds to the retail premises.  As you are selling handmade items, you also will be looking for shops with higher price levels to be able to sell to the shop at a reasonable profit.

You need to do your research.

What do you know about the gallery/shop?

•  What is its perceived standing?  Is it a “go to” shop? Does it get discussed in media? Is it talked about in craft circles? What does its online presence look like?
• Location.  Where is it? Is it in a prestigious area? Is it unobtrusive?
• Will there be, or is there already, a good footfall?  Who are its customers? Who does the shop target as their clientele?
• What is the fit between the shop and your pieces? Will your pieces fit in with the existing items? Will they stand out well, or seem odd?
• Will the shop advise on the prices they expect to get?  Can the shop get you higher prices?
• Does the shop have promotional events that you could participate in?

Visit the store/shop as though a customer first to assess the venue.  If the shop is too far away to visit in person, look online to get a sense of the business.  This will show how the shop fits with your products – style, kind, price levels.  Also take note of the presentation of the store internally and externally.

Even after visiting in person, an internet search will be useful, especially to find out about their submission policies and forms. Look at what internet profile they have. And do they have good online reviews? Also enquire around from people you know about the venue, and contact any local crafts organisation for more information.

Local vs regional/national

Should you be looking at local shops or be more ambitious and look at a wider area.  If you are willing to travel some distances for craft fairs, pop-up shops, etc., you may find expanding your search area to regional and multiple outlets a worthwhile activity.  You could take an extra day to investigate shops in the area or meet with the owners.

Some considerations in favour of starting local:

• Low cost shipping. If your work is large or difficult to post, you can hand deliver.
• Local helps to start small and get experience for larger volumes, more stores.
• Local builds an audience for your work near your studio.
• Getting featured in local press is easier that regional national.
• Local allows for a more intimate relationship to be developed.
• Starting local allows you to learn how to build up the volume of your work.

Assessment

Arranging a visit to the short list of shops is the next step.  After those meetings there is a further assessment of the venue to be done.  These are the same questions you looked at in your preliminary research about each shop:

• What is its perceived standing?  How do they perceive themselves?
• What is their media presence?  What is the customer perception?
• Location in shopping terms.
• What is the customer base and how does your work fit with that group of prospective purchasers?
• How will your works fit with the shop and its presentation?
• What advice is available on the prices they can get for your items?
• What promotional activities are presented?
• What are the consignment commission rates?

Since these are the questions you will be basing your decisions upon, they are the ones you should be asking during the appointment, if not already discovered from your prior investigations.  Assess how you feel about the responses you received after the conclusion of the meeting.  Do not make on the spot decisions.

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.

Other posts on consignment:

Consignment

Consignment Agreements

Consignment Rates

Consignment Venues

Consignment

Why sell on consignment?

Biscuit Factory, Newcastle

Benefits

Consignment arrangements can add income additional to your other strategies of online, direct sales, craft fairs, pop-up shops, etc. 

It can develop new customers, and develop growth in both commercial and artistic terms. 

It exposes your work to new and different customers.

It can provide opportunities to partner with another small business (the shop) and benefit from mutual promotion.  

Craft fairs are not a long term means to sell your work.  Fairs are concentrated at certain times of the year.  You cannot attend all of them anyway.

Consignment spreads the income over the seasons.

Down sides

Your stock is tied up in the shop.

Your craft fair and online prices need to be similar to the retail prices at the shop(s) to which you consign work.

Further Action

Consignment can be beneficial to your sales, but it does require preparation and effort. 

You need to investigate shops and prepare for a meeting with the owners. You need to have a written contract even with friends and it should include all the elements and assumptions for the arrangements.

If you decide to pursue consignment arrangements, there are several things you need to consider and prepare.

• Finding suitable shops and stores and assessing them.
• Preparation for meeting the owner.
• Knowing your terms
• Placing and promotion of your work.
• Maintaining the relationship.
• Wholesaling

These aspects of consignment are the subject of postings to come.

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.

Other posts on consignment:

Are consignment rates fair? 

Consignment

Consignment Agreements

Consignment Rates

Consignment Venues

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. 

Other posts on consignment:

Consignment

Consignment Agreements

Consignment Rates

Consignment Venues

Pricing, 2 - Pricing Structure

Creating a Pricing Structure

After calculating what you are going to charge, use the prices to create a pricing structure:

• Selling price to the public - recommended retail price
• Wholesale price/trade price
• Sale or return price
• Selling direct to the public

The selling price for the public should be the trade/wholesale price times two, plus tax. This means that the wholesale price is your bottom/lowest price that will give you a profit.

You should set your prices to realistically cover your costs, including time spent at an event, and know what you need to charge to make a profit. You charge double your wholesale price to cover your own costs of sales, such as packaging, stand hire, etc.

Do not undercut your other outlets, otherwise they will no longer want to sell your work.

Use selling to the public as an opportunity to test the market by exploring new products and new prices.


Selling to trade

The prices you offer to trade, i.e., your wholesale prices should cover your costs and provide some profit.

Galleries and shops have enormous overheads, which is why they put so much of a mark up on pieces, but remember they will be selling your work all of the time, so you can produce the work without interruption.

Before approaching wholesale or trade outlets you need to decide on:

• Minimum order quantities.
• Discount prices, and quantities to qualify.
• How much of your work they will need to make a good display (it is in both of your interests to display your work as well as possible).
• Consider charges for carriage or if you want to offer carriage free.
• Agree what the payment terms are – pro forma, payment on delivery or credit. If offering credit, ask for trade references.

Sale or Return

If you provide work on consignment (sale or return), make sure you know exactly what the terms are. Keep a close eye on the pieces, as there are risks that may or may not be covered by the seller

You do not want your work out for too long, so if it is not selling after 6 months it is time to move it. That means keeping records of where your work is and when it was placed.


Review your prices annually.




More information is available 
Establishing the costs
Creating a pricing structure
Terms and conditions of sales
Customer relations


Payment

Consignment Agreements

Consignment (Sale or Return) agreements are to protect both Artist and Gallery, and ensure each understands the other’s expectations. The agreement should relate to each item and include at least the following information:

• Artist’s name and address
• Gallery’s name and address
• Name and signature of the owner/manager of the gallery
• Title, medium, dimensions of the work(s), edition number
• Retail price
• Artist’s price
• The commission taken from the retail price

Additional information that is advisable to include:

• Each work is to be offered at the stated retail price. Any discounts shall be from the retail price, not the artist price.
• Each work sold should have a bill of sale copied to the Artist.
• The Gallery shall send to the Artist the stated retail price of each work less the stated commission, within a reasonable time after sale, and not less than 1 month after the sale. In the case of exhibitions the payment should be made not less than 1 month after the close of the exhibition.
• If a work is lost, damaged or destroyed during the period of the agreement, the Gallery must notify the Artist immediately and pay him/her the stated retail price, less the stated commission.
• Insurance of the work –a statement of when the Gallery’s insurance takes effect. The Gallery normally provides insurance upon receipt of the work(s) and signs a document to indicate safe receipt of the item.
• The Artist shall retain all rights in and title to the works until sale, at which point the title shall pass directly to the purchaser whose name and address the Gallery shall give to the Artist on written request.

Other posts on consignment:

Consignment

Consignment Agreements

Consignment Rates

Consignment Venues