How to Know Whether Your Wholesale Minimum Is Hurting You

We got a great question from one of our favorite makers yesterday, a letterpress card maker who had decided not to have a wholesale minimum:

I don't currently offer a wholesale minimum and oftentimes a buyer will tell me that they are very appreciative of that -- it enables them to try product and figure out what they want to sell in store.

I'm in a weird place with my business where I am not currently doing this full time and I don't have a massive ton of product on hand. And I feel like if I start enforcing a $200 minimum order, I'm going to have to be printing a lot more often and I'm going to have to keep a lot more of each card/pin/etc. in stock at all times.

I know everyone's business is different. Do you think it’s possible that I don't have the same need for such a high minimum order? 

Am I crazy? Am I going against the flow for no reason?

On the flip side, sometimes we hear from makers that have chosen a very high wholesale minimum and have the same concern: am I crazy and will this hurt my business?

My short answer? No, you’re not crazy, and you’re likely not going against the flow for no reason. But you should think through a few cornerstones in wholesale minimum setting to make sure you won’t be hurting your business by setting your minimum too high, too low, or with a structure that doesn’t make sense.

Here’s the deal.

In the past, we’ve talked about our basic tips for feeling super-confident about your wholesale minimum. And we still stand by those.

But sometimes we’ll hear from a maker who has a sense that the typical way of doing it just doesn’t apply to them. AND -- they want to make sure they’re not “missing something” and are going to hurt their business by choosing a different way of going about it.

So whether you’re considering having no wholesale minimum order, a wholesale minimum that is structured differently than normal, or a wholesale minimum that is especially high -- there are some key points to consider in deciding whether that decision will ultimately help or hurt your business.

 

8 key considerations in setting your wholesale minimum order so that it doesn’t hurt your business:

How expensive is your line?

We have makers who sell $200 leather handbags and makers who sell $2 note cards. If the handbag maker sets her minimum opening order at $500, that will mean the store needs to order 5 bags (with wholesale at 50%); whereas if the note card maker sets their opening order at $500, that will mean buying 500 cards (with wholesale at 50%). 500 cards is a LOT for an independent store owner -- and likely a level of risk that could dissuade them from moving forward. So, generally, the higher your price point, the higher your wholesale minimum be. Additionally, makers of much higher-priced products can actually run the risk of having consumers try to get a deal by placing a wholesale order. If the handbag maker set her minimum at $200, the store owner would only need to buy two bags.  Forcing the wholesale buyer to buy five bags protects against that.

How hard is it to get supplies?

For some makers, the supply of their materials is a concern. Perhaps they need to buy several yards of leather at once, at a not insignificant cost, and if they don't have a reasonably sized wholesale order, they're left with a lot of excess source material. That would guide you to make your wholesale minimum higher. On the other hand, you might not have a lot of inventory or might have unique, one-of-a-kind supplies (like upcycled materials or limited-availability gemstones) -- that might mean you’d set your wholesale minimum lower, or even have a per-unit maximum. Similarly, you might need to produce a certain amount at once for a run to make sense (pointing to a higher minimum) or you might struggle to produce a lot at one time (pointing to a lower minimum.)

How much do you have to work for each order?

Most makers are pretty good at thinking about the costs of their individual items (labor plus materials plus a percentage of overhead). But they sometimes makers forget the cost of an order as a whole. Whether a wholesale order is $1,000 or $100, you invest time (and sometimes money) into the outreach to the store, answering questions, processing and packing the order, etc. All of that adds up to a cost -- and when you don’t set your wholesale minimum high enough, that cost can make it unsustainable to serve your stores.

How established is your business?

Someone who is brand new to wholesale will benefit SO much from having 5-10 boutiques they’re working with (in follow-on sales that arise from that visibility, in particular) -- and that might make it worth hustling a bit more for a bit less money at first. On the other hand, more established makers might be wary of taking on new accounts unless they’re really going to be financially meaningful.

How small of a barrier to buying can you make?

In some ways, this is the biggest consideration, especially if you are actively reaching out to store owners to pitch your line. When a store owner takes on a new line, it is a big risk. For an independent boutique owner, spending $200 or $500 or $1000 on a set of products that aren’t proven sellers is exciting, but can be costly if the work doesn’t move. The lower you can wisely set your minimum -- in full consideration of all of the factors here -- the less risk you create for the store owner. That means the barrier to them buying your products is lower.

What does a store need to sell your product well?

If you have a line of essential oil perfumes, with 7 different scents, and the store only buys a few bottles of one scent, your line likely won’t sell as well, in store, as it would if the owner had bought a few of each scent. Or perhaps you have 4 sizes of your leggings -- if the store owner buys two pairs of leggings total, it’s going to make it hard for customers to find their size, and thus hard for the leggings to sell.

How are you structuring your minimum?

There’s the amount of your minimum, and then there’s the way you actually structure it. Here is a menu of different ways you can structure your order:

  • Minimum opening order (dollar amount): a minimum total order, like $250. Usually repeat order minimums are lower.
  • Minimum opening order quantity (units): a minimum number of items, like 25 cards.
  • Per-unit minimum: a minimum of each product, like 5 of each card.
  • Incentives for different order amounts: offering something like free shipping or a free display above a certain order amount.
  • Starter packs: offering a set mix of products as an initial order, usually best when there is a variety of products that won’t sell well in isolation.

The most common mistake in structuring minimums is to make it confusing. Sometimes a maker even has a very store-friendly minimum, but they’ve made that fact sort of confusing and opaque. Think about it this way -- if you were shopping online at, say, West Elm and they had the same minimum you have, would you find it confusing or unwieldy? Wholesale, of course, has different standards, but there’s no reason it can’t be elegant and simple.

How do you feel about it?

Establishing minimums is like establishing pricing -- there are no hard-and-fast rules. Which means that after you’ve taken all of the above factors into consideration, your own sense about the minimum is a pretty big deciding factor. Set your minimum at a level, and with a structure, that won’t make you cringe because it’s a little unfair to the store… but not so low you’ll feel resentful or overwhelmed when you see a wholesale order come in.

 

Long story short, you should absolutely do what makes sense for your business. Industry standards are evolving quickly, and what worked for one maker may not work for you. In fact, what worked for you last year may not even work for you this year. Learn about the factors you should be considering -- and then feel free to go against the grain in the ways that make sense for you and your business.



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