How much should a store mark up your product?

[BassinWizard 4]

Hello,

I have owned my PCUT for almost a year now and have mainly been making decals and signs for myself and friends, then started selling some on Ebay. I recently got in with a successful local store owner that does monogramming. She liked my work and wants me to sell finished products to her store by customer orders. So, I am in the process of making a portfolio and setting up some displays for her store so her customers can place orders thru her store, then she forwards the orders to me twice a week. I then deliver the finished product to her store once or twice a week. If sales are good, she wants me to do the same for her other store located in another part of the state.

My question is, what would be the typical and fair mark up on her end? Or is that something that I have no control over and shouldn't worry about? My main concern is that I'm worried she may mark up my product to a point that it will not sell. But then again, she may not. She has been in business for several years and I'm sure she would know what fair markup would be. Again, I was just wondering if this needs to be negotiated up front or should it be totally left up to the store owner.

Thanks for your input and advice.

Doug

[midwaste 4]

I would ask her what she thinks a good price point would be on selling them and agree on that.  She will know better than you what her customers would be willing to pay, based on her other products (hopefully).

You can then work from there to determine what you will sell them to her for.  If you are doing each one custom, is she responsible for taking the order, or will there be a form that a customer has to fill out, which she then collects and gives to you?  Will the customer be paying her for each item, and then she will total them up and pay you at some set points, or will the customers be paying you directly?  Those things need to be kept in perspective, as you will need to make it worth her while, if she has to commit time and effort to it.  15% should be in the ballpark, but on vinyl it may be worth both your time to do 20-25% if she is moving the product.

I "sub-contract" screenprinting for a place, and I give him a 15% discount from my price.  Another partner of mine gives me a lot of referrals and brings me quite a bit of business, but doesn't necessarily do any of the "work", I give him 10% off the top of any order, screenprinting, vinyl, etc.

[john! 1]

anytime your doubling your money your doing good. Like if someone sells you something wholesale that costs $5, retail it for at least $10 and your doing good. If your not doubling your money on low quantities it's not really worth it to me anyway.

[BassinWizard 4]

Thanks for your reply!

We haven't worked out any fine details yet. I am getting my displays, item binders, picture binders, etc. put together for her by the end of this week. I am also going to create an order form for her to use and a price list. I could create a separate price list with and without the markup percentage that we agree on for her eyes only.

At least 95% of the work will be custom for each customer order. So the order forms I'm creating will be simple for her to use and fill out. The customer will pay her directly at her store, as if it were her products. Then she'll pay me weekly or monthly (whichever we decide). I won't have my business name at her store, just the items "for display only", and binders with different products and pictures for customers to look thru and order. So, really the store owner will only be taking orders for me and selling to her customers.

So, your recommending about a 15% markup for her? That sounds fair to me. I just do work in the afternoons and weekends, since I have a full time job during the day. I don't have alot of spare time to find new customers. I think it's definitely worth a try to see how this works out setting up a display in her store. It's gotta work better than Ebay. You almost have to give lettering and decal work away on Ebay because of so much competition.

Thanks again for your help.

[paz21paz 7]

Would you let me know what kind of display you are making and pricing. I have a local place wanting to do the same thing. thanks

[sdgirl 13]

That is a great oppurtunity. I wish I had some place that would display/sell my graphics. Let us know how it is working out for you!

Christi

[BassinWizard 4]

Would you let me know what kind of display you are making and pricing. I have a local place wanting to do the same thing. thanks

Her customers are about 99% women, so I've had to come up with (and borrow) a few ideas that I need to cater to the female buyer. I have mostly made and sold items to guys. So, this is a change for me and it's a good thing. I can't stop thinking everyday of stuff to make. Plus, the store owner will give me some ideas that her customers are asking for and/or buying.

I'm making samples of lettering and decals and installing them on gloss black paper. Them putting them into clear sleeves and putting them in a 3 ring binder. I put all the swatches of the actual colors available on a sheet, put the different fonts that customers can choose from on sheets. Also printing pictures of previous work I've done on 8x10 photo paper. Printing about 6 pictures per sheet and putting those in clear sleeves in the binders. I'm also making some various marble tile displays with stands, and a tag display on a picture stand, and various nick-nacks with monogramming. On all my tiles and tags, I put something on all of them that I would be able to use in the future and keep in our home since they are displays only. But this is all just a start. I'll be constantly adding items to the binders and creating more display items over time for the customer to see my work.

I created a price sheet and an order form in excel to make it easier for the customer and the store owner to use. Then the store owner could just enter the info in the order form on her computer them send the form back to me by email everyday (if something sells everyday!).

I am going to present it to her Friday afternoon. I hope it all works out and I'm very thankful for this opportunity.

Doug

[Rodger 527]

anytime your doubling your money your doing good. Like if someone sells you something wholesale that costs $5, retail it for at least $10 and your doing good. If your not doubling your money on low quantities it's not really worth it to me anyway.

  I agree with John! ,

I think you should charge what you normally charge & she should double that at her retail store . makes 1 think about having a retail store , but that is a big step up from a home run business . The overhead bills are NEVER late  . If she charges less than 100 % mark-up , the better for selling more decals .

[BassinWizard 4]

anytime your doubling your money your doing good. Like if someone sells you something wholesale that costs $5, retail it for at least $10 and your doing good. If your not doubling your money on low quantities it's not really worth it to me anyway.

  I agree with John! ,

I think you should charge what you normally charge & she should double that at her retail store . makes 1 think about having a retail store , but that is a big step up from a home run business . The overhead bills are NEVER late  . If she charges less than 100 % mark-up , the better for selling more decals .

The store is in a small town, but has zero competition locally for what she sells and what I would be selling. And her customers are loyal customers. But I'm a little worried that if she marks up my product 100%, my items will not sell. Hopefully, I'm wrong on that. But to me, 100% seems like alot of markup for something that she don't even touch. Especially after I have already marked it up 90% to 100%. I'm new to sales and business, so I am learning a little more everyday from people like everyone on this forum.

Then comes the question, do I have to drop my price down if it's overpriced and does not sell well after she places her markup price on it? I just have all these questions with many possible answers going thru my head everyday, and I don't know the correct one. I guess I need to take a business class or two. 

Also, everything she sells in her store is her own work and is custom to each customer order. So she would know how much she needs to markup and how much her customers are willing to pay for good custom made products. But again, Friday, we are supposed to sit down and discuss all of this. This was the reason for my post so I could be prepared for what a typical markup would be. I'll present her with what I'll sell my product to her for, then we'll just go from there. I guess that's about all I can do at this stage.

Thanks again for all the advice given.

Doug

[midwaste 4]

100% markup on product is not uncommon for retail environments.  However, this would typically be in a case where the retailer would buy a quantity of stock product from you, thus earning a better discount. 

Since this is not the case and each product is custom, IMO, it's not unreasonable to expect a much lower markup for a reseller.  In the event that the retailer would sell a large quantity of the custom products, it would be fair to have a sliding % of sales in return profit to them.

I would definitely come to an agreement on the selling price before moving forward.

[BassinWizard 4]

100% markup on product is not uncommon for retail environments.  However, this would typically be in a case where the retailer would buy a quantity of stock product from you, thus earning a better discount. 

Since this is not the case and each product is custom, IMO, it's not unreasonable to expect a much lower markup for a reseller.  In the event that the retailer would sell a large quantity of the custom products, it would be fair to have a sliding % of sales in return profit to them.

I would definitely come to an agreement on the selling price before moving forward.

Thanks for your advice.

That sounds very reasonable. I would definitely increase her % of return if that happens, no doubt about it. I will also be sure to come to an agreement before I proceed.

Another question: Is it customary for me to set the price with her markup % and then I then pay her the money owed to her, or does she pay me what is owed to me after she takes out her %? Or does that really matter? I guess as long as we're both getting paid in the end, it shouldn't matter.

And if it falls thru, which I'm hoping it doesn't, I'll just be out a little bit of money, and alot of time preparing everything for the displays. Like I said, everything I made for displays, I can personally use myself in my own home. So really, it will not be wasted.

Again, thanks to everyone offering advice and opinions regarding my situation. You have all helped me alot. I'll be sure to follow up after the meeting Friday to let you guys/gals know how it went.

Doug

[midwaste 4]

Whether or not she pays you the full amount and then you pay her cut depends on how she handles the sales tax aspect of it.  Assuming her books will show the amount of income after sales tax has been withheld by her, it doesn't really matter whether you pay her or she pays you minus her percentage.

I had the same situation in the past, and the way my customer wanted to do it was to sell everything on his own books, then to write one invoice to me totalling my cost (what I sold it to him for) as if he had purchased all of it at once.

It will be helpful to set up a regular schedule for settlement (bi-weekly, monthly, etc.)

[BassinWizard 4]

Whether or not she pays you the full amount and then you pay her cut depends on how she handles the sales tax aspect of it.  Assuming her books will show the amount of income after sales tax has been withheld by her, it doesn't really matter whether you pay her or she pays you minus her percentage.

I had the same situation in the past, and the way my customer wanted to do it was to sell everything on his own books, then to write one invoice to me totalling my cost (what I sold it to him for) as if he had purchased all of it at once.

It will be helpful to set up a regular schedule for settlement (bi-weekly, monthly, etc.)

Sounds good. Thanks!!!

[BassinWizard 4]

Update: (I apologise for the long post)

Well, I met with the store owner yesterday and everything went great. She really liked my items, prices and what I had to offer. She also gave me a ton of ideas to work on also. She suggested that I shouldn't give the customer too many options to choose from as far as fonts, styles, and colors. She says that has hurt her in the past by offering hundreds of options to choose from. She has narrowed her options with her monogramming business to about 20 or so fonts and her sales have increased. She said that the customer will get too overwhelmed with options then couldn't make decisions on it, then would leave without purchasing anything. She also told me that if you sell items too cheap, they won't buy it and if it's too expensive, they won't buy it. She gave me an example: She had a monogrammed item in her store and a more expensive higher-end store was selling the same item. People were buying from the other store, that is 40 miles away in the next town, even though "her" price was alot cheaper. She raised her price to match the other store and she couldn't keep them on the shelf. Go figure!! But is this a general shopping practice? Her sales are about 99% women also. So is this a female shopping practice? (not trying to offend any women here, just trying to understand) 

As far as markup on her end, she wants to mark my items up 100%. She said we shouldn't have any problem selling for that. (My wife wasn't too happy when I told her about the store marking up 100%). But I tried to explain to her that I'm still selling for what I want out of it, but I guess shes wondering why the store gets 100% markup and does not have to do anything. Well, really she does. She is "selling" my product. She's not just going to set them on shelves and collect dust. Because if I'm making profit, so is the store. And it's easy profit to her since she will only "have" to sell it, not create it. She's putting my displays on the main counter of the store by the cash register. But 100% is her starting point. If she gets feedback that it's a little too expensive and pricey, she will adjust her profit to a lower percentage. The store will place orders with me everyday and I'll deliver 1 to 2 days a week, depending on sales. Then she will pay me my share every time I make a delivery to her.

I also got a sign deal out of it. She wants me to make her an additional sign for her store at the roadside plus some storefront window lettering. She is going to send pictures of my items to her friends store in another part of the state. And if she likes them, I'll ship her some display items too.

I'm really excited about this whole situation. And I'm hoping it all goes well. 

Thanks again for all your advice and ideas you've shared with me. It has really helped and prepared me. If I wouldn't have been prepared for our meeting due to your advice, my jaw would have probably dropped when she told me she will markup 100%. But anyway, thanks again. 

I hope this thread will help others with the same questions I have had.