298 | Why You Should Never Accept a $25 Wholesale Order with Katie Hunt
I completely remember what it was like in the early days of selling wholesale. I felt like I was winging every single decision. I questioned everything I was reading on the internet. And, I was craving a community of other product makers that I could tap into for answers and to share resources.
Way back in 2008, that community didn’t exist so I eventually created it. Since 2011, we have helped thousands of brands across industries and across the globe, get their products on the shelves of stores big & small.
Our Paper Camp alumni sell to big box stores like Anthropologie, Target, Macy’s, and Barnes & Noble. But, our best customers are the independent brick & mortar retail shops located around the world. Small businesses, just like all the manufacturers that we support in our Paper Camp and LABS programs.
I very intentionally point this out, because I’m going to be answering some questions I received in an email about the importance of following industry standards, having strong wholesale terms & conditions, and why I never ever want you fulfilling a $25 wholesale order.
I feel it is important for you to understand that our community focuses our energy and efforts on independent shops, so my feedback is coming from that perspective!
Today's episode is brought to you by our Is Wholesale Right for You audio series! This free 12-part audio series will help you decide whether wholesale is a good next step for your specific business.
After listening to this audio series, you'll know:
whether you want to pursue wholesale for your product business and
you'll have the confidence and action steps to get started with wholesale
Industry Standards When Selling Wholesale
The other day, I got an email from a woman named Jennifer that said:
“I understand that there are conventions and industry standards when selling wholesale—particularly minimum opening order amounts, minimum reorder amounts, and minimum order quantities, but I want to understand why these things exist.”
To give a little backstory, she basically goes on to say that she’s working with 34 independently owned shops and most can not put together a $150 order as many ask to order in 3s or 4s rather than 6s—which are industry standard for the greeting card industry.
Let’s break down why these rules exist for wholesale and what breaking them means for your brand.
Do I Need Wholesale Terms & Conditions?
There is a delicate balance at play when selling wholesale.
We want to make it easy for our buyers to purchase our products while making sure that fulfilling the wholesale order is worth our time & effort. Selling wholesale is a volume game.
Our terms & conditions set expectations for buyers and also boundaries for what makes financial and smart business sense for our businesses.
Why You Shouldn’t Accept a $25 Wholesale Order
Have you ever done the math on a $25 wholesale order? It doesn't make financial or logistical sense to process a $25 wholesale order, as you're very likely losing money on that sale.
Once you factor in your cost of goods sold (COGs), time to pack, fulfill & ship, process the order, and communicate with your customers. Let’s break down the math.
For a $25 wholesale order...
Divide $25 by $2.75 per card = rounds up to 10 cards
For 10 cards with COGs of $.60 each (card, envelope, cello) = $6 (your costs may be higher)
That brings us to $19 profit so far not accounting for your time.
Factor in shipping materials, tape, paper for packing slip, shipping labels, etc.= $1 (buy covers postage)
That brings us to $18 profit.
Now, let’s factor in your time (or your employee’s time). Conservatively, it takes 2 hours from start to finish.* Seeing that most of our community members are paying $12 - 18 hours for fulfillment help, we’ll use $12 as the hourly wage. 2 hours at $12/hour = $24 for time & labor for this order.
That totals a $6 loss on this order.
You’re running a business here and you should be making a profit on each and every order that is heading out the door.
*Your time includes: confirming the order with the customer, pulling product, packing the box, printing the packing slip, printing the shipping label, taping everything up, sending the shipping notification to the customer, calling for mail pick up or drop the package at the post office.
Your $150 Opening Order Is Not a Barrier for Stores
One of Jennifer’s concerns about having a $150 opening order was that it was a barrier and limit for shop owners.
A $150 opening order is actually considered a small order in the wholesale world and it is easy for the majority of stores to hit that opening order amount. This isn’t a barrier for stores.
Depending on the price of goods sold and the selection of SKUs offered, the opening order minimum will vary.
Remember, you are the business owner and can take it case by case to decide if you want to bend your terms & conditions for people. I always encourage folks to be stricter in writing with their terms & conditions and flexible in practice.
Should You Follow Industry Standards for Wholesale?
First and foremost, this is your business, so you can do what you want. You can set whatever rules you want for your business, including what you make, how you sell your products, and whether you follow industry standards for sales terms & conditions.
The caveat? Having minimums that don't align with industry standards are a red flag to buyers.
It raises questions about your product, your professionalism, your industry knowledge, and your experience, plus they simply wonder why you aren’t abiding by industry standards.
This doesn’t mean they won’t buy from you, but it could mean that you’ll have a tougher time getting traction with wholesale sales.
Buyers are busy. They want and need easy. When they see a brand that is not meeting industry standards, it creates extra friction in placing their order. They may pause the process to ask why this is different from other brands in our industry.
Industry standards exist for a lot of reasons—most of which revolve around setting you and your business up for success.
quick recap:
Here is a quick recap of links shared in this podcast episode:
If you are ready to learn more about wholesale, I encourage you to download my free audio series, Is Wholesale Right for You?
This free 12-part audio series will help you decide whether wholesale is a good next step for your specific business.
After listening to this audio series (in less than an hour), two things will be true:
You'll know whether you want to pursue wholesale for your product business
You'll have the confidence and action steps to get started with wholesale. Sign up for the private podcast today!
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Connect with Katie Hunt
Katie Hunt is a business strategist, podcaster, mentor and mama to four. She helps product based businesses build profitable, sustainable companies through her conferences, courses and coaching programs.
Website: prooftoproduct.com | Instagram: @prooftoproduct
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