. . . doesn't go belly up trying to price too low.
First of all the market determines how much it is willing to pay. Of course you can effect this by various packaging, marketing etc. But generally the market will only pay so much for certain things.
If you can get an idea what they will pay you can start to figure out what price you can pay for a product and make a nice profit.
For this thread I want to just get down to the nitty gritty numbers. I am not big into terms such as mark up, triple net profit, gross profit before capital expenditures, profit point potential after variable costs are reduced for depreciation, etc.
Why? Why?? Why?????
Well ah because every time I read those things I have to go to Wikipedia AGAIN and see what they mean and I easily get confused Only half kidding.
So for me what I do is look long term to when I hopefully will get picked up by a distributor.
At first I thought selling direct was the way to go and not go through resellers and distributors. Then I looked at the BIG companies and almost every single one has resellers and distributors. It just makes sense to me.
One of the VERY VERY best decisions I ever made:
Selling my product to distributors and resellers.
Distributors in various industries have their own mark up or profit they want to make. I would find out what the industry norm is for mark up BEFORE I decided to go ahead and start selling my own product.
I do know 100% if I start off with my price too low compared to what it costs me to buy it, I will have a next to impossible task of ever getting a distributor to pick up my product or product line.
So when we say price what price do we use?
and a half dozen others out there that seem to change depending upon which store and which distributor you talk with.
They really didn't mean a thing even to stores I was selling to
I have had stores, EVEN after they have agreed to the price they were going to pay for my products as well as what they were going to sell them for, ask me what the wholesale, MSRP etc prices were. I asked why they needed that and they said for their records. I honestly just made up some numbers to fill out the spread sheet they sent me and sent it back. I never heard anything back so I am guessing it was ok lol
For our example we will use MAP(Manufacturers Advertise Price) as the selling price. This is the price you will see advertised online at Amazon and other such stores and in many stores for items similar to yours. While you can NOT tell a store what to sell your product for you CAN tell them do NOT list it for sale for less than X amount or we will not sell to you.
It is in that stores best interest for long term profit to sell at that price BUT they can always give their customers a discount code via email or run promos etc. To me MAP basically is the price my grandmother would see and pay if they went to that resellers site and wanted to by my products.
Back to what we should price our products at.
Well there are various types of companies who will resell your product and they get different discounts.
Types of Resellers
What this does is makes them comfortable to PUSH you line harder than your competitors who they are not sure really are on their side. Also this relieves you of the phone calls/emails etc of having to send out such small quantities to many many stores.
Shipping cost who pays it?
From the manufacturer to your warehouse, generally you do so you need to add this into how much a product costs you. From you to the reseller/distributor I say if the order is under $250 they pay, $250 and over I pay. This will depend if your product is bulky or extra heavy etc.
Ok so let's take an example of MAP of $40 based upon what similar products are selling for. So if you were to look on Amazon as well as other online resellers you would see the price VERY close to $40. Maybe $40.50 or maybe as low as $38.50. IF they are a pretty big store and you see them advertising BELOW that I would IMMEDIATELY contact them in a nice way and reason with them about putting the price back up to $40 or very close.
They may say well store XYZ is at that price and I need to be competitive. You can tell them ok I will get them to change it can you PLEASE change yours now and then it will make my job easier to get them in line.
Get CONTROL Your MAP !!!!!!!!!!!!
I had a distributor delay picking up my line for a YEAR because one big online store had a price $1.50 below MAP and it was only for a day. BUT these stores WILL for the most part work with you. If they refuse you simply do not sell to them anymore. You let the others store know they have been cut off and if they don't put their MAP at $40 or say $38.50 the same will happen to them.
Setting your prices I want to sell to distributors for 2 times BUT prefer more like 2.5 times what I buy for.
If I have too many products were I am BARELY at 2 times my cost I know it can make things very rough on cash flow and paying for new product. If I have a few good sellers and am at 2.3 xs my cost I can have a few products which I sell as low as 1.8 times my cost if they help get my name out there. BUT I have to watch these and not get so I am making so little I have a tough time coming up with the money to pay for more and more products.
I will sell to a distributor for 45% off that $40 or $24.
So I need to be able to purchase the product for between $10 and $12 this includes labeling, warehousing shipping etc.
How do you do this for your product?
VERY important
I would base your price on how much the item will cost you when you can buy in a good size quantity. For example: In my numbers above when I first started I was ordering in such small amounts my cost was NOT the $10 - $12 it was more approximately $22 - $25. YIKES!
BUT A couple things. I was selling only to 1s and 2s so they were paying $28 and I was also selling Direct so I was selling for $55. AND I had gotten price quotes so I knew when I had more money to buy in larger quantities I WOULD be paying only $10 - $12 so my markup WOULD be where I needed it to be.
Price your products at what you will be paying for them in the future not what you are paying now if you are buying in SMALL quantities and if things go as planned you will make money and be able to buy in MUCH larger quantities.
And there you have it. As always please feel free to leave comments, questions and suggestions below.
First of all the market determines how much it is willing to pay. Of course you can effect this by various packaging, marketing etc. But generally the market will only pay so much for certain things.
If you can get an idea what they will pay you can start to figure out what price you can pay for a product and make a nice profit.
For this thread I want to just get down to the nitty gritty numbers. I am not big into terms such as mark up, triple net profit, gross profit before capital expenditures, profit point potential after variable costs are reduced for depreciation, etc.
Why? Why?? Why?????
Well ah because every time I read those things I have to go to Wikipedia AGAIN and see what they mean and I easily get confused Only half kidding.
So for me what I do is look long term to when I hopefully will get picked up by a distributor.
At first I thought selling direct was the way to go and not go through resellers and distributors. Then I looked at the BIG companies and almost every single one has resellers and distributors. It just makes sense to me.
One of the VERY VERY best decisions I ever made:
Selling my product to distributors and resellers.
Distributors in various industries have their own mark up or profit they want to make. I would find out what the industry norm is for mark up BEFORE I decided to go ahead and start selling my own product.
I do know 100% if I start off with my price too low compared to what it costs me to buy it, I will have a next to impossible task of ever getting a distributor to pick up my product or product line.
So when we say price what price do we use?
- Manufacturers Suggested Retail Price (MSRP)
- Manufacturers Retail Price (MRF)
- Whole Sale Price (WSP)
- Discounted Whole Sale Price(DWSP)
- Are You Still Reading This Drivel(AYSRTD)
and a half dozen others out there that seem to change depending upon which store and which distributor you talk with.
They really didn't mean a thing even to stores I was selling to
I have had stores, EVEN after they have agreed to the price they were going to pay for my products as well as what they were going to sell them for, ask me what the wholesale, MSRP etc prices were. I asked why they needed that and they said for their records. I honestly just made up some numbers to fill out the spread sheet they sent me and sent it back. I never heard anything back so I am guessing it was ok lol
For our example we will use MAP(Manufacturers Advertise Price) as the selling price. This is the price you will see advertised online at Amazon and other such stores and in many stores for items similar to yours. While you can NOT tell a store what to sell your product for you CAN tell them do NOT list it for sale for less than X amount or we will not sell to you.
It is in that stores best interest for long term profit to sell at that price BUT they can always give their customers a discount code via email or run promos etc. To me MAP basically is the price my grandmother would see and pay if they went to that resellers site and wanted to by my products.
Back to what we should price our products at.
Well there are various types of companies who will resell your product and they get different discounts.
Types of Resellers
- 1s and 2s These are stores that resell your product and buy 1 or 2 units at a time They get 30% off MAP.
- Dozens These are stores that resell your product and buy a case at a time from you. They get 35% off MAP.
- Large Dozens These are the big name stores that buy at least a case and you always give them 40% off MAP even if sometimes they only order a dozen at a time. Reason is they can really help your company grow and you want to take care of them.
- Overseas Dozens These are overseas stores that buy a dozen or more at a time. They get 40% off if they pay the shipping. If they are BIG stores, do a good deal of business with you you MAY want to give them 45% off.
- Distributors THESE are the big dogs who eventually will end up buying from you and selling to your 1s and 2s as well as your Dozens. You will keep your Large Dozens as in house accounts, selling direct to them and supporting them yourself. You may be hesitant to turn your 1s and 2s and Dozens over to your distributors but it makes the distributor see they do NOT need to worry about you completing with them.
What this does is makes them comfortable to PUSH you line harder than your competitors who they are not sure really are on their side. Also this relieves you of the phone calls/emails etc of having to send out such small quantities to many many stores.
Shipping cost who pays it?
From the manufacturer to your warehouse, generally you do so you need to add this into how much a product costs you. From you to the reseller/distributor I say if the order is under $250 they pay, $250 and over I pay. This will depend if your product is bulky or extra heavy etc.
Ok so let's take an example of MAP of $40 based upon what similar products are selling for. So if you were to look on Amazon as well as other online resellers you would see the price VERY close to $40. Maybe $40.50 or maybe as low as $38.50. IF they are a pretty big store and you see them advertising BELOW that I would IMMEDIATELY contact them in a nice way and reason with them about putting the price back up to $40 or very close.
They may say well store XYZ is at that price and I need to be competitive. You can tell them ok I will get them to change it can you PLEASE change yours now and then it will make my job easier to get them in line.
Get CONTROL Your MAP !!!!!!!!!!!!
I had a distributor delay picking up my line for a YEAR because one big online store had a price $1.50 below MAP and it was only for a day. BUT these stores WILL for the most part work with you. If they refuse you simply do not sell to them anymore. You let the others store know they have been cut off and if they don't put their MAP at $40 or say $38.50 the same will happen to them.
Setting your prices I want to sell to distributors for 2 times BUT prefer more like 2.5 times what I buy for.
If I have too many products were I am BARELY at 2 times my cost I know it can make things very rough on cash flow and paying for new product. If I have a few good sellers and am at 2.3 xs my cost I can have a few products which I sell as low as 1.8 times my cost if they help get my name out there. BUT I have to watch these and not get so I am making so little I have a tough time coming up with the money to pay for more and more products.
I will sell to a distributor for 45% off that $40 or $24.
So I need to be able to purchase the product for between $10 and $12 this includes labeling, warehousing shipping etc.
How do you do this for your product?
- Find out the discount distributors in your industry receive
- Find out how much you can purchase your product for
- Find out how much the market(people) will pay for your type of product
- Plug your numbers in the above examples
- Can you mark up your costs by 2 - 2.3 times? If yes I think it could be a good product.
VERY important
I would base your price on how much the item will cost you when you can buy in a good size quantity. For example: In my numbers above when I first started I was ordering in such small amounts my cost was NOT the $10 - $12 it was more approximately $22 - $25. YIKES!
BUT A couple things. I was selling only to 1s and 2s so they were paying $28 and I was also selling Direct so I was selling for $55. AND I had gotten price quotes so I knew when I had more money to buy in larger quantities I WOULD be paying only $10 - $12 so my markup WOULD be where I needed it to be.
Price your products at what you will be paying for them in the future not what you are paying now if you are buying in SMALL quantities and if things go as planned you will make money and be able to buy in MUCH larger quantities.
And there you have it. As always please feel free to leave comments, questions and suggestions below.
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