I'm working with a client who has dealt with this situation before, and 
he explained to me that in general suppliers, catalog companies, and 
retail outfits want to get specialized items for 50% of the price they 
intend to sell them for.

So if it takes you $50 to make something, you should be charging the 
supplier/retailer/catalog outfit $100, and expect them to sell it for $200.

Further, you need to make a lot of profit because the supplier will send 
back any unit for any reason that a customer gives (depends on the 
supplier and profit - sometimes they eat it, but make sure you 
understand what you are getting into).  You get to eat the loss if you 
can't send it back out the door.

You also tend to get less knowledgable customers when you allow others 
to sell your product.  By the time they get to your website potential 
customers either already know what it is/whether they need it, or they 
will learn from your site because you give a lot of information.  A 
catalog or supplier is only going to print perhaps a sentence or two, 
and you may get to work with customers who bought it without 
understanding as much about it as you are used to.

Lastly, many (if not most) comapnies measure success not in profit, but 
revenue.  It may be advantageous to increase sales even if that involves 
a decrease in profit.  It doesn't matter that you're making only a 1% 
profit if you're selling a million units a month.  Increasing revenue 
means increasing sales and/or increasing cost.  If you work with a 
supplier you can increase sales without increasing cost (ideally).  But 
you also have to figure out how to decrease cost of manufacturing, 
increase output, and still manage the workflow - greater quantity 
requires exponentially greater organization.  Make sure you have the 
processes in place to handle everything.

If you've already set your price and can't make much of a profit by 
giving them their discount then you need to either increase your price 
or decrease your cost.  The suppliers won't carry your product if you 
sell it for lower than they sell it.

The only suggestion I can give you as to the course of action you take 
is that either way, make sure you stay on top of things - don't let this 
project control you.  "This above all; to thine own self be true."  And 
other such platitudes.  :-)

-Adam

Allen Wayne wrote:

>Hi All,
>
>I am currently working on a small control box for an exclusive bunt not
>small market. I have been approached by a number of suppliers who are
>looking for wholesale rates of around 50-60% off my RRP. As my pricing was
>based on my profit being similar I am faced with a number of alternatives.
>
>1 reduce my profit.
>2 increase my prices so I can offer a 50% discount for wholesale.
>3 Only sell 'direct from the manufacturer' and use this as a selling
>point... I pass the savings onto you the customer
>
>As my price point seems to be comfortable for both myself (I make a profit)
>and my customers (I am perceived to be selling at a reasonable non-rip off
>price) I am heading towards 3, but then obviously my sales will be lower as
>I won't be selling in as many outlets.
>
>Any comments?
>
>
>Wayne
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