Pretty excited to bring you my first “Ask The Fashion Business Mentor” Post!
—-Is retail always 2xs wholesale?
At least. Once you start selling to large chains they will talk down your wholesale price so they can turn a larger profit. It also gives them more wiggle room for the big percentage sales (50% OFF!) they have. They couldn’t make money if they only doubled wholesale and they will expect you to lower costs if you want to do business. Keep this in mind when you price a collection that you plan to market to large chains.
–If you figure out what retail pricing would be according to the formula below, and think that it is too high, how low should you go to get the wholesale price down to get the retail price down? Or do you make other changes such as fabric type to get the price down?
- cost of dress x 2 = wholesale x 2 = retail (if this is too high?)
- cost of dress x 1.5 = wholesale x 2 = retail
- cost of dress x 1.25 = wholesale x 2 = retail (Is this too low and not worth doing at this point?)
Fabulous questions I personally struggled with. If it costs me $20 to make a dress it is very hard to ask $80 for it if my target market is toddlers. Wholesale pricing is based on volume and when you sell in volume you buy in volume so your costs go down. The problem is that if you are just starting out you aren’t getting the price breaks in materials or production (sewing). You need to do some research and planning here to project volume costs:
1. Project Volume
Determine the volume you think you will sell in a season. How many stores are you targeting and how many pieces do you think you will sell? In forecasting you need to be realistic and conservative.
2. Get Volume Based Materials Quote
Determine how much fabric you will need for the season based on your projections. Say you determine you need 30 yards of fabric (same color) and you need 3 colors. So a total of 90 yards. You will get wholesale pricing on this so find out what it is. If you are already getting wholesale pricing you may get a larger discount for volume. Ask and negotiate. Almost all fabric dealers will negotiate and all of them offer wholesale pricing. Buy from the source not the local fabric store. You can buy a bolt of fabric direct for the same price as a few yards at your local shop. Don’t forget to get quotes on notions and labels too.
3. Get Volume Based Production Quote
Talk to your seamstress/sew shop about costs based on volume. How much if I bring you 10 of the same thing? 20? 50? 100? Time yourself sewing the garment and see if this price is fair. Keep in mind if you use a home machine for sewing it takes 1/3 of the time to do it on an industrial machine. I have one and now that I have timed myself sewing I realized my seamstress was making $40/hr. Too Much!!!
4. Calculate how much one garment will cost based on these volume quotes
Now use this formula:
cost of dress x 2 = wholesale x 2 = retail
If this is too high based on what you think is fair market value you can cut into your profit margin or you may need to make changes in fabric or how your garment is constructed. You can ask your seamstress what part of the garment is taking the longest or how you can change the design to make it easier to produce. OR You keep the high price and market it to high-end clients. You may sell less but you have a larger profit margin. If you do this then you really have to make a unique product worth the price not just slap a high price on a generally simple product.
So initially you will be making low volume (which will cost you more) but selling it for high volume prices. Do the math though, don’t lose money to try to wholesale your line. If you are losing money you need to make changes to your product or charge more.
Want to “Ask The Fashion Business Mentor” an anonymous question? Email it to firstname.lastname@example.org. OK I will know who you are but I won’t tell. However you may see your anonymous questions and my answers here on the blog.