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How much should I pay retailers for selling my product?

How much of your profits should go to your distributor?
By Henry C. Ong |

Q: How much should I pay retailers for selling my product? I want to start selling my handmade jewelry in boutiques, but I do not know how much of the profits should go to the owner of the shop.

 

A:Before distributing your product to retailers, do some research about the jewelry business to find out the best practices in the industry and assess your market position and competition. Are there similar products currently selling in the market? How much is the average market price? How many boutiques in your market can possibly distribute your product? What is the typical arrangement that boutiques offer to manufacturers like you?

 

One arrangement that you can strike with retailers is consignment, or getting a space at the outlet to display your products and paying the retailer a certain commission rebate for every product sold. If the products are not sold and become out of fashion, you get back the unsold items and replace them with new ones.

 

The commission rate varies by retailer and location. If the location is in demand and there are many suppliers competing for the space, the commission rate may be higher than usual. You would also have to prove that your product would sell well. There are retailers who may also ask you to pay a fixed monthly rental aside from the commission rebate.

 

Another way to distribute your products is through outright sale. Under this arrangement, you sell your products to the retailer, which in turn resells them at their outlets. Normally, retailers will demand a discount larger than the commission rebate to cover their additional expenses. Because this arrangement requires an investment from the retailers, they can become quite choosy with the products and demanding with the terms.

 


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