HOW TO PRICE AND PRESENT TO A DISTRIBUTOR

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Apr. 29 2008 at 9:40 PM
Posted by: krissyferro “Quote Reply
Hello everyone! I thought I'd ask here since I consider the members here of the highest integreity and totally knowledgable. Ok the big debate for me- I own a cosmetics company of all natural mineral cosmetics. We launched in October, and will be featured nationally in just a few weeks on PBS programming and their National Environmental Reprt Series called GOING GREEN-THE FUTURE OF SAFE COSMETICS. Anyway, in addition to the exposure we anticipate, we have several ways of selling our products. Our retail website- www.ferrocosmetics.com Wholesale- selling directly to salons and businesses to retail our products And now up and coming.....Distributors. Our two potential markets- A professional beauty distributor- selling to salons/stylists, as well as an international distributor, who plans on retailing and distributing to others to retail. My problem is I have always been horrible at numbers and terrinbly too trusting and giving. Who do I go to for figuring out a pricing grid.....as in what's the job title of this kind of person and is there a standard in the industry as far as what discounts are for volume sales? That's a very loaded question huh? lol I'm nervous I'll underprice myself, yet if I'm not in the know cut ourselves off from potential future offers once our program airs. Example: If I sell wholesale, generally the price they buy is 50% off retail, an industry standard I'm aware of in the salon industry. BUT volume or distributor sales? How much OFF of that 50%? I'd even love to hear from anyone selling now or in the past on QVC or has bigger store accounts. What pricing do these bigger stores require? Or is there a retail specialist out there to help? I am so overwhelmed, and so horrible with numbers- and OBVIOUSLY numbers isn't something to make even the smallest mistake about LOL Thanks I appreciate any partial answer or advice! Krissy Ferro Founder/President Ferro Cosmetics Pure, Fabulous Mineral Makeup www.ferrocosmetics.com krissy@ferrocosmetics.com
Apr. 30 2008 at 7:05 AM
Posted by: tgroup “Quote Reply
Hey Krissy- I don't have any direct experience with cosmetics but I do have a lot of experience in the health/beauty care (HBC) products industry. When you're talking about large retailers, on the whole, HBC margins tend to be a bit lower than other categories (but not always). At the low end some might go for a 33-35% margin with the majority probably falling in the mid-40s. There are no set percentages that work in every case though (but lots of variables that determine the lowest margin a retailer will take). Distributors generally look for a 30-35% margin. As an example, you might sell something to the distributor for $1. He might sell it to the retailer for $1.35 who might in turn sell it for $2.25 (a 45% gross margin). I'd be careful about looking at your pricing strategy from the perspective of taking a percentage off retail pricing though-you need to be sure that your fixed and variable costs are covered and that you're generating a decent profit margin for your company. As far as offering volume discounts, in my experience they're usually (but not always) only going to be effective when dealing with smaller retailers and (maybe) distributors. Any of the large chains and distributors are going to demand your lowest price regardless of volume. Hope this helps a bit-let me know if you have any other questions. Ron Edited by: tgroup - Apr. 30 2008 at 11:32 AMTurner Group Marketing (www.tgroupmarketing.com). Experts in assisting small enterprises in successfully introducing their products to the mass market.
Jul. 09 2008 at 2:14 PM
Posted by: DefMall “Quote Reply
Krissy - Hop I am not too late to chime in here. We are a wholealer of unique office products, so when we price we figure the Suggested Retail (what the market will consider reasonable) and then we give our resellers a 50% discount. We give 50-and-10 if the reseller is going to stock the item. This allows up anywhere from a 30-50% margin above OUR cost. The idea of putting a 'distributor' or 'middleman' into the mix is not appealing to everone because there is the obvious problem of margin. We obviously are not making enough margin to take the distributor's cut out of OUR profit, and the resller would have to mark his selling price up even HIGHER than suggested resale price in order to get 50 points above the inflated cost of having to buy from a middle man. As long as you are selling directly to the end user and as a Wholesale operation, you shouldn't really 'need' distributors, also. Sure, the extra exposure is good...but with WEb 2.0 marketing techniques and a few trade shows, you are alreayd on your way. We do, in some cases, use a Manufacturer's Rep in markets taht we want help penetrating. Depending on the volulme they do, we give them a 9-12% commission. It isn't much (so it's ok with us) but it isn't motivating either (so they aren't exactly going to spend all day selling our wares). On high-ticket, high-margin items, it's a good arrangement. I hope this was a little helpful. The serious blog = www.ShopForTheGood.blogspot.com The silly blog = www.SodaIsGood.blogspot.com Either way, you win...