Thursday, June 25, 2009

Saying NO to a new product

Q: Why would you say no to a new product?

A: There are two things that will automatically limit me from selling your product, and I do not even have to view it to respond. Lately, there have been a slew of children’s manufacturer’s contacting me with retail vs. wholesale price issues.

For example, someone that manufactured minky blankets had a MSRP* of $70.00 with a wholesale price of $65.00. Shipping on that item was $12.95.

*MSRP is manufacturer’s suggested retail price.

Selling this item for those margins will never work. I'll explain why.

Most online stores give some sort of discount to loyal customers. The percentage is irrelevant; with only a 9% mark-up, there is hardly any wiggle room in there for even a 5% discount.

Take into account the fees generally associated with credit card processing, running and hosting a website, any type of office staff and you can see quickly why the wholesale vs. retail price is unattractive.

The shipping- $12.95. Three workers rotate at our post office, and all three of them know my husband very well. We bought them Christmas gifts. I know shipping. I also know it is not $12.95 to ship a blanket.

Shipping is sort of pesky for an online store. Especially when items are shipped directly from a manufacturer (DROP SHIP). For example, an item I sell will send their item directly to my customer for $6 shipping. Well, add that $6 shipping to this blanket ($12.95). There is not a customer in the world that wants to pay $18.95 for shipping two items.

So what happens? Usually, I just eat that difference and take less of a profit on the item. When the shipping amount is high, and then coupled with the small margin, you can easily see why this item would receive an automatic NO. It is a wonderful, innovative item, but if I lose money on each sale, it is not worth it to carry it.

If you intend to drop ship, I would suggest looking at those two things before presenting your items to online stores. Keeping shipping and discounts reasonable will automatically make your item more attractive for me to resell.

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