Saturday , 6 June 2020
Wholesale means selling your products to retailers in bulk for a lower price. Basically, you are introducing a middleman between you and your customers. The benefits of wholesale are many: reliable steady income, a broader audience for your work, and chunks of money that help pay the rent.

Wholesale, Consignment and Drop Shipping: A Breakdown for Etsy Sellers

Wholesale, Consignment and Drop Shipping: A Breakdown for Etsy Sellers

I originally wrote this on Bean’s Blog, and I thought many Handmadeology readers might find it a handy resource for navigating the world of wholesale as well. I would love to hear about experiences good or bad you’ve had with wholesale, consignment or drop shipping and any helpful tips you’ve picked up along the way.

When I was first starting out on Etsy I would get a variety of confusing emails asking questions like do you wholesale/consign/drop ship? It’s good to be informed and consider which options are right for your business so you’re prepared to field questions from retailers. Don’t get taken unawares.

Wholesale means selling your products to retailers in bulk for a lower price. Basically, you are introducing a middleman between you and your customers. The benefits of wholesale are many: reliable steady income, a broader audience for your work, and chunks of money that help pay the rent. However, in order to sell your product wholesale you will need to give retailers a competitive and lower price than what you sell products for on Etsy or your website. Selling wholesale means setting retail prices that are roughly 50% higher than what you can afford to sell your product for wholesale. If you decide to sell wholesale, setting opening order minimums and reorder minimums is a great way to structure things so that you are making some money from all your hard work. Depending on how much business you do and what type of retailers you deal with your opening order minimum could be anywhere from $75 to $1200. If you want to attract retailers to purchase from you, creating a line sheet is a great way to put information about your wholesale prices and policies in a neat little package to send out. Also consider your lead time, or how quickly you can ship wholesale orders of various sizes. This may vary depending on the season and how busy you are.

Selling wholesale often means making many of the same item. Make sure you are ready and willing to create lots of multiples before agreeing to wholesale.
Consignment is an arrangement where a shop displays your goods in their store and when they sell the item they take a commission and send you money. You retain the legal ownership of your items, and are often paying to ship them to the store. When selling consignment, research the shop and make sure they are legit. There is a gamble when you send goods out and are not receiving money right away in return. In my experience consignment commission rates vary from 30-50%.  It can be a pain to get products back when you consign, so you may want to be cautious and send smaller batches of products until you’ve built a trusting relationship with a consignor.

The first time someone asked me if I drop ship I had to go and look it up because I had zero idea what that meant. Drop shipping is similar to consignment, but your product is posted on a retailer’s website and you ship the product directly to the customer. Commission rates for drop shipping in my experience also range from 30-50%. A few questions to ask up front: Will they want to use your photos to sell your products? Will they rename your product on their site? Will they mention your brand name in the item listing? Additional information to consider when setting a commission rate: What kind of traffic do they have on their site? Do they advertise? Do they have a printed catalog and/or attend trade shows? Will they also purchase some of your products wholesale?

Setting commission rates is hard and it’s difficult to figure out what’s fair. If I could sell everything I make at retail that would be wonderful. However, we all know the risk in retail is that sales will be unreliable when you need money the most. When you sell on Etsy and your own website, the overhead can be as much as 20% just to sell online. Retailers take on that responsibility so that’s a little piece of the pie that earns them their percentage. Plus, if you are doing a good job branding the work you sell wholesale (sewing in tags, hang tags, etc) people will find you and purchase from you directly as well. If a retailer has a great following and will lead to me getting more sales through them and on my own website, then they are earning their 50%.

Finally, consider whether you have the time and resources available to offer your products at less than retail. I had to hire an assistant when I started wholesaling. Retailers will want products from you during peak seasons as well, so make sure you equipped to handle your best case scenario – lots of orders! Selling wholesale can also mean including more specific packaging with your products. I designed hang tags with sizing information to make things easy for retailers carrying our products.

I know that many of you out there are veterans of handmade business and have much more than my two years of experience under your belts. I’d love to hear what you’ve learned and what’s worked for you!

I highly recommend Craft Inc. by Meg Mateo Ilasco for additional reading about wholesale and consignment. The Craft Inc. business planner is wonderful as well and has some good templates for wholesale order forms and policies.

Handmadeology: How to Write a Line Sheet Catalog for Wholesale 

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  1. Thanks for this helpful article. I recently had a wholesale inquiry and felt very much at the mercy of the retailer.

  2. Great Callie, I’m so glad you found it helpful. I found it very difficult to find information about commission rates when I was starting wholesale, and felt the same way. Handmade folks gotta stick together so we don’t get fleeced!

  3. This was very helpful thank you! I have never even heard the term drop ship before.

  4. Thanks for the information. I have been considering wholesale requests myself and was just not sure how to go about it. I must say, I have never heard of drop ship. This is very helpful.

  5. Great article – I’ve done a small amount of consignment, and recently was approached about wholesale with drop shipping. Happy to get a little more information about the process!

  6. Thanks for the very useful info for etsy sellers. Great info.

  7. Great information! I was on a website that mentioned drop shipping and I had no idea what it meant, now I know :)

  8. Fantastic article–thank you for this information. I just started talking wholesale today, so this post was perfect timing!

  9. i just learned a few day ago that you should consider wholesale as your costs times 2. they also said that you should calculate retail as 2 times the wholesale number. i thought this was very helpful. it showed me that i could still recoup my costs and make a little more. i always price my items at retail. when i go to flea markets and craft fairs it gives me a “profit margin” to use as a way to barter. (cause we all know that people like to get a ) this was a great article to encourage those of us who can to sell at wholesale and cut out the commissions that a retailer or consignment would charge. thanks for sharing your knowledge!!!!! i learn something new every day from handmadeology…thanks y’all!!!!!

  10. Very useful info. I didn’t know what drop ship meant either! LOL

  11. this is so helpful! thanks!

  12. Thank you so much for this informative article. I kept getting approached to wholesale or consign some of my items and just don’t know how to set price/ commission. Your info has been very helpful and I will be reading up on how to create a line sheet.
    THANK YOU!!!

  13. Thanks so much for the article on wholesaling. I did not know exactly what the term drop ship meant either.

    One of the problems that I’m running into is that when I calculate my wholesale price and double it to get my retail price the retail price is often way higher than the normal market price making it well nigh impossible to compete. Some items I have decided are just not worth making at the current market price. Thankfully this is not happening with all of my items. Some are spot on.

    Also have you ever heard the term ‘keystone’ used? I think it means the normal 50/50 split of the retail price between manufacturer and distributor/retail store owner. But I am not sure of this definition.

  14. Great article. Another thing to consider when drop shipping is the actual shipping cost. Are you going to charge the actual cost to ship or pad it to cover your time,the cost of packaging etc. Many drop shippers add a drop ship fee from $1.50 to $3 on top of the price of the wholesale and shipping price. I would highly advise this as I did not do this starting out and you will soon realize when you start to get a number of drop ship orders that it is time consuming to mail out individual items at wholesale pricing.
    Also have a written plan on how you will collect money from each drop ship order. I collect monthly from my larger retailers as they have a solid reputation. Smaller stores I require up front payment before I ship out an item. I recommend collecting payment before shipping out as it is a hassle to put together a bill every month.- easy to make mistakes plus you have to wait to collect money especially If they pay by check.

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