As well as being a great option for commercial bulk buying, wholesale is the perfect solution for retailers looking to sell goods on. Whether it’s home furnishings, gardening equipment or even food products, you can buy them in bulk at a low price and sell them to your customers for a higher amount to make money.
The question is: just how much higher should you sell products for? In other words: what is a good mark-up for wholesale items? In this post, we discuss the average wholesale mark-up and how to calculate mark-up when you sell items on.
The mark-up dilemma
If you feel like you’re overthinking mark-up – don’t worry. It’s an important part of re-selling, and something which troubles a lot of retailers. Essentially, if you mark products up by too much, you will price customers out of your products. After all, there may be other retailers selling the same products for less – unless you have an exclusive distribution agreement.
At the same time, you don’t want to price products too low, as it will eat away at your profit margins. It also makes things like packaging and shipping less viable. You’ll probably get a lot more orders, but will need to pay to ship them for a much smaller profit – not to mention paying for the staff to handle all of this.
A good rule of thumb
One of the most common methods used by retailers is keystone pricing. In short, this means doubling what you paid for the product from the wholesale. Clearly, the best thing about this pricing system is simplicity, which provides a healthy profit margin every time and covers things like staffing and shipping.
However, there are quite a few scenarios where keystone pricing isn’t suitable, depending on availability and competition.
Some suppliers provide a recommended retail price (RRP) with their products. As suggested in the name, this is the price they recommend their product is sold at. Typically, it’s because they want their products prices to be standardised. They don’t want their products to be sold at a discount price, for instance, as it could make their brand look cheap.
Again, this is a simple option for retailers as it takes any calculations out of the process. However, it will only be available on more mainstream products and could be unsuitable for your business.
If you’re not seeing enough sales, you can reduce the mark-up on your products. In many cases, retailers use competitors as a benchmark. Why? In short, it’s because they want to undercut them and make themselves the cheaper option without losing out on profits unnecessarily. So, there’s no point reducing mark-up by 20%, when a 10% cut will gain a similar amount of customers.
Try reducing your mark-up gradually, to 45% then 40%, 35% and so on, to find an amount which works.
Find the right wholesaler
With wholesale reselling, it’s important to find a supplier that works for your business. If their prices are too high, it either makes your prices too expensive for customers, or eats away at your profit margins.
At Homefords, we offer impressively low prices on wholesale curtains, bedding, dining linens and other home furnishings. Take a look at our wide range of products to find the perfect stock for your online store or brick and mortar shop.