Wholesale Pricing Strategies To Keep You Smiling!

vintage-sale-tags-psd_31-6546

Pricing for wholesale doesn’t necessarily mean cutting your retail price in half. In fact, that’s more likely to make your wholesale prices unsustainably low. Instead, when you set your wholesale price, you need to price for profit.

Pricing for profit at the wholesale rate

When planning your pricing, you first need to come up with a wholesale price that pays you for your time, labor, materials, packaging and everything related to the core of your product. This price should have profit built into it so that you are able to stay afloat and grow your business.

Once you’ve set your wholesale price, perhaps double that price to create your retail price (the suggested retail price to your wholesale customers). And when you sell your product yourself via ecommerce, use the same ‘suggested retail price’.

What to include in your pricing formula

When pricing, we suggest you consider:

Labor: This is not negotiable. Build labor into your price, so you can easily hire someone in the future.

Cost of goods: You have to include every single material used to create your product.

Profit: The margin needed to reinvest in your business. Without profit, you can’t grow, hire, or even take a break from your business.

For labor, consider what you would feel comfortable paying an employee per hour, and work out how many of your products you can make in an hour to figure out labor costs per product. Do not include your labor for ideating or designing (these go into the general expenses category discussed at the bottom of this post), only include the labor directly input into the making / assembly of each product.

The Ponoko formula for success

At Ponoko, we’ve spent years experimenting with multiple formulas to arrive at one that works best, is easy to remember and even easier to implement. Here’s what we think wholesale pricing should look like:

Cost of Goods = Product Cost (Making + Materials + Shipping + Making / Assembly Labor) + Packaging Cost.

Wholesale Price = Cost of Goods x1.5 at least (to get you started), and preferably x2 or even better x3.

Retail Price = Wholesale Price x1.5, x2 or x3 as above.

When starting out, we recommend you stick to this formula because it’s the easiest way to calculate your pricing, and all the information needed for these calculations is easily available.

Calculating overhead costs and general expenses 

It’s too tough to try and work out how much of your power bill or your ideation or design time should be allocated to any one product you sell. So let’s not try. Instead, use your near constant monthly expenses to calculate your break even point – the number of products you need to sell at the price you set to cover all of your general expenses.

For example, if your expenses are $1,000 per month (including design labor) and your product costs you $25 (including making labor), this means:

* If your retail price is set at $100 (gross profit of $75), you need to sell 14 units of your product at retail every month to break even.

* If your wholesale price is set at $50 (gross profit $25), you need to sell 40 units of your product at wholesale every month to break even.

This example shows the power of increasing your prices (and keeping cost low), because the more profit per product, the less number of them you’ll need to sell each month to break even and start making a decent profit!

Please feel free to share in the comments below other ways you might calculate your pricing …

Ideas for Creative Agencies & Brands – #16

Going BIG: Changing the way we see everyday objects

giantcomb.1_1200x1200

Every day we interact with hundreds of objects, barely giving them a second thought as they perform their designated functions. The transformation that happens when you dramatically upscale an item can be a real conversation starter, as is demonstrated by the giant comb bike rack pictured above.

This clever design was a response by Know How Shop LA to the question: “What would I lock my bike to if I were really small?”

Changes in scale can be a simple way to create an eye-catching impact, where often the more ubiquitous the item, the stronger the reaction will be. See how using laser cutting to go big can help your clients stand out from the crowd! Let us know about your ‘big ideas’ in the comments below.

Ideas for Creative Agencies & Brands – #15

Laser Cut Mobiles

laser cut robot mobile das wood

While there are some people who don’t give the humble mobile much thought outside of a baby’s nursery, for others the transformation that takes place as an object floats delicately through the air can be quite mesmerising.

Mobiles can take on many forms, as is demonstrated by the playful examples pictured here from Diana Jess aka daswooddesign. Hand-made from low impact eco-plastic, she used the compositionally friendly arrangement of four floating elements (pictured above)… but you can also have just as much impact with five, three, two or even one lone pendant suspension. It all comes down to how interesting your individual items are, and how well they balance when suspended.

laser-cut-mobiles-das-wood

Many of our favorite laser cutting materials are ideal to use in this application, as the silhouette of the object and the negative space around it contribute to creating a dynamic visual impact. The designs from daswood achieve this particularly well, using the strengths of laser cutting to make the most of the chosen material’s physical characteristics.

Where can you suspend an eye-catching promotional laser cut design from? Going beyond the standard ceiling mount, there are opportunities around us all the time. How about something dangling from the rear-vision mirror in a car, or clipped to the edge of a computer monitor? See what else you can come up with, and use the Ponoko Personal Factory to create a ‘space modulator’ that leaves a lasting impression.

Ideas for Creative Agencies & Brands – #14

High contrast laser cut layers

Laser cut and etched wood has a striking impact all on its own, but as this example from San Francisco creative duo b-spired shows, adding in a backing layer of bright colored card really makes things pop.

Enhancing the crisp lines and bold negative space that is such a strength of laser cutting, the layered card creates a high-contrast visual impact that completely transforms the natural tone of the timber. The same effect will be equally impressive when applied to other popular laser cutting materials such as acrylic and metals.

These greeting cards and invitations by b-spired also have a sturdy backing and a neat little pop-out stand, because when something looks this good, chances are high that people will want to display them.

Imagine how this technique would look when applied to corporate identities and company artwork. How can you use the Ponoko Personal Factory to create promotional laser cut layered items, inspired by b-spired?

Ideas for Creative Agencies & Brands – #13

Laser Cut Annual Reports and Catalogues

Celebrating a company’s milestones and achievements, the Annual Report is an important document that can be further enhanced through clever use of laser cutting. By using typographic voids, multicolored layering and other similar techniques familiar to laser cutting designers, the published information becomes interesting and eye-catching in a way that invites the reader to explore further.

Pictured above are examples of laser cut cover artwork on Annual Reports and Catalogues from Under Consideration (top-left) and Croatian Post (lower-right) as well as internal content from Pelayo Insurance (top-right) and the Zuiderzee Museum (lower-left). We can see in these different approaches that selective application of laser cut elements can help to give a sense of prestige and style to the printed material.

Have you seen other interesting examples of laser cutting on business publications? Let us know in the comments below, and see if you can come up with a novel way to transform your next annual report into a dynamic document that has lasting impact using the Ponoko Personal Factory.

Beginners Laser Cutting Cost Saving Guide: Part 5

Ponoko Cost Saving Guide

Product Recipe #1 – Part 5

Jill is a graphic designer from Oakland, CA. While riding her bike to work, she was inspired to create a set of custom-made bike gear-themed coasters to sell at local bike shops and in her Etsy Store.

Here Jill takes you step-by-step through the process she used to turn her idea into a profitable product with Ponoko. Making her coasters at the lowest price possible means she pockets a healthy margin selling to stores and direct to customers.

You can apply these steps to your own project, or you can download all the files here.

Laser Cutting Cost Saving Guide Part 5: Sell It

With my product line ready to go, it was time to make some money …

Packaging Your Product

Time to consider packaging. l wanted it to look great, but be very low cost. After a bit of experimentation, I came up with this for the cost of $1 per package:

Setting a Profitable Price

With all costs now calculated, it was time to finalize my retail and wholesale pricing.

To start, I used a simple ‘cost plus margin’ pricing model to ensure profitability …

First – Calculate Your Total Production Cost at Various Order Volumes

Total Production Cost = Making + Materials + Shipping + Packaging Costs:

Sets of 4 Coasters 1 11 56 461
Material Sheets 1 x P1 1 x P3 5 x P3 45 x P3
Free Account Cost $18.64 $123.67 $618.33 $5,070.33
Prime Account Cost $15.69 $91.93 $447.42 $3,028.12
Prime Cost / Set $15.69 $8.36 $7.99 $6.56
Packaging Cost / Set $1.00 $1.00 $1.00 $1.00
Total Cost / Set $16.69 $9.36 $8.99 $7.56

Second – Calculate Your Profitable Pricing

My rule of thumb is 1 : 2 : 4 … $1 of cost means a $2 wholesale price, means a $4 retail price. In other words:

Profitable Retail Price = 2 x Wholesale Price = 2 x Total Production Cost.

Hence:

Sets of 4 Coasters 1 11 56 461
Total Cost / Set $16.69 $9.36 $8.99 $7.56
My Wholesale Margin 50% 50% 50% 50%
Wholesale Price / Set $33.38 $18.72 $17.98 $15.12
My Retail Margin 75% 75% 75% 75%
Retail Price / Set $66.76 $37.44 $35.96 $30.24
Overall Profit 50/50 62.5% 62.5% 62.5% 62.5%

To profit, this shows my retail price needs to be between $30.24 and $66.76 per set of 4 coasters to retain a profit margin of 62.5% assuming a 50:50 split in sales across both retail and wholesale channels.

Third – Set a Retail Price that Feels About Right

The information above coupled with knowing the market price ranges from $15 to $50 per set, I decide that my original retail price target of $30 per set is a good place for me to start.

Hence my profits will actually be:

Sets of 4 Coasters 1 11 56 461
Retail Price / Set $30 $30 $30 $30
Total Cost / Set $16.69 $9.36 $8.99 $7.56
My Retail Margin 44% 69% 70% 75%
Wholesale Price / Set $16.69 $15 $15 $15
My Wholesale Margin 0% 38% 40% 50%
Overall Profit 50/50 22% 54% 55% 62.5%
Prime + Packg Cost $16.69 $102.93 $503.42 $3,489.12

This third table tells me a few important things:

1) My Minimum Order Size – To hit a 54% overall profit margin, I need to order & package at least 11 sets of coasters at $102.93 per order. This is a good place for me to start my business.

2) My Most Profitable Order Size – To hit my goal of a 62.5% overall profit margin, I need to order & package at least 461 sets of coasters at $3,489.12 per order. This is a good place for me when I get a reliable stream of retail and/or wholesale orders.

3) Minimum Wholesale Order Size – To hit a 54% overall profit margin, I need to sell to retailers in a minimum batch of 10 sets of coasters at $150.

4) Tough Retailer Negotiation – To retain my profit margin, a retailer will need to order at least 461 sets of coasters to get a wholesale price less than $15 per set.

5) Taking a Tiny Step First – I know I can order & package just one set of coasters at $16.69 and sell them retail at a 44% profit margin, which is really nice to know if I do not want to spend the next level up at $102.93. But I also know that I can not sell this small order size at the $15 wholesale price because I will make a loss.

Of course, if I’m just getting started I can relax some of these 1:2:4 pricing ‘rules’. But they’re a great place to benchmark what is actually going on with my cash.

Without profit I can not continue my passion of making things for others. With profit I create new possibilities for myself :-)

Profiting from On-Demand Inventory

Continuing on my theme of keeping costs low, I decided to keep my stock digital until I had customer orders. This way I have zero cost until I make a sale and collect the cash.

The third table above shows that I can order just 1 set at $16.69 to fulfill a $30 retail order at a 44% retail margin. But I make nothing on a wholesale order – which tells me I need to set a minimum wholesale order size of at least 10 sets. And, in general, to maintain healthy profits I probably want to produce at least 11 sets each time I get an order, so I have a tiny stock on hand for fast delivery.

My friendly bike store owner pre-ordered 10 sets of 4 cork coasters when I was user testing in his store. He paid me the $150 wholesale price.

So I made the following design (of 45 coasters):

Download design file for this step.

I sold 10 sets for $150 at a cost to me of $93.57 (= $83.57 production + $10 packaging). A 38% wholesale profit margin to get me started ($150 wholesale price – $93.57 total cost = $56.43 profit).

Promoting Your Product

I sell my coasters to retailers and on Etsy. Here are my top tips.

Good Photos Sell

Well lit, crisp high-resolution photos of your product are a must.

Describe Your Product Well

I describe what it is made of, what the dimensions are and what it feels like. I share a bit about myself as well, so folks can identify with me as a person.

Be Pro-Active

Don’t just sit back and wait for customers to come to you. In the case of local bike shops, I just walk in, introduce myself and start a conversation. For larger retailers, I search company websites to get in touch with vendor departments. Wherever possible, I speak directly to their buyers.

Go for it!

  • Imagine it
  • Design it
  • Prototype it
  • Make it
  • Sell it

It really is that easy and low cost to make money selling your own products. You’re only limited by your imagination and determination. Ponoko can help you with the rest :-)

Beginners Laser Cutting Cost Saving Guide: Part 4

Ponoko laser cut cost saving guide 1

Product Recipe #1 – Part 4

Jill is a graphic designer from Oakland, CA. While riding her bike to work, she was inspired to create a set of custom-made bike gear-themed coasters to sell at local bike shops and in her Etsy Store.

Here Jill takes you step-by-step through the process she used to turn her idea into a profitable product with Ponoko. Making her coasters at the lowest price possible means she pockets a healthy margin selling to stores and direct to customers.

You can apply these steps to your own project, or you can download all the files here.

Laser Cutting Cost Saving Guide Part 4: Make It

And now for the fun stuff…

My Final Design & Material Choice

From the price testing and cardboard prototype earlier, I decided on this final design. And from the three $2.50 material samples I bought earlier, I decided to do my first real test using the cork material:

Download design file for this step.

Make a Few for User Testing

I laid out my winning coaster design onto a template for the smallest P1 material sheet size and ordered:

Yippeee! My Final Product

A few days later I received a very special delivery. I was pretty excited!

Time for User Testing

I tested my coasters with potential customers – biking friends, my friendly bike store owner and his customers. They loved the design and I took pre-orders.

But some wanted a different material. So I repeated the process above to make some in black acrylic …

Final Product Line!

With cork and black acrylic coasters in my new product line, I was ready to sell.

Making tests in the final material choice enables you to trial your actual product with potential customers. This way, you can get a real feel for how people will respond to your design, and also make any last-minute changes in response to genuine feedback before moving ahead with the final production run. It was through this process that Jill discovered a demand for alternate material options, an important marketing opportunity that she otherwise may have missed.

Next up in Part 5 of this Ponoko Product Recipe we look at preparing the product for sale and making sure that the final pricing is right for the coasters to sell at a profit.

How have you tested your production-ready designs before moving on to the final sale item? Tell us about your experience in the comments below.

Ideas for Creative Agencies and Brands – Laser Cut Flat Pack Vases

Laser Cut Flat-Pack Vase

Flowers in a vase can mean so many things, and bringing a beautiful snippet of nature into our lives has a unique magic to it. Where to put those flowers can be as personal as the choice of flowers themselves, but sometimes it can help to give people something to work with.

As we’ve seen many times before, laser cutting is a great way to quickly achieve novel 3D forms from sheet materials. These vase examples from the Ponoko Showroom by Colin Francis and Chromatophobic use a test tube as the vessel, with a laser cut structure to hold it in place.

How would you use this as inspiration for a promotional product? Let us know in the comments below. To get you started – imagine placing branding on a slot-together structure that assembles around a standard water bottle, that can then become a functional keepsake for conference attendees or clients to take home with them.

Beginners Laser Cutting Cost Saving Guide: Part 3

Keep your laser cutting costs down with the Ponoko Product Recipe

Product Recipe #1 – Part 3

Jill is a graphic designer from Oakland, CA. While riding her bike to work, she was inspired to create a set of custom-made bike gear-themed coasters to sell at local bike shops and in her Etsy Store.

Here Jill takes you step-by-step through the process she used to turn her idea into a profitable product with Ponoko. Making her coasters at the lowest price possible means she pockets a healthy margin selling to stores and direct to customers.

You can apply these steps to your own project, or you can download all the files here.

Laser Cutting Cost Saving Guide Part 3: Prototype It

My goal was to find a happy compromise between design aesthetics (look/feel) and efficient engineering (cost).

Zero Cost Prototyping!

Before I paid to make anything, I used my Personal Factory to price lots of design iterations instantly. I learned a whole lot and it didn’t cost me a bean …

Summary:

Target Production Cost = $1.88 per coaster (75% off retail).
First Quote – #1 = $5.40 per coaster (28% off retail).
Final Quote – #9 = $1.64 per coaster (78% off retail) !!

Here’s what I did to reduce my production cost, without actually making anything:   (more…)

Ideas for Creative Agencies & Brands – #9

Laser Cut DVD Sleeves

Distributing large files on optical media continues to provide significant bang for your buck… even in these times of ever-cheaper flash storage. So if you’re still using discs as a way to distribute your digital wares, why not show off some creative flair with the packaging that goes along with your promotional CD, DVD or Blu-Ray?

The particularly refined laser cut case pictured above comes from designer Jazz Tigen and it is a great example of the impact that can be achieved when you break away from the standard DVD sleeve.

Here are a few more approaches that others have taken in creating unique CD and DVD sleeves through clever use of laser cutting.

Sarah Holbrook

Stine Strand

Neslihan Ulus

What examples have you seen of businesses or musicians using laser cut packaging designs for optical media? Let us know in the comments below, or jump straight in and make your own with Ponoko!