Commission for retailers taking orders for my product?

Kent Brockman

I have had a few offers from retailers offering to display samples of my product in their shops.

Each print is made to order as its personalised, then framed, boxed and giftwrapped before being bubblewrapped,packaged and posted. I would still be doing all this but the retailer would be taking the details from the customer and passing the those details on to me.

Is there guidlines/ standard % for the commission they would receive for passing on the order (its basically dropshipping)?

Anyone on here doing similar? and what would you expect to either pay or recieve (depending on which side you are on retailer or supplier)?

Really I'm just looking for guidlines....thanks

smcgiff

I'd probably look at it a different way.

1. Would you make these sales if you didn't receive these orders from the websites? No - then their proposal is worth considering.

2. Do you have spare capacity to take on these orders over and above your non referral sales?

3. If the answer is yes to the two questions above then from a paper exercise POV it looks like you should consider going ahead with their offer.

4. You then need to come up with a commission structure that will mean you still make a profit after deducting your overheads and opportunity costs - (fancy words for profits you could be making from other activities).

You'll find a breakeven point whereby the commission you give will be such that you don't make a profit or a loss from the referral sales. Of course you'll want to make sure the commission is less than the break even point commission. But it's all gravy from there. Hopefully you can get it reduced as far as possible.

If you're looking for a rough guide I'd say anything from 5 to 10 %. It's gravy for them too, but remember we're assuming you wouldn't be making these sales otherwise.

N.B. probably obvious but better add to be on the safe side. Commission should be on the NET of VAT value.

Kent Brockman

One of the retailers informed me thats its usually 50%:eek::eek: We are obviously not doing business.....

I wouldn't mind hearing from someone actually involved in one of these arrangements if anyone wants to share:D

smcgiff

50% does sound very high.

The only scenario I can envisage is where you hire a jet engine, start up the engine and "artistically" throw a variety of paints into the jet stream for the paints to land on a canvas.*

You could then sell the subsequent painting for a million euros, give the shop 50% and still make a few quid.

Seriously, ask them how they can justify making 50%, when you wouldn't even make that.

And if their only justification is that this is the normal procedure then turn on your heels and make a dramatic exit, said display must also portray utter disgust.

*think this has been done

stcstc

lots of retailers look for 50%

lots of products are bought with 100 markup, but thats not 100% profit obviously

i do a lot of prints for clients who sell by hanging in retail outlets, and the generally take between 30 &50%

smcgiff

stcstc wrote: »

lots of products are bought with 100 markup

But in this instance the retailer will have zero cost. They probably wont even have an increase in cost in overheads - potentially opportunity cost, yes.

Especially as the retailer came looking for the OP they should be giving him a good rate.

I know the owner of a shoe shop in Dublin - just off O'Connell street that might take your work. I can't think of the name of the street, but you can see the base of the spire from his shop. I don't think he'd be looking for anything like 50%.

If you PM me an example of your work I can ask him if he'd consider taking some in - that's if you wouldn't mind them being presented in shoe shop!

Kent Brockman

@smcgiff u got pm

antoinolachtnai

I think 50 percent is fair enough, if they are able to deliver a reasonable amount of volume.

Consider the following:

How much is the real estate you would be taking up actually worth? Premium retail real estate costs a lot of money. The store owner has invested a lot in the development.

How much is it worth to be associated with their brand? They would be endorsing and standing over you product with the goodwill they have accumulated over the years. How much is that worth? (This assumes the location is appropriate. If it is not an appropriate location, you just won't sell anything and the whole exercise is a waste of time.)

How much to staff it? In order to have staff available to deal with your customers when they order, how many staff do they need? It takes time to explain the product and the selling process and the staff have to be trained.

How much would the shop be making if they put something else in the space they are proposing to allocate to you.

How much is the business going to deliver to the retailer for the year? If it isn't a reasonable amount, it isn't really worth doing.

Are you sure your pricing model is really right? Why not increase the price you charge?