Advice on Supply price of a new product.

grumbleweed

Iv developed and patented a new product that I am in the process of bringing to market. I can manufacture in China at €14 per unit, my MRSP is €70 .. which from intensive market research people are more than willing to pay.
I’m going down the B2B route and I’m just wondering what is a reasonable price to be suppling resellers ... given that they will also want discounts on quantities. What would be a good figure to give me a decent margin while also keeping the agents happy.

Bandara

grumbleweed wrote: »

Iv developed and patented a new product that I am in the process of bringing to market. I can manufacture in China at €14 per unit, my MRSP is €70 .. which from intensive market research people are more than willing to pay.
I’m going down the B2B route and I’m just wondering what is a reasonable price to be suppling resellers ... given that they will also want discounts on quantities. What would be a good figure to give me a decent margin while also keeping the agents happy.

Hi, the simple answer issuing the usual formulas etc would be approx €38 to the wholesalers with maybe a ten & 1 foc (or even 6+1 foc if you want to get into the larger places) quantity discount.

Good look with it. Be careful on offering sale or return, and bear any potential returns in mind also. Make sure your shipping costs are confirmed also.

Good luck with it.

Darc19

Depends on many variables.

A household store / fashion / gift will want 40%-50% margin ex vat. So at €70 retail you are looking about €30-€35

Food is low margin, but I doubt it's a food product.


Retailers will talk margin not mark-up and on the ex vat retail price. Make sure you understand this.

Pharmaceutical is 33%-35% margin, so circa €38-€40 cost.

Wholesalers will talk mark-up as opposed to margin and will want it to be priced to give reasonable margin to their customers.

€14 cost (is this landed in your warehouse and calculating the current $1.20 exchange), sell to wholesaler at €27, sell to retailers at €35 and allow up to 20% discount if a very large order is placed.


All above is ballpark, but would be a general average.

grumbleweed

Thanks for this guys , just got my “landed” unit price from manufacturer of $18 so your figures will give me a good gauge of where to operate from.

lomb

If you can directly distribute it via a website it may be better. Then you can control marketing and customer acquisition cost and scaling rapidly by pumping money into digital marketing as the profit comes on.

You could warehouse it with a third party and integrate via Shopify. it also means you get paid without credit terms immediately , this means a faster scale up. When you think about it you can afford to spend 30+ on each customer and be profitable. If you can sell them again that's a plus maybe a different similar product that lowers the acquisition cost of the customer long term. A business is a system - a list of customers, website, payment methods ,etc
It also means less chance of copying ( most patent can be bypassed by slight changes) as no one knows what quantity your selling ( except your supplier of course and their employees)

grumbleweed

lomb wrote: »

If you can directly distribute it via a website it may be better. Then you can control marketing and customer acquisition cost and scaling rapidly by pumping money into digital marketing as the profit comes on.

You could warehouse it with a third party and integrate via Shopify. it also means you get paid without credit terms immediately , this means a faster scale up. When you think about it you can afford to spend 30+ on each customer and be profitable. If you can sell them again that's a plus maybe a different similar product that lowers the acquisition cost of the customer long term. A business is a system - a list of customers, website, payment methods ,etc
It also means less chance of copying ( most patent can be bypassed by slight changes) as no one knows what quantity your selling ( except your supplier of course and their employees)

Thanks for this ..

“ You could warehouse it with a third party and integrate via Shopify”

Are you talking about a storage facility like “U store” or another similar facility. Shopify is a site I know nothing about.

paul.duka

How difficult it will be for you for changing manufacturing in the future? My point is, probably is worthy for you at this moment looking for the one is giving you the lowest price for produce it, and as long as you are requesting a bigger amount of products, you can think on changing for the one is making you a better discount when ordering a big amount of products

lomb

grumbleweed wrote: »

Thanks for this ..

“ You could warehouse it with a third party and integrate via Shopify”

Are you talking about a storage facility like “U store” or another similar facility. Shopify is a site I know nothing about.

Sure , Shopify basically creates your own store but on the internet think of a shop, it integrates with payment facilitators or credit cards on one hand and companies that specialise in warehousing and posting products as orders come in from your webstore. Tbh you'd be mad to go down the traditional model for a sought after product if it's expensive enough, specialised enough ie you can target your advertising to a certain market ie let's say that there are 1000 dermatologists , why would you go down traditional route it's inefficient, you'd just direct mail the 1000 dermatologists your offer and website with Shopify integration. As soon as they buy , they pay, you get paid immediately, the warehouser holding your stock gets notified, they ship . So you have a happy customer, your advertising cost comes out of the markup you'd have had to have paid anyway, you get paid immediately and your business is safer and worth alot more. And your doing less work or no chasing payment, less shipping stock to different places , no storing stock , less bookkeeping it's all automatic.
Your new role is as a direct mail marketer and webstore owner.

Darc19

It difficult without knowing the product or at least the target market.

If it's builder's, then builder's merchants would be the best market.

If it's 20-40 years old tech heads, then direct online selling is better.

If it requires touch and demonstration, a retail model is best.


Your best bet is to talk to users, give a few out free in return for feedback and ask where they would expect to buy the item.

lomb

Darc19 wrote: »

It difficult without knowing the product or at least the target market.

If it's builder's, then builder's merchants would be the best market.

If it's 20-40 years old tech heads, then direct online selling is better.

If it requires touch and demonstration, a retail model is best.


Your best bet is to talk to users, give a few out free in return for feedback and ask where they would expect to buy the item.

True to some extent,
Coca cola isnt sold direct as it wouldnt be viable to due to the high customer acquistion cost and shipping relative to the unit value.
Disagree about the techhead comment, if you can demonstrate value and pinpoint the target market then acquistion cost is much lower, doesnt matter the age of the person. Ie a non tech savvy dermatologist will happily buy something on your website if direct mailed if its of value to him
Michael Dell became a billionaire long before the internet took off from direct mail (initially before mass market marketing) and a high margin. He saw the direct model was more efficient to consumer and capitalised on it to non tech savvy customers and used the lower cost he could provide it for and immediate payment to scale.
Re touch and demonstration this can be overcome via product reviews on website,a few quick videos, and a fair return policy and likely a phone number to ring for queries.
As this is an entrepreneurial forum I think the above is important to get out rather than blindly following a traditional model. At least know what yoru in for either way.

grumbleweed

Thanks for all this guys .. really really interesting information.

Im a professional musician and the target market is the music Industry, Iv developed a product that does away with the need for guitar stands on stage. Its a new system of storing instruments while keeping them safe yet accessible.
The product has won a few Innovation awards but I have been keeping it under wraps until i am ready to launch it.

Darc19

Then direct sales combined with a select number of outlets is probably the best model.

My guess is that most stores will be independent, so easier to deal with and good to have their regular feedback. I would guess that many of their customers trust their opinions too and could effectively "market" your product to a wider audience. Eg, they recommend it to their customers, people see it being used and search online bringing them to your online store.

If it's small enough, then you can easily look at the world as your market and ship directly via a 3rd party shipping service.

As it's specialist, marketing will be easier and of course you'll need to provide complimentary ones to a few people that others in the industry listen to.