wholesale pricing: how much of a bite to give away
yes, even vampires sink their teeth into good chocolate
Since we’re heading toward spooky season, here’s a quote from a maker that’s downright scary. It’s that if at all that’s frankly terrifying.
It’s also sadly true.
The first time I attended the Makers Unconference (the two-day get-together for makers held before the Northwest Chocolate Fest, originally founded by a group of chocolate makers) I listened in disbelief as Greg D’alessandro of Dandelion Chocolate told me a horrifying tale of stockists who wouldn’t pay and the tribulations of wholesale. In fact, he point-blank advised me to never offer wholesale pricing, saying “You will be shocked at who doesn’t pay you.”
Did I listen? Yes and no.
Was one of those stockists a fellow chocolate maker with a curated selection of other makers’ bars? yes. Was one a highly-trafficked chocolate buyer’s destination? yep.
But first, let’s go shopping (#yay!)
Wholesale accounts, also called stockist accounts, can be a useful tool for your biz.
They can create awareness and demand for your chocolate in places where no one would find you otherwise
they
arecan potentially be a source of regular/predictable income that, if you are a new-ish maker, can offset the “why is nobody buying bars from my lovely new online shop” phase.
Confession: in the early days of 2015 when Map was just getting started I made bars that no one ever bought (here’s looking at you Oregon Trail granola inclusion bar). It was a necessary hurdle: I was new, craft chocolate was new, my online shop was new, I didn’t have a retail space, I was new to Instagram, Instagram itself was kinda new, and I had no wholesale accounts. If I wasn’t going to sell at my local farmer’s market (I wasn’t, nor have I ever, nor will I ever, so sayeth the introvert), then how was anyone ever going to know Map existed?
Wholesale.
For lots of small batch makers wholesale is the holy grail of My Biz Has Arrived-ness, and it is undeniable that the first time I saw Maps sitting on a shelf next to craft icons like Marou or Patric, I was beyond thrilled, and yes I snapped a zillion photos.
How wholesale works:
a stockist buys your bars, paying less than your suggested/working MSRP. MSRP: manufacturer’s-that’s you-suggested (the price you have decided your bars need to sell for) retail (selling to the public) price (the $ sticker on the bar).
typically stockists pay 50% under retail. Note: wholesale is different from a distributor (which sells your bars to stockists, and takes an additional cut).
the stockist pays less to you than if you were selling in your online shop, at a pop-up, at the farmer’s market or however you offer direct-to-customer sales, because of the benefits they provide to you, in addition to the $ they pay per bar.
benefits are: they pay all the costs of a brick & mortar storefront, they hire/train employees to sell the goods they stock, they have an established customer base who frequents their shop(s), they create awareness and demand for your bars.
That said, wholesale pricing is not a consistent equation.
50% off retail was once the standard, which would mean if your bar has an MSRP of $10, the stockist would pay you $5, then sell the bar for $10, pocketing $5. Or they might price it higher, if you’re ok with that (yes you need clearly-defined and written wholesale policies in contract form). Some cities—like NY or SF—have high retail rents, so a shop might need to sell your bars at a higher cost.
You need to decide if you have a cap or limit; is there an impact on someone encountering your $10 bar priced as $18? yes. That yes is neither good or bad, but “it depends” based on who your target customer is.
On Rodeo Drive the customer won’t bat an eye and might think “this chocolate must be amazing,” then possibly shop online from you (#ka-ching!), while in Des Moines a customer might say Holy !@$%#@ and never look you up online, or tell their friends about some snooty over-priced company they saw at Dollar Choco Mart.
Which brings us to this:
Wholesale is a tool.
First and foremost, more than the potential revenue it can offer, wholesale is a way to get your work into the world. The revenue comes at a cost: that 50% off, but also, how you decide to use wholesale as a tool has a huge impact on your branding.
Before pricing comes packaging. And before packaging comes mold design, comes how your bar will be displayed and/or shipped #sizematters and before all this, just after you make that first batch of deliciousness and run around all crazy happy and delirious and decide I am going to not just make chocolate but sell it! you need to think about Who your chocolate is for.
Who are you making it for? and why them? and where do they live? what kind of food do they reach for, what motivates them to spend their $ on something they can clearly “live” without, but decide they want to buy anyway? The list goes on (and on). You need to know who these folks are because *they* are who you are making chocolate for. Sneaking yourself into your chocolate is called branding (your story and how you tell it) but who you are selling it to informs where you sell, as much as how much you price to sell.
You can say Yes to every stockist who contacts you, OR you can align with those shops that beckon to *your people,* the ones you are trying your best to speak to (help them find your beautiful work). As you grow/evolve your stockist list can (and should) evolve. Yes, you can (and should) say goodbye to the shops who do not pay on time, or never (yes, some quite well-known ones) no matter how “well-known” they are.
Standard %s off are 50% off, 45% off, and 40% off. The question to consider from the stockist’s shoes: are these bars worth risking capital to buy the bars/pay bank credit fees every time a shopper uses a debit or credit card/take up shelf space/risk having dead stock/paying overhead for ______ profit?
If the msrp is $10, and you offer 50% off, the profit they get is $5
If the msrp is $10 and you offer 45% off, the profit they get is $4.50
If the msrp is $10 and you offer 40% off, the profit they get is $4
So, do you want to give the stockist a big bite (off) or a smaller bite? Here are things to consider when deciding 50% off or 40% or somewhere in between. Remember, this is NOT your msrp; this is the % off of that price you will take and give to your wholesale accounts so they can make money too.
the Return of Where is how much potential return biz might you get from having your bars there. Street cred is real.
The Hassle to Get Them There is a factor, often overlooked until reality sets in: as a solopreneur I would make chocolate 3/4 weeks, and do nothing but ship wholesale week 4. This aspect can take more time than making the bars, and shipping supplies (branded tape, padding, cold packs) can eat away profits.
Dream Location is the shop where, if you walked in and saw your bars you would keel over with joy.
and Badassness Quotient the true story. Just how f-ng badass is your chocolate? are people singing kudos on social media (family + friends do not count), are you selling out and folks are begging for more? did you just win world gold for every bar? Did Clay Gordon name you Best-ever Small Maker of the Craft Universe?
Bottom line is that who and where is a decision worthy of our attention.
That Makers’ Unconference I mentioned at the start? A well-known early craft maker stated in a group biz discussion that “coffee shops are pointless for wholesale” because, he opined, “the people there just spent $4 on a cup of coffee and wouldn’t want to spend $6 on a bar of chocolate.”
I didn’t listen, namely, because I love coffee and chocolate, and I love coffee shops. Some of Map’s best + biggest wholesale clients were coffee shops, including my first-ever account Barista Parlor (on instagram @baristaparlor )
Happy chocolate making,
Mackenzie