Greetings all, first time post for me. My situation is this: I have a small family business that sells 1 product. It's a specialty item and we've more than tripled our orders from last year. So far, we only sell through our website. However, we've solved our production problems and have been approached by several locations hoping to receive wholesale prices.

Are there some basic guidelines that we can use when dealing with these shops?
1) What are the traditional price breaks?
2) Because we still sell them ourselves, how can we control the resale price?
3) How do wholesalers deal with product returns?

-Any other generic advice would be nice. So far, we're learning as we go. It's just a part time thing that is taking off past our knowledge base.

When it come to distribution policy & strategy my principal advices would be:
Before any engagement in distribution try to:

1) Visualize the growth of your company and visualize where you want your company to be in 4 / 5 years

2) Define what is the ideal product/company positioning according the destiny you established for your company

3) Do your homework. Depending on the industry / product, the rules, discounts, payments, financing, pricing policy etc change widely from one to the other.

So without knowing what product you are selling I cannot tell you how is the typical pricing structure & policy and maybe even knowing the product I might not be able to answer specifically because I insist each market is different and I know some but not all of them.

REMEMBER : The 2 KPI (key performance indexes) kings for distribution are

a) absolut : what % of my product will be handled by a specific distributor/wholeseller in a specific market scope.

b) ponderated : what % of all the products like mine are handled by a distributor in a specific market scope.

You need a safe balance in here if you want to keep the control on your market, product and competition.

So when you will decide which wholsaler or distributors you want for your product make sure to not limit the criteria to how much margin they will take from your product and how convienient are they with returns and inventory management, but also what is their mix in poderated & absolut.

4) I have always tried to not let the distributors play freely with prices, because they can affect considerably your competition game and positioning. Most of them will always try to keep the right to establish the public price and that is a little too compromising. But hey when you go wal-mart or similars forget about establishing any condition, but the orders volume will be challenginf=g enough to not be too bothered about the princing & conditions control. You would get an astonoshing absolut being the ponderated a IT DEPENDS or SURPRISE or OUCH WE ARE DEAD.

resuming, i know some about distribution methodologies and strategies but without knowing the product/service I cannot be a great help.

Well, wow...that is a bit more than I can chew at the moment. I have no business background and as I said before, we're learning as we go. Thanks for the reply, though...I guess at this point I'm kind of hoping for an answer that can't really be given.

Maybe if I give a little more information that will help. However, I'm not too sure of the rules regarding the details I can give about our product.

Anybody else with very basic advice?

Are there some basic guidelines that we can use when dealing with these shops?
1) What are the traditional price breaks?

Are you going to sell to wholesale distributors, who will in turn sell to retailers, who will sell to consumers? If so, you have to have plenty of money in there for all concerned. The retailer, whether they buy from you directly, or from a wholesaler, are going to need about a 50% gross profit, ot to be able to double their cost.

The wholesaler is going to want from 20 to 30% gross profit, or cost plus 40% of cost (in round figures).

So, an item you sell for $ 10 to the wholesaler will get sold to the retailer for about $ 14, who will retail it for $ 27.95. Roughly.

2) Because we still sell them ourselves, how can we control the resale price?

Legally, you cannot control the retail price. Once a retailer buys them from you, or from a wholesaler, he can give them away, if he wants. There are laws specifically restraining you from controling retail prices.

3) How do wholesalers deal with product returns?

This is your decision. In some cases the manufacturer says we have a defect rate of under 1%. We are going to give you a 1 % defective allowane on each invoice and you eat teh returns. Others simply replace the defective items. Of course, if you promote the item with a "satisfaction" guarantee, rahter than just a normal product warranty, you will have to accept the returns and will probably be asked to absorb some of the costs of handling the product twice.

What about MAP pricing? You often see this enforced not allowing the retailer to go below a certain price. I thought this is how they controlled prices. Or am I thinking of the wrong thing?

They enforce that through twisting the arms of their customers (you want the new model? You sell at xx!)

There used to be what were called Fair Trade Laws in the US (not the current ones dealing with natives getting paid for their products). The manufacturer could dictate price and legally refuse to sell to anyone who sold below the retail price. These were overturned in the 60's and it is illegal for manufacturers to maintain a retail price.

Of course, shipments can get "lost", they can be "out of stock", etc. But there are no laws allowing manufacturers to dictate retail prices.

why the response from my former subject line is dying down so i need a new one