Want to grow your business into a large, national brand? The best way to expand quickly is to sell wholesale to large retailers.
Today, Bill D’Alessandro shows us the exact process he goes through to sell wholesale to retailers and the main differences between selling to a business as opposed to a consumer.
Because most shopping carts do not handle wholesale very well, he’s also developed his own software to specifically help run a wholesale business.
His “made for wholesale” ecommerce service can be found at OrderCircle.com. If you are interested in selling wholesale, Bill is offering everyone 25% off his service!
What You’ll Learn
Why you need to be selling wholesale in addition to your website
How to find wholesale clients
Whether you should jump right into wholesale or sell online first?
What your sales should be before you jump to wholesale
How to land a big fish retailer
How to price your products with wholesale
How does billing work for wholesale sales
What are some standard payment terms for wholesale
What you should set your minimum order volume to
When to go after the big boy retailers
How to get visibility for your products on the shelves
The main differences between selling wholesale vs selling directly to the consumer
Other Resources And Books
Order Circle – Shopping Cart Software For Wholesalers
Big Commerce
ElementsBrands.com – Bill’s portfolio of shops
RebelCEO.com
Transcript
MyWifeQuitHerJob’s transcripts are done by Outsource2Africa.com, an awesome transcription service that is half the price of other competing companies. Highly recommended!
You are listening to the My Wife Quit Her Job podcast, where I bring in successful bootstrapped business owners to teach us what strategies are working and what strategies are not. Now this isn’t one of those podcasts where we bring on famous entrepreneurs simply to celebrate their success. Instead I have them take us back to the beginning and delve deeply into the exact strategies they used early on to gain traction for their businesses.
Now if you enjoy this podcast please leave me a review on iTunes, and enter my podcast contest where I’m giving away free one on one business consults every single month. For more information, go to www.mywifequitherjob.com/contest. And if you are interested in starting your own online business, be sure to sign up for my free six day mini course where I show you how my wife and I managed to make over 100k in profit in our first year of business. Go to www.mywifequitherjob.com for more information, now onto the show.
Welcome to the My Wife Quit her Job podcast. We will teach you how to create a business that suits your lifestyle so you can spend more time with your family and focus on doing the things that you love. Here is your host Steve Chou.
Welcome to the My Wife Quit her Job Podcast; today I’m excited to have Bill D’Alessandro back on the show. Now if you don’t remember Bill he was featured in episode 48 where he talked about how he purchased an ecommerce business and doubled its sales in just one year, now it turns out that he’s actually man of many talents and he’s got a lot of projects on his plate. Now we’ve had a lot of ecommerce entrepreneurs on the show at this point, but we haven’t really discussed some of the intricacies of the selling process. Some online stores like mine cater mainly to the end customer, but there are others that sell wholesale and serve as suppliers to other retail stores.
Now because Bill is an expert on the topic of selling wholesale, I actually asked him to come back on the show to talk about how to create a profitable wholesale shop. So with that welcome the show Bill. How are you doing man?
Bill: I’m doing good, thanks for having me Steve.
Steve: Yes, you run a whole bunch of ecommerce stores and do they actually all sell wholesale today?
Bill: Yeah. So when I started we were just selling B to C– business to consumer, shipping via post office and UPs and everything, and as we got bigger you know, we have our own brands and this is more applicable if you have your own brand versus if you are retailing other peoples brands, but as our brand started to get bigger we realized that in order to get really big we had to go into retailers. You can build a big business online, but if you want to build a really big business you really have to be in stores. And what I discovered is that is a whole different ballgame going to the stores than it is selling direct consumers online, and so hopefully I can share how to do that.
Steve: Yeah.
Bill: How to take your brand from an ecommerce store to an ecommerce store that also sells wholesale and get your products in the retailers.
Steve: Yeah, I’m actually interested in this myself because with my store, I didn’t really want to deal with the quality control and then kind of like the buying and selling of huge quantities of goods to retailers, so you know what was your primary motivation just for selling wholesale in the first place? Like can you factor in the decision making process versus the pain in the ass factor?
Bill: It’s close, it’s close, it is the pain because there is more pain in the ass factor for sure is bigger orders but there is more pain in the ass factor, but really the reason I did it is I wanted as I mentioned before I realized that you’ve got to do it to get big. Like I’m sure everybody is heard of Bonobos, the brand of mans pants, and now shirts and everything else. Andy Dunn the founder of that, if you know, kind of read in his writing in the early days of Bonobos he was pounding the table you know.
We are going to build a men’s wear brand online only. Men didn’t want to go on the stores to shop, this is the new way that men are going to buy pants, and he was right and they did very well, but they topped out at about 10, 20 million in revenue. And then about, I guess it’s maybe 18-20 months ago now, Bonobos announced that they had taken funds from Nordstrom and that Bonobos would be in all Nodstrom nationwide.
Now they not just in Nodstrom they are in other big box retailers and they are also opening their own guide shops all over the country. So I think the realization that Andy had of Bonobos was, we can build a nice company online only, but if we want to build a global brand, a big business you just have to go to retail because that’s where the people are, you know, they are walking through just go into Nordstrom just watch all people walking through.
Steve: Right, okay, and in terms of the progression note you probably would still recommend going B to C first and then once you get tapped out there then start going B to B.
Bill: You’ll have to, you’ll have to.
Steve: Okay.
Bill: Because you won’t have, you don’t have to, but it would be easier to go to a big box store and say hey, I analyze our ecommerce records for the past year; we’ve done 1,000 orders into the city where you are located. You know I have customers already here that like this product and want to come in and buy from your stores. Because they are going to want to see some proof that you are– because they get pitched every day, so they are going to want to see some proof that you are legit, and having a track record is one way to show that and plus it’s just you can get started and I know you’ve done a number of blog posts like how you can get a Shopify store going for like I forget the numbers– like $86 or something.
Steve: Yeah.
Bill: It’s going to be more work to do that wholesale. So yeah I would start B to C first.
Steve: Okay.
Bill: So this is really for– if you are doing B to C you are doing well and you want to kind of know how to take yourself to the next level, wholesale might be a way you can do that.
Steve: So what is considered doing well, and what do some of the larger retailers kind of demand from you?
Bill: So a lot, I would recommend, so let’s just take for example my products.
Steve: Okay.
Bill: We do sunscreens, shampoo; you know moisturizer, all sorts of things like that. They are organic, so Whole Foods is a big sort of target account for us. That would be the home run smash it for us.
Steve: Okay.
Bill: Wholesale we’ll just kind of use Whole Foods as the example, but you can search it to your favorite retailer in there. So we approached Whole Foods a couple of years ago and they basically immediately told us to get lost, and the reason they told us to get lost is because we didn’t have any proof. We had online sales as I mentioned earlier, but they said we don’t know does it move at retail. And so what we did over the last two years before going back to Whole Foods is we got in to a bunch of Mom and Pop retailers.
Steve: Okay.
Bill: And so we did Mom And Pop first and it’s tempting to go elephant hunting and call Whole Foods, but it’s much easier to call Bob’s organic market on the corner because you can just walk in with your product and Bob is probably there. And then you can go, hey Bob, check it out this is pretty cool and he can make a decision right there. With Whole Foods and big box stores there is a whole structure like you can only submit at certain times during the year, like there is a whole presentation, you know there is a million decision makers, but if you go a local shop they could just write you cheque on the spot.
I’ve had, I’ve walked into stores locally here in Colorado, we have a sunscreen product called Ski Bum. So I have walked in like Ski shops, out of brokerage and stuff and with a case and they are like yeah, that’s cool and they literally take money out of the cash drawer and hand it to me, and put the thing on the shelf right there.
So it’s just easier if you start with the small guys and then after you’ve been in the small guys for a while, what Whole Foods is going to want to know and really what any retailer is going to want to know is does this sell through, does it move it.
Steve: Okay.
Bill: So like the key thing is you will say yeah, we are in 100 stores and then the immediate follow up question will be how many of them reorder, and how often do they reorder and how many cases do they move you know, what’s the velocity?
Steve: Okay.
Bill: So when you go Whole Foods you can go hey we’ve been in a 100 small retailers for the last two years, they each move about two units a day or three units a day or a case a week whatever it is, and then you can get Whole Foods some proof that your product actually does move through.
Steve: Okay and when it comes to getting these Mom And Pop guys just from listening to your answer, it implies that you actually had to physically go and visit these guys one by one.
Bill: Yes, unfortunately.
Steve: Okay, all right.
Bill: I mean you don’t have to, it just massively easier. The other way to do it is to email first, follow up with a phone call, and then send them samples.
Steve: Okay.
Bill: Which you can do and will and can work, but it’s so- you know it a longer sale cycle and you are going to send a lot of samples and never hear back, but chances are for whatever you are selling there are a couple of stores in your town that will carry it. So I recommend if you are going to start, start there.
Steve: Okay and I understand that the pricing is got to be different when you are selling in these large volumes. So can we talk a little bit about how pricing works?
Bill: Sure, because you are selling in large volumes and also because they have to make money, when you go to wholesale a typical margin retailer wants to make is 50%, we’ll just call key stone pricing.
Steve: Okay.
Bill: So take your retail pricing divide it in half and that’s what they want to buy it from you for.
Steve: Okay.
Bill: Some Mom And Pops, maybe that’s negotiable they’ll take 40% off. Some perishable food items like bread will drop even as slow as 30, but for almost for all durable goods, I mean my products included, shampoo all that stuff is 50% off retail.
Steve: Okay, so that implies that you actually have to be making at least 4X profit on your own stuff then to consider doing this?
Bill: Exactly:
Steve: Okay.
Bill: So my rule of thumb for everything is if your product for it to be viable at wholesale your gross margin has to be 75%.
Steve: Okay and it also implies that since you are doing large volumes like your margin of error is a lot smaller too?
Bill: What do you mean by margin of error?
Steve: What I mean by that is if you have like a bad batch or something that can just really screw you over.
Bill: Yes because they will send it back to you.
Steve: Okay, and are there any sort of terms such as like you give them the product and they only pay you for what they sell or is it only typically they buy a big batch from you?
Bill: It depends, it depends.
Steve: Okay.
Bill: So what you just mentioned is called, will be called consignment. So typically when I go into the store what I do- the standard way to do it would be what’s called net thirty.
Steve: Okay.
Bill: Which means that you send them the product, and they pay you thirty days later. And they do that because they want to have some time to get their money back out so they don’t have so much money sitting on their shelves.
Steve: Okay.
Bill: So it’s a financing thing for them. So what they want to do is, and so this is different than B to C, when you sell online you swipe all those credit card right way, you get the money, you ship the product, not so with wholesale. They’ll say great, they’ll send you an order and they’ll say send me an invoice and go ahead and ship it. And so what you will do is send them an invoice that says here is what you bought, here is how much of it and we shipped it to you and here is the payment due date which is 30 days from today, almost standard, almost always 30 days.
Some larger retailers will try to push you for 60 or 90, net 60, net 90 which is, I wouldn’t agree to unless it was an account you really wanted. I’ve even had of I have a buddy that sells auto parts to O’reilly and they pay net 365.
Steve: Wow, okay. That’s crazy.
Bill: Which is outrageous, I’ve never had anyone else doing that, but most likely it will be net 30 and even Mom And Pops would want net 30.
Steve: Okay, so I mean that means you are like a bank, you are loaning money so to speak. So do you have to do a lot of due diligence for these Mom And Pops shops as well.
Bill: You can, so if they ask you for terms or they say hey, we want payment terms, that means they want net 30. If they ask you for terms you are totally legit trying to go okay, can I have some credit references. And they are used to hearing that and they are probably have a sheet that is already printed they’ll just hand it to you, and there will be other vendor of theirs, so you just call and you go, hey does Bob’s Organic still pay on time all the time, and if they say yes I extend them the terms.
Steve: Do you do any other due diligence like, like do you take their dones numbers and do a look up or anything like that?
Bill: No, it’s just; I mean it’s not that much money, right?
Steve: Okay.
Bill: I mean if it’s wholesale they are going– if it’s a lot of money it’s probably is a big order its Whole Foods and they are going to pay, but if it’s a Mom And Pops it’s just not that much money typically.
Steve: So what’s the typical minimum order that you force them to make?
Bill: So that’s, that’s– I’m glad you mentioned that because this is one thing that you can do as a wholesaler to kind of take a little bit of the power back for yourself, because if they are going to be getting 50% off retail and they are going to get 30 days to pay and everything in exchange the whole point is that they are buying in volume, right?
Steve: Right.
Bill: And so you– it is your right to enforce a minimum order. This is highly negotiable; I would say I usually start at about 250 bucks, as a minimum order.
Steve: Oh, that’s really low okay.
Bill: Well, for a Bob’s organic store it is, but at Whole Foods you might say it is $5,000.
Steve: Okay.
Bill: You know, but Whole Foods would not order less than $5,000 because it would not even move the needle for them.
Steve: Right.
Bill: What you want to do or you might say instead of using a dollar amount you might say your minimum order is one case, or some quantity unit that is easy for you to take off the shelf and mail them, because what you don’t is them going like yeah, send me one shampoo and one moisturizer and one of these and I’ll take 50% off of all of it. Because that now it’s looking like a B to C order and you got to pick pack it and it’s a pain in the butt and they are getting 50% off, and that’s not really the agreement that you had. So either enforce the minimum dollar amount or a minimum quantity.
Steve: Okay, and then once you’ve sold them a case is it up to them to reorder or do you kind of have to remind them to reorder? Like how does it work?
Bill: Well so just like you know with your B and C orders you know you do email marketing, you do all these things to remind them, it’s even worse in wholesale because they’ve got I mean, think just like walking in Whole Foods, how many products are on their shelves you know millions. And most retailers don’t have good systems to know what they are out, so they could very easily be successful with your product and sell it though rapidly and just be out and not even know.
Steve: Yeah, exactly, yeah I can see that happening.
Bill: So you’ve got to be on top of them, so you should know and this is again so you should start paying attention and say in a store like Bob’s Organic shop, how often does my product turn over. And if you know that small stores like Bob’s typically order every three or four weeks and you haven’t heard from Bob in five weeks, you need to call him.
Steve: Okay, so that implies that you have to keep track of the orders of all of your customers in order to be successful?
Bill: You should.
Steve: Okay.
Bill: You could probably be successful despite that, but that is a very good best practice to get them to reorder.
Steve: Okay and all right, so let’s start, let s take a step back a little bit, how do you actually find these retailers that are going to willing to buy from you? Like what’s your strategy for finding people?
Bill: So it can be tough right? Because you are saying like, okay, how many places sell shampoos and you know Borough Colorado or whatever. It’s kind of hard to get your arms around you know who would be interested, who is still in business like who carries stuff like this, and so I have a really good sort of track for this.
So everybody if you’ve got a brand you probably have some competitors, so the products that are most like yours. The easy trick is to go to your base competitor’s website and click on the store locator like. These are all the stores that are carrying your competitor’s products. And call them all because– and if they are carrying your competitors products they are probably interested in products like your competitors and like yours. So you just got a pre-curate it already trimmed down list of all the stores in your area or nationwide, you know filter by zip code or whatever data into your product.
Steve: Okay, that sound like a really good strategy, so then after that you go visit them and bring your products along or?
Bill: Yeah, go visit them if they are local, the other thing you do is call them, send free samples and a brochure. So for wholesale it’s really good, a lot of people will go, do you have any literature? It’s really good to make up like a one and a half by 11 page or like a couple of pictures of your products, hit the highlights and the pricing.
Steve: Okay.
Bill: So like a leave behind, like a brochure.
Steve: So one thing I was a little bit curious about you know, normally when you go B to C you kind of advertise, you do paper click and sort of thing, is that happened in wholesale? Like are you going to attract other retailers through advertising?
Bill: That’s pretty non-viable in wholesale.
Steve: Okay.
Bill: I don’t know anyone that makes paper click or traditional advertising work. The way that you find new retailers besides the trick I just mentioned is to go to [Inaudible] [00:17:06]
Steve: Okay.
Bill: You know because buyers will be there cruising the booth saying hey, what products they want to pick up. The other thing you can do is hire a sales rep or a sales rep group. These are you know, independent companies that represent a lot of products, so they might you know, my case might not represent a brand of granola bars, and my brand of shampoo and brand of milk. And so when they go into Whole Foods they check on all those place in the store. They make sure none of them are sold out, talk to the buyers at Whole Foods about all of them, non competitive you know, none of these products are competing. So one person can touch Whole Foods and also they’ll go hey, my brand of milk is in this one store maybe I can get my brand of granola bars in there too, and those people are typically compensated with 15% commission on the wholesale price.
Steve: Wow, okay.
Bill: Yeah, so as you mentioned you got to have big margins to go wholesale.
Steve: Okay and then how do you– let’s say you’ve gotten a whole bunch of Mom and Pops shop on board, how do you know when you are ready for like the big guys? Like the Whole Foods or the department stores?
Bill: When the Mom And Pops are reordering regularly.
Steve: Regularly meaning like, every month in quantity like in your case for your products?
Bill: Predictably I would say.
Steve: Okay.
Bill: I mean because, you could sell them, I mean maybe you are them a three months supply and they reorder every three months. Maybe you are selling them a month supply and they reorder every month, but when they are reordering predictably and regularly and they are happy with it that’s when you know you’ve kind of hit this fit where people walk into a store see your products and buy it off the shelf, and that’s when you can go to a bigger chain.
Steve: Okay so the predictability from that I’m hearing is almost more important than the absolute quantity it sell, is that accurate?
Bill: Yes, that’s accurate and it depends also by category, so like in Whole Foods for example in some categories if you sell two units a week and three units a week that’s good. In some categories it should be two to three a day; it depends on what you are selling.
Steve: Okay, yeah of course. Another question I had was let’s say you get in one of these Mom and pops shop, how do you ensure that your products actually gets some visibility on their shelf? Like is there something extra you have to do?
Bill: Yeah, so that’s– I mentioned the reps before and you can hire reps for this or you can do this yourself.
Steve: Okay.
Bill: I would recommend you go into it when you know ship it, I would ship it to him and if they are local show up a week later and look for it on the shelf, and make sure it’s you know arranged correctly to make sure they didn’t give you a crappy bottom shelf or something. And if it’s on the bottom shelf and looks bad, go talk to Bob and go, hey man, this is not going to move down here you know, it’s been our experience that mid height are better, you know, our product sells better, and I want you to sell this through, like we are in this together. I want you to make money on it, and my best advice to you is how to merchandise it correctly, that’s called merchandising, how it’s presented in the store.
Steve: What about like displays, so does this all kind of factor into the negotiations? I’m just trying to get an idea of how all this works.
Bill: So I would say the negotiations, there is not usually a negation, the negation is do you like this products enough to put it your store, and then there is usually zero negotiation on price because it is 50% off period. And sometimes like if they feel your price is too high, your retail price is too high they won’t tell you that, but after the fact you go in the store you’ll see they’ve dropped it and they are accepting a little bit less than the 50% margin. But if they think your retail price is really too high they’ll go, no the retail price is too high, I don’t think it will sell, I’m not taking it in at all.
Steve: Okay.
Bill: So there is typically no discussion on price, and there is typically no discussion on terms either. They like if you are like pay me up front, they are like we got net 30 from everybody else, what are you going to say? You know.
Steve: Okay.
Bill: So the negotiation is more of a sales process of get it in and then the key thing to remember in wholesale is in B to C you are kind of done once you’ve sold your product. In wholesale you are not done until they’ve sold your product because if you sell a case to them and it doesn’t sell through and they’ve got to throw it out or they eat the cost of that case like yeah, it didn’t cost you any money, but they are not reordering.
Steve: Yeah, I was just thinking like let’s say I had like a slightly more complicated product or let’s say I had one of your lotions and I really wanted the store to kind of really express the value proposition, and so how would I– would it just be kind of like a negotiation on how to get like a display, like you know when you walk to like Wal-Mart or something there is like a display right front and center.
Bill: Yap.
Steve: Do you kind of, is that rampant to the negotiations or the terms in order to get one of those things up there because…
Bill: Yes.
Steve: That floor space is limited, right?
Bill: Yes, so it’s kind of again the Mom Pops and the Walgreens [Inaudible] [00:21:55] here.
Steve: Okay.
Bill: Mom And Pops typically they will see themselves on the same team as you as soon as they agree to take your product in.
Steve: Okay.
Bill: And so at that point I typically approach it as hey, this sells better if you do a, b, c, d and if you want a display like the anchor display you are going to have to provide that, but they will typically put it out if you push.
Steve: Oh, okay, okay.
Bill: However when you go to Walgreens like walk down the isle of Walgreen, just to be out on end cup, just to have your peanut butter or whatever it is on the end cup is 20 grand a week or something at Walgreens in addition that you pay them you know and if you want display of something, there is a whole different negotiation when it comes to big bucks.
Steve: Okay, okay are you at any big buck store right now with your stuff?
Bill: We are working on the Whole Foods right now.
Steve: Okay.
Bill: So hopefully with the year we will be in Whole Foods and that’s, like when I say within the year that’s I mean we’ve been working with them for three months and its probably– it’s a year process or six month between the time they say yes and the time you end up on the shelf at Whole Foods.
Steve: Okay, and how many Mom And Pop shops did you have your stuff in prior to deciding when to apply?
Bill: Pushing a hundred.
Steve: Pushing a– oh wow, that’s a lot, so that’s a hundred stores that you’ve visited and have been talking with and have keeping track of their sales of.
Bill: Yes.
Steve: Okay, well that’s a lot of work, okay.
Bill: Yes.
Steve; How do returns work if they don’t work your products, do they just send it all back to you?
Bill: So again negotiable, a little bit, and when I say negotiable on this stuff my recommendation to people would be to have a policy. So like you just come in and go here is our policy. If you are selling something that is perishable sometime stores will say hey if it spoils on our shelves you got to take it back for a full refund which sucks. Some stores will say if it’s not perishable they still can return to you if it doesn’t sell, you know if it’s been on their shelves for 90 days and they hadn’t sell they can return it, but you also it’s, that’s not– it doesn’t happen all the time, so you could say sorry no returns and that would be fine. But if the store gets– like a consumer returns it to the store the store generally eats it, or they will sometimes they will bill it back to you also. It kind of depends on how the store already does it.
Steve: Okay, what are some of your terms just an example?
Bill: So we don’t take returns.
Steve: Okay, okay.
Bill: We don’t, because it is- you know not perishable but it’s semi perishable, we want to encourage them to kind of order lean and move it through and that’s another thing too. It’s much better to sell someone a one month’s supply and have them reorder every month than to have sell them a three months’ supply and they reorder every three months, because it gives the perception that’s it’s moving.
Steve: I see, interesting.
Bill: And you know, they order from you more often and that they think of your brand as a brand that sells for them and moves. You know if you only get to do something every three months it’s easy to forget.
Steve: So when you go in there you actually don’t even try to sell them a long term supply? So you aim for like a month?
Bill: Yeah, aim for a month.
Steve: Okay, that makes you work more though, also right?
Bill: Yes, but it’s better for the long term.
Steve: Okay.
Bill: Because it will move through faster and also if you try to sell them a long term supply they won’t do it, because they don’t know you, you are new, why would they a take three months gamble when they can take a one month gamble.
Steve: But once you’ve been working together for a while then all bets are off, right?
Bill: Yeah, then all bets are off if you want to, if they want to take it more you know I would kind of resist if someone wanted to buy a six months’ supply from me for the reason I just mentioned but-
Steve: Okay, another kind of thing that just popped into my mind is do you actually advertise your products even if they are sold at the retailer? So let’s start with that question first I have another one after.
Bill: Yes, so and again Mom And pops and big bucks are going to be different. You go into Walgreens and they might require you to spend like 50 grand to market and say available at Walgreens. And you will see those ads if you watch TV sometimes you will see like such and such and then at the end there is a Walgreens logo, and some branches do that because they want to sell through at Walgreens and for Walgreen too, maybe they know they are in 100 Walgreens in Florida and they want to be in 6,000 Walgreens nationwide. So they’ll run ads in Florida to try to convince Walgreen that it sells through.
Steve: Interesting, okay, how do you do it, do you advertise your own products?
Bill: So we no, we really don’t, because we are not, I mean we are not like at national brand scale, I mean we are not Coca-Cola and if you are listening to this you are probably not either. So you probably don’t have to. What I have offered occasionally in the past like when I’m talking to a really big account like Whole Foods, we are here in Borough and we trying to get them to try us in all of their Colorado stores.
So what I said to him is look guys, we got a ton of customers already in Colorado, they buy online already, if you roll us out of all the Colorado stores, I’ll do an email blast, I’ll pull every one that’s ever bought from us and shipped it to Colorado and say hey, now available in Whole Foods go and get it at 20% off this week. And the buyer will be like, oh cool first of all they are blown way that I have the capability to do that because they are used to, they are used to working with you know, people who are to that sophisticated, but you know they think that’s cool.
But really the fact of the matter is to your benefit. As I mentioned before it’s not– your job isn’t done until it’s moved off their shelves, so anything that you can do to move it off their shelves is helping you sell because that means they are going to reorder and they are going to roll it out in more stores. And plus everybody that buys it from them, there is a chance they come back and buy it directly from you, and I meant to say this at the top, but this is really one of the other main reasons I do wholesale is I see it as marketing.
Even if you break even, even if you don’t make a dime, even if you move thousands of units and don’t make a dime, that’s thousands of units of your products that are out in the world now, and you probably put your URL on every label. So hopefully some fraction of those people are going to come back and buy direct.
Steve: That actually leads into my next question, so you are selling to the consumer and wholesaler here right? And so does that mean that you can’t undercut them on price, like how does it work?
Bill: So you typically you want to greet anything like that, but it’s kind of widely regarded as a dick move. So if you are like, if you are selling online which you probably all are if you are listening, and you are a small brand in smaller stores they probably won’t care, but if you start to go into like some smaller chains like ten stores or whatever, they all start to ask you, do you sell online and you’ll say yes and they’ll start to get squarely.
And then immediately what you want to do before they get too squarely you just see their face kind of turn upside down as soon as you say you sell online, and you are going to say right away before they even have a chance to open their mouth don’t worry we are here to map pricing and what map pricing is minimum advertise price, which means that they have to sell it for the same price as you sell it for as all the other retailers sell it for.
You know, we don’t undercut you, to undercut them would be what’s called a channel conflict meaning you are trying to jump out in front of them with the consumer. So you have to make some promises, and they might make you sign something but it’s very hard for them to enforce it or for you to enforce it for that matter.
Steve: Okay, because you know in your own story you have the infinite ability to drop the price right? Since you are making four x and they are only making two, right?
Bill: Right.
Steve: So okay, so let’s talk a little bit about the logistics here because based on our conversation thus far it seems like it’s a pain in the butt to sell wholesale, right?
Bill: It is and it just works a little bit different too.
Steve: So the advantages I can see also is that you have a consistent revenue stream unlike a consumer who just buys it once and disappears, these businesses will hopefully consistently buy from month to month from you, so it’s a more predictable revenue stream, is that accurate?
Steve: Yes.
Bill: Okay, if you know if your stuff moves.
Steve: If your stuff moves of course, so you know for shopping carts and that sort of thing, do you just use an off the shelf cart to manage all this stuff, or do you have something custom? What do you do?
Bill: So it’s funny you ask because you can’t really, it’s hard to use an off the shelve cart because the process is a little different. So when you buy B to C right, you go, you add the things to your cart and you put it in your credit number, you pay instantly and it ships, but with wholesale let’s say some, a big store says we want to order five hundred units but you only have 510 units in stock, you probably don’t want to sell them 500 units because now you only have ten units to sell on your websites or to anyone else.
So you really need to review wholesale orders before they come in or before you approve them and they are used to that, stores are used to that, they are used to stuff going on back order. So you can’t just blindly accept all the orders that come in because then you could end up in awkward spot of calling them back and going we can only sell you 200, we can’t sell you 500 right now.
So it’s kind of hard because regular carts don’t have approvals. The other thing regular carts– the two other things regular carts don’t have are support for terms. So like I use BigCommerce for my B to C sites and BigCommerce has the ability to do multiple payment methods, but what they can’t do is multiple payment methods only for some people. So if you enable people to place orders without paying for them like you need to do for wholesale, that’s going to enable it for you website, you know for people that come to your website to just place orders and not pay for them at all.
Steve: Right, right.
Bill: Which you don’t want. So you need different payment methods for wholesale, and the other thing for wholesale is you might have different pricing, like Whole Foods might get 50% off Bob’s Organic shop might get 40% off. So you need to be able to show different prices to different prices to different, you also need to be able to enforce minimum orders.
Steve: Okay, that implies that everyone has their own account right? And they log in and they get a completely different experience on your shop.
Bill: That’s kind of what you need yes.
Steve: Okay.
Bill: And so as a result I couldn’t find, it’s very hard to this on off the shelf cart, so I actually just launched a software to do this, it’s called Order Circle, and you would think of it really as Shopify For B to B commerce because you’ll find that if you start selling wholesale very quickly most people are emailing you orders, calling orders, faxing orders and it turns into a giant logistical mess. So we need a software internally to run it, so we built Order Circle about nine months ago internally, we’ve been using it to run all the wholesale for all my brands for most of 2014, and just in the end of 2014 we opened it up to other brands to sign up.
So it helps you know, manage all of your customer accounts, it helps you generate those invoices to see how many days left on those 30 days they have to pay you, they can leave a credit card on file that you can charge after the 30 days you know with one click, you can sort and see who is late, you can see who still needs to be shipped, you can also view a customer page, you can see like when the last time was they ordered and how frequently they order. So as I mentioned earlier you can do that follow up, like hey, it’s been too long we should call them. So it’s really designed with this wholesale order flow in mind which most B to C carts are not, not any fault of theirs because it’s not what they are made for, and so we have, we use everything on Order for Circle and it’s really streamlined things for us.
Steve: You know it’s funny, as we kind of doubled into B and B recently, I mean actually from the start we’ve had event planners contact us to buy stuff in bulk and each time what happens is they call us up, and then they place their order that way, so each time it’s a phone conversation so does that imply then with your system like they just go on the website and it’s just all self serve so to speak?
Bill: Yes it can be.
Steve: Okay, okay.
Bill: So there is, they’ll go to you know, nurturemybody.ordercircle.com and they’ll log in and they’ll see their customized pricing you know they won’t know, they only see the one price, but it could be different for different people. So they’ll see their customized pricing, they’ll be able to see all their old orders, they’ll be able to reorder with one click…
Steve: Okay.
Bill: Etcetera and that goes into your, into the order circle back end, so you can see all their orders and then if they— but if they still call you and I’m sure you guys will have you know, I’m sure you have with event planners people who don’t to do that, or they want to order on the phone, there is a back end for you where you just open up orders while they are calling, you can key the order in on their behalf, all their information is already saved. So whether the customer inputs it, or you input it, it all ends up in the same place in the same flow.
Steve: Okay, and I’m just curious, I mean you pose that inventory dilemma which we actually have all the time. Someone comes in and they want to order like almost all the units we have in the inventory, so how do you kind of manage that with your shop.
Bill: So we have in Order Circle, we have built in order approvals. So when someone places an order and when the customer logs in and places an order, it’ll say your order is pending and it sends a ping to one of my sales reps and says hey, your– and depending on which sales rep is signed into their account. Hey, new order login and check it out. So the sales rep logs in and they can see the total inventory on hand and how much was ordered, and then they go, and they decide hey we are going to accept this order as is, we are going to reject this order or I need to edit this order, and you know take it from 500 units to 200 units and then approve it.
Steve: Okay, and so in terms of just your own operations with your store, do you kind of reserve a set of inventory just for B to B versus B to C?
Bill: Yeah, I don’t do it that formally, I just kind of know, I have like kind of a danger zone for like how much I like to keep on hand for B to C, and then I know anything above that is kind of game for wholesale.
Steve: Okay and in terms– since it’s like the wholesale side of the business it seems more predictable, do you just order when it comes to time for ordering inventory based on the months projections?
Bill: Yeah, yeah, I try to guess and some it depends on how long your lead times are. Some wholesale customers are cool at ordering [Inaudible] [00:35:54] in a month. It depends, if it’s not a seasonal product, now if it’s a wedding they probably won’t be cool with that, but sometimes you know they are just going to put your widget on their shelf and it’s not seasonally specific or it’s not anything like that, and there is a one month lead time, they might not like it, but that might be okay.
Steve: Okay, interesting and so Order Circle manages all this stuff as well?
Bill: Yeah, so you can see all the– everything you have on hand, everything you have pending, what’s kind of available to sell and we are also launching soon a sync with Shopify so you can keep your whatever inventory in Shopify is up to date with Order Circle and vice versa, so you never sell anything you don’t have.
Steve: Okay and so just looking at your store kind of like a high level you have wholesale sales, you have B to C, and then you also have Amazon, right?
Bill: Correct.
Steve: Okay, and then all those just kind of tie together and you sell on all channels just full blast.
Bill: Yap, so it is Order Circle basically is like another cart, so I think if we sell on BigCommerce, we sell on Amazon, and we sell on Order Circle.
Steve: Do you find that your retail customers, do they kind of eat into your online sales, or they are just completely separate channels?
Bill: You know, I think we are not big enough, you know and I mean and I’m too afraid for that to happen, I think you would need to be you know a national brand. There is so many people who have not heard of Nurture my Body in America that I think is additive. I really don’t think– the person that is in the store and is going to grab some shampoo is probably not the same shopper that is going to buy some shampoo in the internet, I don’t think.
Steve: Okay.
Bill: And hey, even if it- even if it’s slightly cannibalized it, it’s worth because the overlap is not a 100%, if the overlap is 5%, I still expanded my total market.
Steve: And in terms of just overall sales, is the wholesale portion of your business a lot larger than the rest of it?
Bill: No, not yet which is good because it means my margins are better, no I think wholesale it depends, so for Nurture my Body organics and skin hair care products we do, it’s probably 10% right now as wholesale but growing because we really-
Steve: Okay.
Bill: You know we just started in earnest you know a couple of years ago, but for Ski Bum which is a wind bum protection sunscreen for your face, something that you really want to kind of grab while you are on the slopes right, you forgot sunscreen, that is 90%-95% wholesale.
Steve: Oh, okay, but at the same time you are still driving like paper click traffic and other advertising to your own website, right?
Bill: Yes, yes.
Steve: Okay.
Bill: And they kind of exist really independently.
Steve: Okay, and then is the plan to grow the wholesale business so that one day it’s larger than the rest of yours, like what’s the overall strategy?
Bill: I think that will happen just because I think the ceiling on the wholesale business is higher than on the B to C business. I mean look at– I mean when you look at ecommerce, ecommerce I think the numbers for 2014 are not yet, but for 2013 I think ecommerce was like 11% of total retail sales, which means Brick and Motor retailers are 89% of total retail sales, when you think about it that way. So if you restricting yourself to ecommerce only, you are taking yourself out of 89% of the market, just you are not even addressing.
Steve: I’m just thinking like as an individual business owner there is only like finite amount of resources that you can allocate, and it sounds like this B to B stuff requires a lot of legwork.
Bill: It does unless you use good software.
Steve: Right, and just like how do you allocate your time– like how are you allocating your time?
Bill: So I take– I have a full time sales rep who I hired, who works for me and reps my brands only, and she goes to stores and that’s been good. But then we also have a wholesale section on our website that says, hey if you are a retailer we get leads for this, people would say hey, I’ve been a customer direct for years and I love it, I own this store and I’d love to carry your stuff. I own a saloon or whatever it is and they are like they just submit the form and then we picked up accounts that way too. So if you definitely have mentioned on your B to C site that hey, put in the photo of wholesale information that takes them to a form that says, hey fill out you know how you are and then you follow up.
Steve: Interesting, cool that’s definitely something I’m thinking about looking into and maybe I’ll check out your software as well. Hey Bill we’ve talking for 40 minutes, so where can people find you if they have questions on selling wholesale?
Bill: So you can always find me at rebelceo.com and I have a contact form on there it goes right to my inbox, or if you want to check out Order Circle, you can go orderCircle.com. And if you are a My Wife Quit Her Job listener, we’ll give 25% off forever, so all you have to do is sign up and just reply to the sign up email, and I’ll give you the discount.
Steve: That’s awesome, that’s a generous offer, does that apply to the owner of My Wife Quit Her Job also?
Bill: It does, are you a listener?
Steve: Sweet, sweet, all right Bill, hey man thanks a lot for coming on the show again, I learned a lot.
Bill: Sure, thanks Steve this is fun.
Steve: All right take care.
Bill: See you.
Steve: Hope you enjoyed that episode, while our online store primarily focuses on the consumer, we also have many event and wedding planners that have very similar characteristic to a wholesale customer, and overall I learned a ton about the differences between B to B and B to C from talking to Bill to today, and I hope you did too. For more information about this episode go to Mywifequitherjob.com/episode63 and if you enjoyed listening to this episode, please go to iTunes and leave me a review.
Because when you write me a review, it not only makes me feel proud but it helps keep this podcast up in the ranks so other people can use this information, find the show more easily and get awesome business advice from my guests. It’s also the best way to support the show. And please tell your friends because the greatest complement that you can give me is to provide a referral to someone else, either in person or to share it on the web.
Now as an added incentive I’m always giving away free business consults to one lucky winner every single month, for more information go to Mywifequitherjob.com/contest. And if you are interested in starting your own online business be sure to sign up for my free six day mini course where I show you how my wife and I managed to make over a 100K in profit in our first year of business. Go to www.mywifequitherjob.com for more information and thanks for listening.
Thanks for listening to the My Wife Quit her Job podcast where we’re giving the courage people need to start their own online business. For more information visit Steve’s blog at www.mywifequitherjob.com.