Q&A: How can I pay wholesale platform commissions and still make a profit?
One of our wonderful community members, Ann, wrote to us the other day with a question that may sound basic to some. But it’s a question that so many folks struggle with… and feel like they’re missing something.
Ann asked:
I have a question for you. If Faire or another wholesale platform is charging 15-20% commission on orders through them, should I mark up my wholesale price 15%? I have it structured that wholesale is 50% of my retail price. So would I now price my products at just 35% off the retail price in order to still end up with a profit?
And here’s my answer:
Hey Ann! That makes rational sense as a plan but unfortunately when it comes to wholesale, it doesn't really work to do that. There are two things that are important when it comes to wholesale pricing:
that the wholesale price is the same for all retailers, regardless of where they buy
that the wholesale price is no more than 50% of the retail price.
People try other approaches but I've found that retailers have a very negative reaction if they feel like they're getting a different price than someone else... or if they're paying more than 50%. That means that if you're going to pay a platform commission, it has to be absorbed by you (in the same way a credit card fee would be). If you don't have the margin to do that AND make a profit (understandable!) then wholesale platforms like this just aren't a good fit.
Hope that is helpful! And if you’re looking for a deeper dive into wholesale pricing concerns, check out How to Make Pricing Work for Wholesale: 5 Things to Try.
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