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Wholesaleing

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  #1  
Old 08-24-2001, 12:37 AM
Doug Nelson's Avatar
Doug Nelson Doug Nelson is offline
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Wholesaleing

So many have mentioned the possibility of getting work from a 3rd party (rather than directly from the client) that I though some things should be said about 'wholesaleing'.

Generally, the idea is you supply the 3rd party at a discounted price, and they resale at a higher price (perhaps your undiscounted price, perhaps more, it's up to them).

Some thought needs to go into the justification of lowering your prices, however. Sure, they're finding customers for you, and that's worth something. But you also need to consider what else they need to do to justify this discount.

I don't do restoration work via 3rd parties (but I sure get asked a lot), but I did spend the majority of my adult life working in the wholesale industry. The 3rd party has some responsibilities that are pretty standard (and it's also pretty standard for them to try to get out of them).

The 3rd party (let's call him the dealer from here on out) has the responsibility of interfacing with the client. They're his headache, don't let him foist them off on you (otherwise it's not reselling, but a referral, which justifies a much, much lower fee).

The dealer has the responsibility of not being a headache on his own. After some initial hand-holding, he should be able to field virtually all questions (make up a faq for him if he's totally clueless).

The dealer has the responsibility of paying on time. Reselling is different from a regular sale. It's typical that they pay at the end of the month. Making sure he's good for it is YOUR responsibility. And don't stand for lateness. It will be abused if they learn you're a pushover. If you can work on a payment-per-job basis, good for you.

Depending on the dealer, other areas of responsibility that can help you out are handling the scanning and printing (ie: you get a file, work on the file, deliver the finished file and you're done). But this will be highly unusual, since it sounds like most of the dealers asking for work have nothing to do with scanning or printing. But don't count it out as a justification for a discount.

Other thoughts:

Is the dealer representing your work as his service, or you as an outside worker? If the latter, put your contact info on a tasteful line in the white space under the photo. Cards and brochures can be 'lost' by the dealer, and info on the back can show through or cause other possible problems. If you have access to the client's name and contact info, write it down.

Have it clearly worked out with the dealer if there should be pricing anywhere the client could see it.

That's enough for now. More as needed.
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  #2  
Old 08-24-2001, 02:02 AM
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Ed_L Ed_L is offline
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Basically what you're saying is that the price you are paid is based on just how much work you are expected to deliver, and that makes a lot of sense.

The one thing that newcomers in the business need to establish (for themselves) is just how far they can cut prices for something like this (or any business transaction). In almost all businesses, the *main* reason you are in business is to make money. The way to find out how to price your work is *not* to go by what others charge. That should only be used as an *indication* of whether you have a chance to make it in business with your current business practices. Every single cost must be taken into consideration, and there are some that tend to hide from you. For instance, you have a home computer that is used by the family. It is easy to think there is no cost for you to use this, but actually there is. There are also costs for upgrading equipment, and countless other things that may not be apparent at first. Some costs hide better than others. After you take into account every single item, then is the time to look at what the competitors are charging. It's okay to be at the high end of the current scale, but it's not okay to be at the low end of the current scale if it means that you're losing money. If you find that your costs will not allow you to sell even at the high end, then you either need to make some adjustments, or forget about trying to make it. If you just want to improve your skills, do it at a site such as this one. You have no deadlines to meet, no hassle over cost of product, and since there is no pay involved, you do not need to consider how to handle the customer who got out of bed on the wrong side. You have *no* responsibilities.

Sorry for getting off on this line Doug. But I can see the possibility of someone walking into a bad deal with a swift talking business associate. You simply *have* to know how to price your work.

Ed
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Old 08-24-2001, 09:27 AM
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thomasgeorge thomasgeorge is offline
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Doug, When approached to do 3d party work I will readily accept it but I give a 10% discount and thats it. Thats 10% on the total final price. NO FIXED RATE JOBS PERIOD. My policy has been, as regards payment, and probably will continue to be " IN GOD WE TRUST. ALL OTHERS PAY CASH". I am sure not billing has lost me some work but at least I am not out hours of work, materials etc.. I still have reservations about credit for ANYONE. For those who have more wiggle room as it were, the situation is different but all should be aware that doing 3d party work introduces a new level of complexity and you must make yourself aware of all angles pertaining to that aspect. A contract signed by both you and the 3d party covering payment agreements etc., would be a real GOOD IDEA. Anyone considering "wholesaling" would do well to go back and read your post a couple of more times thenstart investigating. Tom
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Old 08-26-2001, 10:13 PM
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thomasgeorge thomasgeorge is offline
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Anyone else have some thoughts on this.I think that what is today considered in the grey area between legitimate business and hobby is going to really take off as a respected field in the not so distant future and there will be markets emerging which will be of a "contract" or wholesale nature. Learning how to respond to them is going to be a survival skill. IDEAS? Tom
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Old 08-27-2001, 07:34 AM
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I think that charging by the amount of time spent is a good idea for the restorer, unless you can be pretty darned accurate on your estimate of the amount of time it will take to do a job. This can also be good for the other party because you can't afford to get burned very often, so you are forced to put a fixed price on something rather high. This doesn't mean that you work for $5.50 per hour. Another upside of this is that when you get the customer we all hate to see, he is more likely to be satisfied with your work the first time around. The downside might be that the other person wants a firm price on the work before leaving it with you. Just some thoughts.

Ed
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Old 08-29-2001, 08:01 AM
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Chris W. Chris W. is offline
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Well I guess I've been lucky as a "wholesaler" to a 3rd party.

I've been working with a photo lab in the small town near me for a while now and it's worked great. They deal with the customers and I've educated them enough I guess on what to look for and ask as so far all concerns regarding the photo and restoration have been covered.

As far as payment they have consistently paid on time.

Now if I were in a big city I might not do this as it might not work as well.

The markup from them is very very minimal, I mean maybe 10% or less, so it's not a huge amount they're getting but they like the ability of offering this service to their customers.
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Old 09-04-2003, 04:40 PM
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Jim Conway Jim Conway is offline
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Retail math anyone?

I've found these posts very interesting and perhaps the ideas advanced on "pricing" here may help to explain why we have to go to established businesses to out service our work overflow rather than out servicing it to individuals. (I've sure tried to approach independents including help wanted ads here)

The point is that I cannot figure how or why anyone in business would agree to handle an order at retail for 10% of the gross!!! Or maybe there is something here I'm not understanding???

What about the cost of securing a new client - our YP advertising and other promotions comes in at 23% - in house sales costs (someone does have to take care of the customers right?) adds another 14% and the basic overhead isn't free for retail space - so that adds another 7%.

So here is the math - we are a dedicated business and do nothing but photo conservation work - printing and restoration services included. Of the total income, about a third of it is in charges for "art services". Now if that third contributed 10% or less to our cost of doing business, where do we get money to pay the bills? The only alternative would be to overcharge for all other services! The fact is I don't think that 10% would do much more than cover the cost of our bank card fees and order forms - and if any "sub" job proved to be rejected and we had to refund, it could put us out of business.

Retail markup are generally keystone - and if any shop will carry any line at less, the owner must be a family member or a nut with a business death wish!

I opt for paying someone a fair price but what we charge on the retail end is not really their business unless they care to join the Company as an associate and pick up their fair share of the expenses as well as the income like any other professional would have to do..

Jim Conway

Last edited by Jim Conway; 09-04-2003 at 04:46 PM.
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Old 09-04-2003, 09:51 PM
Vikki Vikki is offline
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In response to Jim:
Unless I'm mistaken, your business is proportionately conservation and restoration. I think many of the people here are doing work for labs or shops that aren't specialized, as your business is.

I think one reason a shop/lab would be willing to accept 10% profit, is that they are not able to offer this service on their own. A smaller business probably cannot afford to hire a full time person and may only need this service on the "if come". By outsourcing they can offer their customers an extra service, make a 10% profit, and keep the customer from going somewhere else.

I'm speaking as someone who is currently doing freelance work as mentioned above, and working in house for a studio with it's own lab. Being able to take an order and pass all the work off to a freelancer is a lot easier, and cheaper.
Vikki
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Old 09-12-2003, 12:46 PM
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Jim Conway Jim Conway is offline
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Thanks for responding Vikki - however, my point was that the 10% is not "profit". As I've understood these posts, it's the gross being talked about here and on that basis, I was (am) questioning the feasibility of it as there must be some expenses involved in the sales end of the deal. No one stays in business selling at a loss. Even if it's considered a "service" marketing tool. treated as a loss-leader - it's usually temporary at best.

It does bring up another point however, when you are servicing another "store" or retailer - are you delivering a final product or is the 10% markup allowed them (as discussed here) cover only the retouching?

I've owned camera stores, a chain of studios in shopping centers and other businesses before I went into this one a decade ago - so I'm not just looking at it from my current business - there has to be room somewhere for the retailer's side of these deals to make money or any arrangement to sell your work will be short lived.

I could see some value in it if the deal offered the retailer is strictly "consignment" with a 100% packaged product being provided along with a 100% guarantee that it will deliver ...something like the Bakery agreement with your local supermarket where the retailer provides nothing more than "shelf space".

So many people here talk about going into the business that I think discussing the "cost factors" (both sides) is pretty important information for them. Even if you and a few others have a 10% arrangement with a local shop, any assumption that most camera stores or other outlets might be anxious to sign on to a 10% deal is like believing you can buy a course in real estate and get rich with no money! While it might happen, it seems to me that the odds are right up there with the Lottery.

Where am I wrong about that?

Jim C
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