Navigating Wholesale Commissions: How to Maintain Profitability

Smart Pricing Strategies for Handmade Entrepreneurs

Are you feeling the pressure of wholesale commissions cutting into your profit margins? You’re not alone. A lot of handmade sellers grapple with this challenge, especially when using platforms like Faire that charge hefty commissions.

One of our community members, Mary, recently posed a question that many others might also be wondering about. She asked if increasing her wholesale price by the commission percentage would still keep her products affordable and profitable. If you've ever felt unsure about how to price your products for wholesale while ensuring you still make a profit, this post is for you.

Let’s break it down.

First, it’s important to understand that your wholesale price needs to remain consistent across all retailers. If you set your wholesale price at 50% of your retail price, you should stick to that structure. Adjusting your prices based solely on platform commissions could alienate retailers and undermine your pricing strategy. Remember, retailers want to feel like they are getting the best deal, not that they’re paying more than others for the same product.

So, what does this mean for you?

You will need to absorb the commission costs just like you would a credit card fee. This approach ensures that your wholesale pricing remains fair and transparent. If your current margins don’t allow for this, it may be time to reevaluate your wholesale strategy.

Consider rethinking your pricing structure before jumping on board with a new wholesale platform. You may find that a different approach could yield better results in the long run.

To get ahead of this situation, consider the following tips:

1. Evaluate Your Costs: Before deciding on your wholesale price, analyze all your costs to ensure you’re covering everything, including platform fees, production costs, and shipping.
   

2. Create a Sustainable Pricing Strategy: A well-structured pricing strategy allows you to remain competitive while also ensuring profitability. If you need to adjust your retail prices, ensure that your retail pricing is still attractive to your customers.
   

3. Explore Alternative Platforms: Not every wholesale platform is the same. Some may offer better commission rates or more favorable terms. Take the time to research and find a platform that aligns with your business goals.
   

Real-World Example: I've worked with many sellers who were hesitant to absorb wholesale fees. After re-evaluating their pricing strategy, they decided to slightly increase their retail prices, allowing them to cover the commissions without pushing retailers away. As a result, their sales grew (some multiple six figures), and they maintained solid relationships with their wholesale partners.

By navigating your pricing strategy wisely, you can absorb commissions while still making a profit. Remember, it’s about finding that balance between providing value to retailers and maintaining your bottom line.

Question for You:  Have you had to adjust your pricing strategy to accommodate wholesale commissions? What changes did you make to ensure profitability?