Wholesale: Common Terms and Definitions

Sara WagnerBusiness & FinanceLeave a Comment

Once you’ve established your business and have been actively selling at fairs, markets and shows, you will really start reaping the rewards of your hard work! There are few things more satisfying than watching your business grow, and knowing that the success of it settles squarely on your shoulders.

As your business grows, new opportunities will present themselves; the ability to donate products for charitable causes, sponsorship opportunities to get your name in front of more diverse audiences, and wholesale opportunities that will get your product in big name stores and in the hands of more customers. This wholesale level is very exciting, but can present a challenge for those that are not familiar with the process; so today, we are going to cover a few basic terms in wholesale so that you can dive right into the business of growing your empire.

Wholesale: When you sell wholesale, this means that you are selling a bulk quantity of your product at a reduced cost to another company so that they can sell the product at a more retail-friendly price. This is not the same as selling in bulk to an individual so that they can use the product for themselves (although you can do this and charge wholesale pricing). Wholesale accounts can be small businesses or larger corporations and each will have their own needs when it comes to quantity and type of products they need.

One question we hear a lot is, “What’s the difference between wholesale and consignment?” Consignment means you will not receive payment upfront from a retailer; they will pay you a percentage of the sales, but not until after the product has sold. Although consignment is considered a good way to get your foot in the door, generally it is advised against in the handcrafted soap and cosmetic industry.

Vendor Information Form, Catalogue, Line Sheet: These are various ways that you will distribute your information to your buyer. A Vendor Information Form is a complete resume of data on your company that you may be asked to provide to the retailer (also called a line sheet). Information on this sheet will include your company’s name, address, methods of contact and possibly basic pricing information. This is an “at-a-glance” type sheet that will be helpful for buyers when they need to contact you.

A catalogue is a more comprehensive look at your products. This can be a booklet or a brochure if you prefer, but should have intricate explanations of your products with accompanying pictures. These will not be “action” pictures, although a few photos of your product in use or with tasteful decorations are a great way to spice up the catalogue; the product photos themselves should showcase the product on its own, so that the buyer can see if it is what they are looking for.

MSRP: This stands for Manufacturer’s Suggested Retail Price, and it is very important when negotiating pricing. This is the price that you will recommend to your buyer/the retailer for them to sell the product at; this well help to retain your product’s integrity in the marketplace, while also giving the retailer valuable insight into what is fair for the item. Another common term in relation to MSRP is MAP (Minimum Advertised Price). We won’t get in depth with these two terms in this article, but it is very important not to overstep the line between a suggested retail price and a required retail price.

SKU (Stock Keeping Unit): Although they are often used interchangeably in conversation, don’t confuse a SKU with a UPC. A SKU is a unique number that identifies each individual product; think of it as your product’s social security number.

UPC (Universal Product Code): If you’ve been in a retail store at all since 1974, odds are pretty good that you’ve seen these little buddies around. UPC’s are a bar code that is scanned by a store’s register for checkout purposes. Unlike a SKU, you don’t need to have a unique UPC for each item-generally speaking, that is. Some retailers will require that you do for tracking purposes.

Net Terms (NET): NET, simply put, is how much time you give the retailer to pay for the products you’ve sent them. Most wholesalers will give a bit of time-anywhere between 10 to 90 days. That’s not a very specific guideline, we know! It’s nearly impossible to tell you which terms will be right for your specific business. You’ll hear this time period referred to NET 10, NET 30, etc-this is NET + the number of days given as a billing cycle.

Terms: The terms you provide are the basis, the fundamental core of your wholesale deal. Usually these terms will have provisions for the first order, subsequent order amounts, NET, returns, shipping, and other basic selling terms. These terms are also referred to as a Wholesale Agreement, which will give a comprehensive list of the terms and conditions and will be signed by both you (the manufacturer) and your customer (the retailer).

Final Thoughts 

Learning to operate in a wholesale atmosphere can be a challenge, but don’t let it intimidate you! Scaling your business will be on the top of your mind, and we can help. Check out the HSCG How-To Library to help you get started!




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