Comission Charges?

[sam09]

Hello,

Not sure if this is the right place to post but had a wee question and didn't know the sort of in and outs of the situation I am in, as it is my first time selling.

Basically, I should hopefully be selling my stuff in a boutique. However, I am trying to type up my price list but the owner will not tell me the amount of commission they plan to take until they see my prices, or whether they plan to take commission from my sale price or if they will add on their own mark up and take that as commission.

Am I wrong in wanting to know this before handing over my price list? As if the commission is quite high(some boutiques charge up to 50%) I need to at least try and recoup some of that from my selling price to make sure I am making money and not loosing it? No?

Do I have the wrong idea about how this works? And I'm confused as why she can't tell me? Is this usually how this all works?

Sam

 

[Former Member 1]

Briefly... First thing to get your head 'round is it's NOT 'commission'; not unless the retailer is acting as a 'facilitator' to set up a direct sale between yourself and the end user...

It's a mark-up... And that mark up has to cover all the retailer's overheads plus their profit. That's how shops work if you think about it... They buy stuff for 'X' pounds, it costs them 'Y' pounds to open the doors of the shop and they need to make a profit 'Z' pounds...

X+Y+Z= The price on the ticket!

You need to work out two prices for what you sell. First is your base price... Briefly this is your manufacturing cost plus manufacturing overheads plus margin... You CANNOT afford to receive less than this figure for your goods...

How the retailler marks this up basically isn't really your concern... You just need to agree a unit price (trade price) you receive for each item sold... If they're taking them on sale or return though be careful the agrement's fair and watertight...

YOUR OWN retail prices should be based on the trade price plus what it costs you to make your sales plus a mark up. Try to NOT undercut your retailers on the same item.

...Obviously the retailling game isn't just quite as simple as that; but there's the bones of it.

 

[sam09]

Well in a way she is acting as a facilitator, as I will not be doing any selling.

Also if your explaintion is the way to go why is it called commission it makes it so confusing for the likes of myself. Also as when I asked how it will be worked out I don't get an answer. As so many shops do it differently.

I know obviously how larger shops work, they buy at trade orice etc...but in some shops-as I know of some designers who sell in simillar style shop, the 20%, 30% or like I say the 50% comes off what their arment/item is sold for hence why I just feel I need more clarification on the way it should work.

I have worked out my trade prices, it would just help to get my head round it all to know how it would all work.

Sam

 

[stugster]

You are, in essence, the manufacturer. Once you've sold the item to the retailer, or agreed a price with them, what they sell the item at isn't your concern.

As Matt says, watch out for sale or return. If the retailer doesn't sell the items in their shop, they'll just return them back to you and not expect to be charged.

Another biggie is faulty goods. Are you able to keep a satisfactory quality for each item, and do you have the ability to rectify the problem should an issue arise?

 

[Adventurelife]

Get the word commission out of your head. See the what Matt said above

You just need to make sure you are selling to the retailer at a price that covers all your costs and leaves you with a profit.

What the retailer then sells to the consumer for is no concern of yours , apart from it will let you know what the direct sales market price for your goods are.

As you build up your retailers you need to have a range of prices that cover all your costs example

Retailer 1 sells 20 of your product a month they get price x

Retailer 2 sells 50 of your product a month they get price y

Retailer 3 sells 200 of your product a month they get price z

Ensure you have enough built in margin in your product that you can give a range of prices to retailers depending on the volume sold and still have enough leave profit in each and every garment.

As the other have said watch sale or return. Avoid it if at all possible it leads to issues and drains cash flow

 

[kmbookkeeping]

I wonder if I can see where the confusion is.

From what I read, you're NOT selling the goods to the boutique. They are letting you display your goods in their shop. They are selling the goods on your behalf and taking a cut for doing so, am I right?

Kris

 

[Mike Lewis]

I have to agree with Matt and the others.

Your only concern should be to agree the price that the retailer pays you. And also to make sure that it is a "firm sale" - as opposed to sale or return. You need to fix a price that is high enough to cover your costs and give you a profit, but not so high as to price yourself out of the market.

If the retailer is claiming to be selling the goods on your behalf on a commission basis -- well, I can only say that that's not the usual way it works. It might be a signal that you should look elsewhere for your business.

One other point .... and please don't think I'm deprecating your efforts ... but if you haven't yet grasped the basic concepts of wholesale and retail and markups and margins, perhaps you better take time out to learn more about business methods before you go much further. (I really do mean this as constructive advice.)

Mike

 

[Former Member 1]

I wonder if I can see where the confusion is.

From what I read, you're NOT selling the goods to the boutique. They are letting you display your goods in their shop. They are selling the goods on your behalf and taking a cut for doing so, am I right?

Kris

That will probably be how they're framing it...

Mike puts it tactfully... That's a skill that I lack. :001_unsure:

To me this just sounds well dodgy!

For one, when you, as a member of the public go into a retail store and buy something your contract is between yourself and the retailler... NOT the manufacturer.

Commission sales where the 'retailer' acts as agent for the manufacturer are rare; and only really appropriate to very high value items. ...Bespoke jewellery, art, antiques, cars etc. They need to be carried out in a certain way and are just way too complex for day-today general retail sales.

Even then the agreement between agent and supplier needs to be VERY carefully thought out and agreed beforehand; if you're going down this road you need your lawyer to give it all the once-over... And essentialy the same principal of trade price + cost of sales + profit applies anyway...

If you're selling £3000 bracelets this route might be appropriate...

SO I'm afraid all this 'cloak and dagger' stuff on the part of the owner seems rather suspicious to me; I am tempted to quote the redoubtable Ms Dunbar on this one!

What manner of 'flanker' are they attempting to pull? What part of the Sale of Goods Act are they attempting to circumvent? Or do they just see a youngster keen to make their way in the world and want to try it on?

As I have friends who work in the fashion and design industries I am aware that there are certain store owners who are highly impressed with themselves and imagine they're doing young designer's a favour by trying to work this way. Others simply recognise that it aids THIER cashflow and imagine it can help them abdicate their responsibilities...

Either way they're taking the P.....

Sam; just tell the woman what you need for each item sold. If she starts waffling or trying to BS you tell her where to insert her shop and walk... You're better than this and deep down I think you know it...

This ISN'T how honest, competent, professional people work...

 

[kmbookkeeping]

You're right the contract is between you and the retailer, and working on commission sales are not really any different. All it means is the retailer doesn't pay the manufacturer until they sell the item. Think dropshipping.

Commission sales can be on low cost items, greetings cards is a good example.

To be honest this method probably helps the retailer and manufacturer. For the retailer it aids cash flow and for the smaller manufacturer it gets their goods on the market and in places they probably wouldn't otherwise be able to. It's horse for courses.

The most important thing is that the deal is transparent, which seems to be the issue in this case. I suppose the question the OP needs to ask themselves is how much do they want their products in this store?

Kris

 

[Former Member 1]

Commission sales can be on low cost items, greetings cards is a good example.

To be honest this method probably helps the retailer and manufacturer. For the retailer it aids cash flow and for the smaller manufacturer it gets their goods on the market and in places they probably wouldn't otherwise be able to. It's horse for courses.

That's Generally S.O.R. surely? In a retail context at least. This is where the confusion's arising...

One of the businesses I'm involved in sells limited-edition prints that way. And, as you say the bottom line is the deal is very transparent. We specify exactly what the price of each unit is. The retailer agrees either to sell it or return it within a given period of time. We also stipulate that they need to keep the goods insured , safe and in good order etc...

IF the goods sell we're selling them to the retailer; NOT the customer!

A commission is what (for instance) ebay or a physical auction house charge... Legally the sale is between vendor and end user with the 'store' merely functioning as a venue ... For which service they charge a proportion of the final sale price...

Or where say a PR company puts a client in touch with us... If We make the sale (and that's the important distinction) we pay 15% commission once the client coughs up...

If THEY hire us directly and sell on to their client they get a 20% discount from the rack rate (retail price) and can put whatever mark up on that they see fit...

They're very different things...

 

[kmbookkeeping]

I am happy to be corrected, but I understood sale or return to be subtly different. In that you must buy the goods in the first place, and if they dont sell you can return them by an agreed date for a refund or credit note depending on the agreement.

My understanding from the OP is they are not selling the goods in the first place but allowing the shop to display and sell them and only pay once the goods are sold.



IF the goods sell we're selling them to the retailer; NOT the customer! - This point I think we all agree on. It just happens in the reverse order as it normally would, i.e the retailer sells the goods to the customer THEN buys them from the manufacturer/wholesaler.

A commission, in this instance, would be the retailer fee for selling the item. Just a saleman may get a commission from their employer for selling an item.

We agree commission and markup different, however they can both be used in this instance.

Kris

 

[Former Member 1]

I am happy to be corrected, but I understood sale or return to be subtly different. In that you must buy the goods in the first place, and if they dont sell you can return them by an agreed date for a refund or credit note depending on the agreement.

My understanding from the OP is they are not selling the goods in the first place but allowing the shop to display and sell them and only pay once the goods are sold.

IF the goods sell we're selling them to the retailer; NOT the customer! - This point I think we all agree on. It just happens in the reverse order as it normally would, i.e the retailer sells the goods to the customer THEN buys them from the manufacturer/wholesaler.

A commission, in this instance, would be the retailer fee for selling the item. Just a saleman may get a commission from their employer for selling an item.

We agree commission and markup different, however they can both be used in this instance.

Kris

Whatever Kris...

We certainly retain title on all goods 'till they're paid for...

S.O.R. DOESN'T mean the retailer has to buy the goods to sell them; it means WE supply goods for THEM to put in their shop... They remain our property...

Advantage to them is they don't have to lay out cash for stock they may not shift... Advantage to us is we get a venue...

As you gave the example of greetings cards here's an illustration

Colneis Cards

"We can supply you with a selection of quality greeting cards on a sale or return basis. You only pay for the cards that you have sold. Cards are paid for at each service visit and new designs are added to keep your display looking fresh. "

Clearly here the stock remains the supplier's property until sold when the retailer needs to pay for them....:001_rolleyes:

More examples?

Sale Or Return

Sale or Return | one world shop

Sale or return

As for the salesman example... Think 'Kay's Catalogue' ; the DEAL is between the supplier and end user... The salesperson gets paid their commission from the supplier after the transaction between the supplier and end user is completed....

If you work as a commissioned salesperson your job is to set up deals between supplier and end user. NOT between yourself and the end user; which is what a retailer does...

Pretty sure there are legal implications to the distinction too... :001_unsure:

 

[kmbookkeeping]

Whatever Kris...

I'm sorry, I thought I was on an adult forum where various points of view could be discussed without anyone resorting the the above.

I did say:

I am happy to be corrected

However I feel there is a right way and a wrong way to do this.

I will now bow out of this thread as I feel it has now degenerated. It has turned into a game of semantics. My purpose was to explore a point of view that I felt was being overlooked.

Kris

 

[Former Member 1]

Kris, I'm genuinely sorry if I've offended you but I've absolutely no time or patience or tolerance for games... If you want to argue that pigs are really sheep... well whatever Kris! It's not about opinions it's about facts.

Sam's a young lass trying to find a way forward into the business world. Mike very gently made the point that this is a pretty basic area she needs to gen up on; and it's perfectly understandable she's unclear on the point.

But I'd expect people with a bit more business experience and knowledge to know better!

As far as I'm aware thare is an important legal distinction. So no, it's not by any means a simple matter of semantics. It could be ignorance on the part of the retailer, or it could be someone trying to pull a flanker on a young lassie trying to get a foot on the ladder...

 

[Brian McIntosh]

I thought forums were a place where people could voice their opinions. Not everyone's perfect and human nature dictates that people will make mistakes. Doesn't mean they should get humped for it though.

 

[Former Member 1]

I've honestly really not the patience or the time for this...

And if I was to come on here as an imaging professional and insist that a 640x480 72dpi Jpg was fine for blowing up to A0 poster size? Despite perhaps yourself explaining why that's wrong your reaction would be?

Maybe YOU'D be pointing out that someone in my position really ought to know better about something so very basic? Opinions are one thing, facts are another.

As I say... Whatever! I'm just trying to make sure a young lass doesn't get ripped off...

But I'm quite happy to bugger off and leave you all to it if you'd prefer to have just another lame pseudo-business forum full of half-assed dreamers talking crap and flogging snake oil... I've got clients to see to!

 

[Mike Lewis]

I'd like to try to bring this discussion back to the original question, and try to summarise the advice that I think Sam is looking for:

1. Sam, fix your own price for your products. The price should be high enough to cover your costs and give you a profit, but not so high that no-one will want it. This is the price that you will charge to the shop.

2. Forget commission. Fix the price that you charge to the shop. Let them worry about how much they will sell it to the public for.

3. If in doubt about how much to charge, be guided by the price of similar products on sale in your area. As a very rough rule of thumb, your price to the retailer should be between 50 and 66 percent of those prices.

4. Keep in mind that retailers exepct to buy good on credit. You would normally allow them 30 days to pay (or whatever is customary in your trade). Don't be afraid to chase them if they haven't paid within that time, and be prepared to stop supplying them if they go well beyond it.

5. In your price list, make it clear that you supply goods on the basis of "firm sale" only. You should not accept returns except in the case of faulty or sub-standard goods.

6. Also make it clear that you "retain the title of all goods until paid for". But don't make a big deal of this. It's a standard clause in most dealings of this kind, and should go in your "small print". It doesn't mean that the retailer is not free to sell the goods, and it doesn't make the retailer your agent. It simply means that you would seek to reclaim any unsold goods if the retailer went bust.

7. Learn all you can about this area of business before you go too much further. Read all you can about wholesale, retail, pricing, credit control, etc. Check your local library for books on these subjects, or look for trustworthy small business websites.

Above all, don' let any of this discourage you. Starting a new business venture can be daunting , but if you succeed the rewards will be substantial (and I don't mean just financially). Good luck.

Mike

 

[sam09]

Hello,

I don't have time to read all of this but I will put what I have learned so far from my experience with talking to other boutiques and from friends and people I know who sell in boutiques.

Boutiques do not buy garments from designer as a shop such as Topshop or New Look would. As if they did this and paid X amount for that garment and it did not sell then they are making a loss. Instead they showcase and sell garments on the behalf of designers and take their cut to pay for displaying it in their store which they pay rent for, their staff selling it and giving you a chance really to get your work out there which can be really hard.

And from what I knwo this is how most boutiques work. As a boutique is meant to be more indiviaual than a high street store and to buy in various designers constantly would cost a lot of money and be a risk.

All I wanted to really know is whether it was my right to know whether this comission would be coming off my price or added on top.

It has all been sorted now and is all good. I know what I will be getting for each item I sell and I'm happy with that.

Thanks for all the help and comments and I will read it all later. I didn't realise it had got so heated :S :blush: but will take on board everyones comments.

Thanks,

Sam

 

[sam09]

I think I came across a wee bit not how I intended above.

What I meant to say of what I knew I didn't mean that was concrete the way it goes
Just how I know of how it works. As everywhere is different.
Where I was confused in the begining is that I had thought I had an idea of what would happen
E.g as it the comission fee, I just didn't know if it was normal or not for the retailer to tell
You before of after you agree prices etc...

I must admit I do have plenty to learn, why is why I ask lots of questions. I'm not stupid but
I don't know it all which why I find this forum so brilliant. And I appreciate the fact that I get
Honest opinions.

On a subject like this I think it is different everywhere as regardless of what the facts are people do and say things in their own way and call it the same thing, if that makes sense. Hence why there could be different answers if you were to ask each diferent seller of goods.

All in all I just want to say thank you for all the help on the forum and glad I found it. As hopefully I will be more prepared for all that is hopefully ahead

Also sorry for the slightly cheesy speach lol

Sam

 

[Scottish Business Owner]

Hi Sam,

I think the positives we can take from this are that things are moving forward for you. Your doing what any real small business should do when they first start up start selling a few items and just seeing where it takes. The formal stuff can come a little later when you have funds to get on top of them.

Please keep asking the questions as lots of people read threads but never feel confident enough to post and ask their own questions. This site is aimed at small businesses across Scotlabd and you're an excellent case in showing that forums like these can actually work.