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Old 10th May 2013, 09:09 AM   #1
broudie
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Posts: 67
Default Wholesale Sales - Pricing Strategies?

I'm starting to get into selling my goods wholesale. I'm trying to figure out how to tier my pricing. Here are the relevant facts as I understand them.

- I sell my goods retail at 4X cost
- After comparing my goods to others offered wholesale, a fair floor (maximum discount), is about 2X cost

My questions are around the following:
- at what levels do I create tiers between retail and wholesale (maximum discount)

for example:
1-10 units [email protected]
10-100 units [email protected]
100+ units [email protected]

I am clueless at what the tier numbers are (how should I base the range of units per tier) and what the tier discount is (how much should I sell at these range of units)

My goals are the following:
- maximize my profit per transacation
- create incentives for the wholesale buyer to purchase more

If you have experience on this or know any rules of thumb to follow, your input is much appreciated.

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Old 23rd February 2014, 04:49 PM   #2
ShortcutAccount
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Pricing strategies really come down to a game between lowering your profit margins in hopes of attracting higher sales volume
that ultimately results in more net profit dollars. Think Walmart and Costco...low profit margins, but it has helped increase sales volume and resulted in net profit dollars that are acceptable for investors.

When we started selling our LED lighting products into industrial plants we had high profit margins. But as we grew, the larger electrical distributors took notice and wanted to start carrying our product line.

Since the distributors had already developed relationships with many more plant foremen and facilities globally over the years then we had, it only made sense to reduce our profit margins and make room for them, in hopes that our sales volume would grow substantially. It did.

So we essentially had two separate price sheets. A suggested retail price sheet we would use when we sold direct, and a distributor pricing sheet that was reduced, allowing distributors to reach their profit margin goals (they usually wanted 20% to 30%)

Eventually, some of the distributors wanted additional discounts as they started placing higher volume orders. So we not only had to have two price sheets (a retail and a distributor) but then we also had to create a volume ‘tiered’ pricing sheet like you mentioned.

To come up with a pricing strategy, we had to keep a balance between 3 things:

1. Is the retail price in line with what the consumer is willing to pay;
2. Is there enough profit margin for your distributors to keep happily pushing your product instead of your competitors;
3. Is there enough money left over to cover your fixed overhead, hit your break-even point, and reach your net profit goals

At the end of the day, the best way to create a tiered pricing list is to run a bunch of ‘what-if’ scenarios based on different potential volume orders, and make sure that in every possible case, you’ve covered each of these 3 objectives.

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Old 8th October 2014, 06:46 AM   #3
andrieskcs
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Default Wholesale pricing

Nice posts.. shared lot of information. Thank you.

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Old 4th November 2014, 04:57 AM   #4
ekhantil
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well the prices are totally different based on three things
1 if you are the manufacturer of product than you can decide your prices
2 if you are only a stockist than you have to add your profit margin
3 if you wholesale and deliver your product than you have to increase your product prices

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Old 7th December 2015, 08:05 AM   #5
dsekar
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Quote:
Originally Posted by broudie View Post
for example:
1-10 units [email protected]
10-100 units [email protected]
100+ units [email protected]
My past firm was following above method, working well which depends upon your products or catelogues.

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Old 22nd December 2015, 04:48 AM   #6
chinadivision
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According to our order fulfillment customers' feedback. Their profit of retail can be up to 30%-50%. And the profit of wholesale can be 10% - 20%. Hope the above will help you!

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Old 22nd December 2015, 07:00 AM   #7
HCFGrizzly
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Quote:
Originally Posted by broudie View Post
I'm starting to get into selling my goods wholesale. I'm trying to figure out how to tier my pricing. Here are the relevant facts as I understand them.

- I sell my goods retail at 4X cost
- After comparing my goods to others offered wholesale, a fair floor (maximum discount), is about 2X cost

My questions are around the following:
- at what levels do I create tiers between retail and wholesale (maximum discount)

for example:
1-10 units [email protected]
10-100 units [email protected]
100+ units [email protected]

I am clueless at what the tier numbers are (how should I base the range of units per tier) and what the tier discount is (how much should I sell at these range of units)

My goals are the following:
- maximize my profit per transacation
- create incentives for the wholesale buyer to purchase more

If you have experience on this or know any rules of thumb to follow, your input is much appreciated.
It really depends on your costs and if you are the manufacturer of the goods you are selling.
If your normal price is 100$, you should go for:

1-9: normal price (100$)
10-19: 70$
20-99: 60$
100+ : 50$
You should also think about some bonuses when a buyer reaches some goals, for example, when a person reaches the 500 mark in a given period you should give a supplementary discount or a number of free products.

You can also think about finding affiliates and offer them tier based discounts like I have mentioned above.
For example, I`m working as an Affiliate Manager for a brain supplement company and we offer the following commissions:

10+ : 30% commission
20+ : 40% commission
100+ : 50% commission

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