What to consider before approaching a store to sell my wares
October 4, 2023 1:03 PM Subscribe
I like to be crafty as a hobby, and have found a niche product that I both enjoy making and seems to appeal to a lot of people. I am considering expanding my market a tad but don't want to go the etsy shop route. There is a local store that I think would fit my product well. Before I even approach them, what should I consider?
My idea would be to approach this shop and see if they would be interested in selling some of my items. I would produce a certain amount and also be able to take orders for specific items. A few things I'm specifically wondering about:
1) I do not have a business entity set up - should I?
2) This shop owner handmakes things that are similar but not exactly like mine, and I don't want her to steal the idea. As an example, say she sells bedazzled earrings and I sell bedazzled sunglasses. How can I prevent her from looking at what I bring her and then starting to bedazzle her own sunglasses?
3) What should I be thinking about when discussion distribution of profits for this potential arrangement?
Thank you!
My idea would be to approach this shop and see if they would be interested in selling some of my items. I would produce a certain amount and also be able to take orders for specific items. A few things I'm specifically wondering about:
1) I do not have a business entity set up - should I?
2) This shop owner handmakes things that are similar but not exactly like mine, and I don't want her to steal the idea. As an example, say she sells bedazzled earrings and I sell bedazzled sunglasses. How can I prevent her from looking at what I bring her and then starting to bedazzle her own sunglasses?
3) What should I be thinking about when discussion distribution of profits for this potential arrangement?
Thank you!
1. Creating a business entity of some sort is probably a good idea. Your state probably has a low cost option like a Sole Proprietorship. These are cheap and simple, but usually don't offer any liability protection for your personal assets if someone were to sue you as a result of your business activity or using your products. A step or so up is something like a Limited Liability Corporation (LLC)--your state may call them something else. These do offer some protections but usually at some annual cost and are typically more complicated (but not that complicated) to set up and operate. There are many questions here and elsewhere online debating the pros and cons of these (and other) business entities. As a practical matter the shop may not do business with individuals and only with businesses for a variety of reasons.
2. This is a risk with selling to any sort of business, but nothing will stop the shop owner from reselling or consigning your products for a time and then creating some competing product later. I would say if the shop sells only things they create then this could be a risk. If they sell other items from other local artists then this probably isn't a big risk.
3. It seems to me that either the shop owner will buy the products from you on a wholesale basis and price them for retail however they want or they will sell the products on consignment and take a cut. You have to determine what your costs to produce your items are, what sort of profit you want, how you want to share the risk with the shop owner (spoiler alert--ideally no sharing), and come up with a sales agreement that gets you that.
posted by sevenless at 1:53 PM on October 4, 2023 [1 favorite]
2. This is a risk with selling to any sort of business, but nothing will stop the shop owner from reselling or consigning your products for a time and then creating some competing product later. I would say if the shop sells only things they create then this could be a risk. If they sell other items from other local artists then this probably isn't a big risk.
3. It seems to me that either the shop owner will buy the products from you on a wholesale basis and price them for retail however they want or they will sell the products on consignment and take a cut. You have to determine what your costs to produce your items are, what sort of profit you want, how you want to share the risk with the shop owner (spoiler alert--ideally no sharing), and come up with a sales agreement that gets you that.
posted by sevenless at 1:53 PM on October 4, 2023 [1 favorite]
As someone who once co-owned a shop that sold local creators products (among other things) these are the first things to establish:
— will your work be sold on consignment (meaning that you get paid when they sell, and if they don’t sell, you can be obliged to take them back), or will the shop owner buy them “wholesale”. Consignment is probably more likely, especially at the beginning.
— how reliable is your production? Sometimes we would take on someone’s product and they would be popular and sell out — but the vendor couldn’t make more very quickly. So establish how many you plan to make and what your production schedule is.
— division of profits is — if the shop buys them outright, they will typically mark them up double (this varies, but it is typical.) Consignment can vary because the shop owner takes less of a risk.
— yes, you need to have some kind of business entity set up (because, for instance, if the shop owner does buy them wholesale, you need to be established as a tax entity to be able to sell something that way.) Even small sellers were able to do that in my area without much trouble.
— re protecting your idea — unfortunately you really can’t. But if the shop owner isn’t already making what you make, they may not have the interest in doing it. But it is a chance you take.
Good luck! It was always a pleasure to help local creators find an audience for what they made.
posted by profreader at 1:54 PM on October 4, 2023 [4 favorites]
— will your work be sold on consignment (meaning that you get paid when they sell, and if they don’t sell, you can be obliged to take them back), or will the shop owner buy them “wholesale”. Consignment is probably more likely, especially at the beginning.
— how reliable is your production? Sometimes we would take on someone’s product and they would be popular and sell out — but the vendor couldn’t make more very quickly. So establish how many you plan to make and what your production schedule is.
— division of profits is — if the shop buys them outright, they will typically mark them up double (this varies, but it is typical.) Consignment can vary because the shop owner takes less of a risk.
— yes, you need to have some kind of business entity set up (because, for instance, if the shop owner does buy them wholesale, you need to be established as a tax entity to be able to sell something that way.) Even small sellers were able to do that in my area without much trouble.
— re protecting your idea — unfortunately you really can’t. But if the shop owner isn’t already making what you make, they may not have the interest in doing it. But it is a chance you take.
Good luck! It was always a pleasure to help local creators find an audience for what they made.
posted by profreader at 1:54 PM on October 4, 2023 [4 favorites]
1. Yes, get your legal/financial ducks in a row. In my area, people (including small biz and even independent contractors) get penalized frequently for local business tax/license issues.
posted by Sockin'inthefreeworld at 1:54 PM on October 5, 2023
posted by Sockin'inthefreeworld at 1:54 PM on October 5, 2023
« Older I need a good epub app for iOS | Please help us book our African safari bucket list... Newer »
You are not logged in, either login or create an account to post comments
3. Retail gets by on selling product for double what they buy it for. That doesn’t leave a lot of room for your own margins unless you can produce these things very cheaply and easily. And if you can, it probably makes more sense for the retailer to do it themself and boost their own margins even higher, rather than cutting you into the deal.
I am a retail shop owner. I do have some local suppliers, farmers who raise sheep and make yarn, which I am not equipped to do myself. The shop owner might be happy to chat about it, but it’s hard to make the numbers work such that everyone gets enough income to make it worthwhile.
posted by rikschell at 1:51 PM on October 4, 2023 [2 favorites]