I confess. I’ve committed my fair share of retail sins.
I’ve also encountered some of these “sins,” or mistakes, by doing business with other designers or vendors and with other retailers. With these experiences in mind, I compiled a few standout things I’ve found are common missteps or breaches in etiquette in the retail world. I hope these call-outs and pointers on establishing your precise marketplace, pricing appropriately in light of your profit margin, and retail neighborliness can contribute to a healthy, sturdy foundation for growing your business or brand.
NEBULOUS MARKET IDENTITY
From the get-go, it’s important to establish your market identity. Are you exclusive? In other words, are you going to cultivate a consumer following, develop narrow or niche stockists relationships, and make fewer things with a costlier price point?
Or is your eye set on mass market? Are you looking to scale big, and produce inexpensive goods for a large audience of consumers?
This is a foundational decision, because it reflects – and affects – the expression of your craft and the “identity” of your sales avenues (specialty stores versus big box, for example).
To be clear, there’s no better or worse way to establish yourself! What’s important, though, is making sure that you’re grounded in the vision you have for your company, and that you have made clear decisions about the direction you’re moving.
One reason this is such a crucial early-on distinction is that if affects your margin markup when you’re selling to consumers and buyers. For example, you can’t follow the conventional margin markup if you’re putting hours and hours of strenuous time and material resources into your product – but you’d likely be much more flexible here if your product is more easily assembled. This leads us to...
So you’ve committed to being a manufacturing and design business. Now, you’ve got to make that green. Stay out of the red. Taste the rainbow. However you want to say it, without exception, you must turn a profit to be sustainable and successful.
You know your business model and it’s time to focus your attention on your sales avenues. Hugely important is recognizing whether or not you are going to be selling to platforms other than your own website. (I think it’s safe to assume that most brands, at this point in time, will show and sell their goods or services from a dedicated web platform. Please do leave your comments below if your brand is an outlier!)
The Internet has disrupted the retail paradigm as we knew it. I get really hyped up about this, so I’ll save the nitty gritty of this ginormous shift for a later Design Talk. But for now, I want to call out that retailers will not sell your goods if you are selling on your website for less than they can afford to sell your goods for. Think: if you sell a product for $100 on your site, and try to sell it to a retail buyer, they’ll have to mark it up to $200 to accommodate for their profit margin and for the massive, unaccounted for overhead costs they’re responsible for.
Thus, from the inception of your brand, your product, and your online presence, there’s a certain amount of consideration that must go into your pricing so you’re not undercutting potential buyer partners.
Keeping in mind your market identity, and of course your practical considerations like material costs, other resource capital like website and operations, labor, and time – make sure you’re pricing to sell at the amount you’ll be able to make a profit based on where you see your business going. Pricing for your perceived profit margin is, of course, just another facet of your business interplaying with your vision for it.
I want to reiterate that no vision has to fall in line with another! Regardless, your decisions should be thoughtful, deliberate, and forward-looking. And “the money stuff” is certainly at the forefront of that decision-making.
DISRESPECTING THY NEIGHBOR
And with that, you’re up and running! (If only it could be that easy… ;) ) You’ve mastered your self-definition and established practices for sustainable profit margins. You’re developing relationships with stockists and are poised to expand even further into brick and mortar.
You are on a roll! Honor that “roll” (dare I say... butter it?!) by honoring your relationships with buyers. Respect their commitment to your brand, and your product, and recognize that in turn, you’ve committed to them. Part good business etiquette and part self-preservation, recognize that it’s not okay to pursue other retailers in the same neighborhood as your current stockists. Your current buyer cannot continue selling your product if their neighbor is selling it too – especially if it’s for even just 1¢ less, which starts a race to the bottom as far as profitability goes.
There’s also the seasonal acknowledgement of that buyer-vendor commitment. It’s best to avoid selling your back stock to a flash sale site, for example, until your product is fully out of circulation at your stockists.
Beyond all that, if you’re selling something that should be perceived as exclusive, you’re undermining its value if people see it in two shops in one day. You’re removing the sense of urgency to buy it at all, if the perception is that it’s available anytime, anyplace.
I have incredible faith in small business. That’s why I’m working on Design Talks as a resource for small companies, designers, and creative entrepreneurs. And the reason behind this all, the reason I want small businesses to be able to enter the market, is because I value and want to experience innovation and individuality.
And that is the hugest, most sin-repenting, redemptive, holy thing happening right now: there is a wealth of innovation on the market.
People aren’t hesitating to get their ideas out there. They’re learning from their mistakes and studying up on how to best make, promote, and sell. The democratization of the Internet has played a wonderful role in that (again, I say this with a tinge of caution, explanation forthcoming in a future Design Talk!). Innovative designers are forging smartly ahead to receptive markets like never before.
It’s the sustenance of today’s creative momentum that I hope Design Talks can be here to foster, to help create a scaffolding for future creator-innovators and their business models. That creative innovation is the spice of life.
As told to Emily R. Pellerin
Next week, pull a chair up to the dinner table as I talk aesthetics and congeniality of hosting. Plus, my personal practices for self-preservation, for when entertaining gets exhausting.