Here is the next article from my friend Patrice. She has such wonderful advice on running your own crafter business I just had to share! If you missed out on the first parts you can check it out here.

Tawra

Wholesale vs. Retail
Which is Better for Your Home Craft Business?
Part I: Retail
by Patrice Lewis
www.donlewisdesigns.com

Let’s work on the assumption that you have a wonderful craft product that you’ve successfully test-marketed. You’ve found your niche. You’ve perfected your manufacturing techniques. You’re ready for business. Now it’s time to get down to brass tacks.
Do you want to do your home craft business full-time for a living? Or would you rather keep it part-time?
While not an absolute thing, your product’s ability to be mass-manufactured and thus sold wholesale can make a difference between a full-time business and a part-time hobby.

Wholesale vs. Retail
For purposes of definition, let me explain the difference between wholesale and retail. Very simply, who sells your product directly to the consumer? Is it you…or is it someone else?
If you sell your products directly to the end user whether through eBay, a website, craft shows, or in a storefront, then you probably sell retail.
If you sell your products to a middleman who then sells them to the consumer, then you sell wholesale.
It’s entirely possible to do both, of course. We do, and we have found that both techniques make can money.

Some Backstory
First of all, let me relate a bit of (yawn) backstory.
As you know, we make hardwood drinking tankards. We started our business in 1993, shortly after leaving Sacramento and moving to semi-rural Oregon. We made tankards in order to fulfill two goals: one, the dream of working at home; and two, the dream of bringing in an income (something we didn’t have since we didn’t have jobs after we moved – smart, huh?).
Being vastly ignorant about anything to do with manufacturing and marketing a home-based product (this was before the internet, or at least before we had the internet), we made up a batch of about a hundred pieces and trotted off to a three-day outdoor event. We set up our booth just in time for the rain to start (this was Oregon, after all). For three solid days it poured buckets, and we sold zip…
…Except for a four-hour break on Saturday in which the sun came out. In those four hours, news of our product spread throughout the event and we started selling tankards in droves. We made $1500 in those four historic hours, before the rain closed back in and customers disappeared.
We drove home soaking wet and glowing happy. This experience, as damp as it was, demonstrated that there was a market for our products.

Is it That Easy?
Great. We were in business. However, as with most of life, there was a catch.
Our home in Oregon was at least three hours from the nearest city of any size (Eugene) and at least six hours (or more) from almost all the events that would make us some money. Yes, we could – and did - do some local craft fairs and the like, but we also learned that craft fairs were a poor match for our particular product (our tankards are relatively expensive and have a masculine appeal; most craft fairs are attended by women who are on a budget).
In other words, we couldn’t make a living doing local craft shows – we had to travel farther and do the big events. If we wanted to do a venue that brought in enough money to make it worth doing, we had to hit the road and drive for a minimum of six hours, either up to Portland or down into California.
So we did. For two years we drove and drove and drove. Or at least, my husband did (I was a full-time graduate student so I wasn’t always able to go).
Imagine what this schedule was like: You work like mad to make a batch of tankards, pack the truck/van/whatever to the point of groaning, and take off at the crack of dawn Friday morning. Naturally you’ll either get an overheated engine or a flat tire or something similarly time-consuming and/or expensive while on the road. You arrive at the show, unpack the vehicle and set up your booth, and then must either camp in your booth/vehicle or have the expense of a motel. You also pay for gas and food. You spend two days smiling until your mouth hurts and praying that someone will buy your products. Then you reverse the entire procedure and go home, arriving exhausted on Monday evening or Tuesday morning. You have another show booked for the following weekend, which leaves you only Tuesday, Wednesday, and Thursday to make more product before doing the whole damn thing again.
And yes, you’ve booked shows that close together because hey man, you have to make a living. You have bills to pay, a house to maintain, and food to buy. You don’t have the luxury of a steady paycheck from a regular job. This IS your job. And it’s a job where the pay can be great one week (a good show) and lousy the next (it got rained out). But the expenses are exactly the same for both, whether the event was a good one or not.
Is it any wonder that we burned out within two years? All we wanted to do was work at home. So why were we always on the road?
One day we found ourselves back in Sacramento (do you see the irony here?) and got together with some old friends for dinner. These friends had started a successful oil-and-incense business on a card table in their garage five years before. They had grown to become a national wholesale distributor. They gave us the best piece of business advice we ever got.
“Get out of the retail side of things,” they told us. “Stop doing shows. You’ll burn out too quickly. Instead, go wholesale.”
They explained that by selling wholesale, we receive only half the money per item (though we sell more pieces per order), but we have none of the expenses incurred by being on the road. No travel expenses, no broken-down vehicles, no booth fees, no gas or food purchases, no motels. Plus, and this was the largest advantage, we didn’t have to be away from home. Time away from the manufacturing process was the most costly factor of all. If we sold wholesale, all of our time could be spent making our products.
Over the next ten years we gradually weaned ourselves away from traveling and acquired wholesale vendors. (If you’re interested in becoming one of our wholesalers, let us know!) It wasn’t an overnight thing, but in the end it has vastly simplified and expanded our business.
We haven’t entirely given up on retail. One of our biggest money-making events of the year is a big retail event in the Midwest. It works for us because it is consistent, our products are well-respected, and we have excellent sales help.
Selling retail has some huge advantages. This subject will be broken into two parts. In this article, I’ll examine the retail side of sales. In the next article, I will delve more into the wholesale side of things.

When Wholesale Doesn’t Work
So how do you determine which route to take, wholesale or retail? A major consideration is your manufacturing methods.
If your product lends itself to assembly-line manufacturing, then you have the potential to go wholesale. As Henry Ford discovered, assembly-line production means you can product a large number of high-quality products for a lower per-piece price (in terms of time). This means that you can sell your pieces in larger batches at a lower per-piece cost.
But if your product can only be made one-at-a-time, then you may have to stick to retail. I knew a woman who produced ethereally beautiful hand-woven shawls and scarves. Because she could only produce one shawl at a time, and each piece took about a week to make, she sold her shawls for a high price - enough to pay for the amount of time it took her to make one. Since there was no way for her to speed up her manufacturing process (how can you weave faster?), she had developed a high-end clientele of customers who purchased her luxury goods. Nothing wrong with that!
However, it should be said that the ability to turn your craft product into a full-time job, one that supports your family, is more likely to happen if your product can sell wholesale.

The Downside of Retail
If you look at most people who have storefronts, you’ll find that very few of them actually make the products they sell. This is because it’s hard to do both.
Making your product takes time, and unless your manufacturing techniques are “portable” (knitting, for example, is easy to do whether you’re at home or sitting in a booth or storefront) then you cannot make any product while you are in the process of selling it. For many people, the two activities (manufacturing and selling) are mutually exclusive; they cannot be done at the same time.
The exception is computer sales (eBay or a website) where the computer more or less does the selling for you.
Another difficulty with retail sales is that you are at the mercy of [fill in the blank]. It could be bad weather that rains out your craft show; it could be theft, where some sticky-fingered people rip you off; it could be theft via bad checks or credit cards (if you only have one of those manual “chunk-chunk” credit card machines, people are more likely to try and pass off a maxed-out card because they know they won’t be caught until later when you can’t do anything about it).
Of course the biggest downside of selling retail is the higher expenses. Whether you are renting a space in one of those rent-a-spot craft stores; or setting up and maintaining a website; or dishing out eBay’s percentage; or paying for booth fees, gas, motel, and food costs if you do shows; or paying your employees…the costs add up.
And taxes. Don’t forget taxes. If you sell in a different state, you’ll have to obtain a tax ID number for that state and then pony up Caesar’s due when the time comes. Naturally, you’re paying state taxes for any sales done in your own state…right? Plus there is more paperwork associated with retail sales. (More on taxes in a future article.)

The Upside of Retail
Goodness, what a depressing list that was. Why, then, would anybody in their right mind sell retail?
That’s easy: the money.
With a good venue and a good product, you can make money hand-over-fist by selling retail. That’s why so many people (including us) do it despite the potential hassle and expense.
You can charge whatever you wish for your products according to what the market will bear. If we have a tankard that we might sell for $40 in one location, we might be able to get away with charging $50 or even $60 in a different, more upscale location. It’s up to you, the retailer.
You get out of the house. Believe me, after holing up in your workshop for weeks or months on end, this is a huge advantage. Home crafters often work alone. Sometimes it’s a lot of fun to get out of the house and do a craft show or other venue, and see people.
Also, doing shows in person has a lot of ancillary benefits. Sometimes you can lose track of the market by not interacting directly with customers. Would a simple change of your product make it more popular? You’re more likely to find this out if you are seeing your customers in person. And what are your competitors up to? There is nothing wrong in doing a little “market research” by finding out what’s selling at other booths. If some of those competitors are acquaintances, it’s a good opportunity to kibbitz on new product ideas.
Plus, getting out of the house or shop once in awhile can be just plain fun, as well as profitable. Once a year I do the Oregon Brewer’s Festival in Portland. (I always say I’m the perfect person to do a beer festival because I hate beer). I get to stay with some friends in the city, I get to go to Powell’s Bookstore (whoo-hoo!), I get to chat and socialize and mingle with friends and strangers alike…all in all, it’s a lot of fun. Plus, we make a lot of money. Definitely a show worth doing.
On the flip side, you also have to fend off a lot of “Boy, do I have a product idea for you!” from looky-lou’s. Then I must politely try to convince them that we’re not likely to become millionaires by giving up our tankard-making business in order to make their grandma’s wooden trivets. Nothing like being a captive audience to Great Money-Making Opportunities.
When you’re in business selling your crafts, you’ll likely have many opportunities to do retail sales – far more than wholesale, frankly. Enjoy them.

Patrice Lewis is co-founder of Don Lewis Designs (www.donlewisdesigns.com).
She and her husband have been in business for fourteen years.
The Lewis’s live on forty acres in north Idaho with their two homeschooled children,
assorted livestock, and a shop which overflows into the house with depressing regularity.