We sent out a survey to all of of our customers that are t-shirt labels to learn a little bit more about their challenges in running  their business.

We invited them to send us any questions they had about their business for us to attempt to answer.

Here is one I wanted to share with everyone from Brendan. Hopefully there is something useful in there for you.

If you have any thoughts, suggestions or further questions just add a comment at the bottom. Its great to be able to learn from each other.

Brendans email…

Hey Joel,

Got a question about selling to stores.

Well first of all, once my label is up and running, I
would prob be selling tees on website i make for say
45AUD.

So my cost price for tee is $16. thats $29 profit.

So if my cost price per tee is $16 and I sell to a
store for $30 then they would sell it for $60
correct? Or how ever much they want to sell it for.

How would I go about contacting say someone like…
www.thegrandsocial.com.au
www.squeakytee.com.au

Thanks
Brendan
______________________________________________________________

Hey Brendan,

Thanks for sending this through.

Its great to see you are serious about getting your t-shirt label cranking. Here are some answers to your questions.

Firstly these are answers from my experience an in no way am I suggesting that this is definitely what you should do but from my experience this is about the norm (just our disclaimer

Ok…so when attempting to work out what to charge stores for your t-shirts it is always good to reverse engineer the prices. Start at your retail price and move backwards. So first you want to set your RRP (Recommended Retail Price). This allows you to price position your brand.

So choose what price you want your t-shirts to retail for. Lets say for ease it is…$50 in this case. Generally the stores will want a 100% mark-up if possible. So that means you would want to wholesale your t-shirts for $25.

So now you have to make sure that your costs come in well below this so that you are making a profit on your sale. How much profit is enough?

Well obviously the more the better But there will have to be a minimum of course to cover all the other expenses you incur as a business and not just how much the t-shirt cost to produce. Even if there aren’t many costs now starting out…there will be in the future and you have to at least consider that now.

So ideally as the wholesaler you should aim for around 50% profit (as a minimum). Why so much less than the retailer you ask? Well when you think about it they are taking all the risk. They are purchasing in bulk and those goods are sitting on the floor in the hope that they will sell. But as the wholesaler you have it good because you get paid for the goods…you have sold them already. Even if the retailer has 30, 60 or 90 day account they have commited to purchasing your t-shirts.

So here is the formula for you to find you ideal cost price

Cost Price = Sell Price/(1+Profit Margin)…So in this case CP = $25/(1+.5) = $16.67 (You can use the same formula to go from RRP to wholesale price as well)

So Brendan…you are estimating your costs at $16 per t-shirt and you have chosen an RRP of $45 lets see how that works out for you…

So to figure out your wholesale price to the retailers – CP = SP/(1+M) = $45/(1+1) = $22.50

So you should be selling to the retailers at $22.50. Now what cost should you be aiming for to get a min 50% margin on your sale?

CP = SP/(1+M) = $22.50/(1+.5) = $15

So at the moment you are just a little over your target cost price of $15. At this stage of your business I don’t think this a big issue because as you increase volume of orders then this price will come down. But there are a bunch of things you can do to decrease your production costs.

The other thing I noticed was that you gave different RRP prices for your website and for the retailer. I’m not sure this would be a wise move unless your web one was the more expensive. In effect you can become your retail clients competition and they won’t be happy that you are undercutting them on price. Thats another reason to have a fixed RRP price. On the other hand you may want to revisit your business structure and re-evaluate if you want to retail online as well as wholesale to retailers. If you decide to sell online as well as wholesale this can be a deterrant for retailers as you become their competition.

Those websites you mentioned…the first actually seems like something that would be a great start for you. It looks as if you can start your own online store with them. Might be worth checking it out a little – http://www.thegrandsocial.com.au/help_pages/store_owners/opening_a_store

The second is a retail outlet that looks like they only sell big name stuff. But theres no harm in approaching them and seeing if you can show them your stuff. The big thing with that sort of experience is learning. If you get knocked back be sure you ask them what you would need to make them say yes.

Anyway Brendan…I hope this has been helpful for you.

Thanks mate
______________________________________________________________

Brendan got back to me with some further questions and I will share them with you soon.

Tags: clothing company, T-shirt business, t-shirt company, T-shirt design, t-shirt label, t-shirt printing

This entry was posted on Tuesday, August 10th, 2010 at 4:00 pm and is filed under Blog, T-shirts. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.