Of Wholesale Price, Recommended Retail Price & "Under-cutting". Let's Discuss :)

[ChinChic]

hi all, i'm fairly new to the ways of doing business and i've been wondering about the following issues:

- if your manufacturer does not impose a minimum order to get the items at wholesale price... then how to be assured that others (ie ordinary shoppers) would not be able to approach the manufacturer & get fr them directly?

- at the moment, i do not have enough resources to place large quantities. then i could not request for the manufacturer to direct retail queries exclusively to me right? You can only get that if you are the authorised dealer... correct?

- my concern is, my potential supplier who's also the manufacturer, seems quite easy going with the selling guidelines, then i may end up seeing competitors if i were to do well... how do i secure my market share then?

- how do i negotiate that he directs interested retailers/shoppers in s'pore and even the neighbouring countries to me & i help him distribute to them? how does that work?

- what's is the meaning of under-cutting? if you need to adhere to that, then it would mean you've got to sell your items to ordinary shoppers at quite a high price & must not be lower than the retailers who got the supplies from you, right?

[chrislim]

Hi ChinChic,

I'm new to this forum as I just stumbled upon it. Your scenario is a very common one. Let me help you on this.

1) I assume you mean "What if the consumers go direct to the manufacturers since there's no minimums?" - I'm sorry to say that if the consumers have a way of finding the manufacturers, you cannot stop them because the manufacturer wants business no matter.

2) Yes. Unless you sign an exclusive agreement with the manufacturer, only then can you be assured of supply ONLY to you. Other than that, anyone and everyone can get goods from the manufacturer because they can't say no to money.

3) To secure your market share, you need to win your competitors in terms of location, innovation and branding. From what I see, it seems that you are taking a generic product from a manufacturer who can supply to anyone. My suggestion is to create your own designs, labels etc and introduce new products ahead of the rest. This is the only way to win in the long run otherwise you'll be like everyone else.

4) You may need to communicate with your manufacturer. One way is to present your plans to them and give them an estimation of your volume (eg. I can order $50,000 worth of products in a year). If they are convinced, have them sign an agreement to ensure that they supply only to you. However the best way is to make a product exclusive to you rather than ask them to supply their current inventory exclusive to you.

5) Under-cutting simply means a price cut below your competitor. By doing so, you lose a part of your profit margin but you may steal away more customers from your competitors. My advice is to always avoid price wars because it devalues your products and it is unhealthy in the long run.

I hope this helps!

[ChinChic]

Originally Posted by chrislim

Hi ChinChic,

I'm new to this forum as I just stumbled upon it. Your scenario is a very common one. Let me help you on this.

1) I assume you mean "What if the consumers go direct to the manufacturers since there's no minimums?" - I'm sorry to say that if the consumers have a way of finding the manufacturers, you cannot stop them because the manufacturer wants business no matter.

2) Yes. Unless you sign an exclusive agreement with the manufacturer, only then can you be assured of supply ONLY to you. Other than that, anyone and everyone can get goods from the manufacturer because they can't say no to money.

3) To secure your market share, you need to win your competitors in terms of location, innovation and branding. From what I see, it seems that you are taking a generic product from a manufacturer who can supply to anyone. My suggestion is to create your own designs, labels etc and introduce new products ahead of the rest. This is the only way to win in the long run otherwise you'll be like everyone else.

4) You may need to communicate with your manufacturer. One way is to present your plans to them and give them an estimation of your volume (eg. I can order $50,000 worth of products in a year). If they are convinced, have them sign an agreement to ensure that they supply only to you. However the best way is to make a product exclusive to you rather than ask them to supply their current inventory exclusive to you.

5) Under-cutting simply means a price cut below your competitor. By doing so, you lose a part of your profit margin but you may steal away more customers from your competitors. My advice is to always avoid price wars because it devalues your products and it is unhealthy in the long run.

I hope this helps!

hi chrislim, i nearly overlooked your reply, so sorry about that

wow! i'm so glad that i revisit this thread, otherwise i would have missed out a treasure trove of info! what you have shared is indeed very insightful and gives me some idea how i could do things differently...

thank you so much

i'm just wondering if i could contact you again if i have doubts in these areas?