I have been asked by a local business (which is quite large) to provide them sweets on a weekly basis ranging from cupcakes, and cookies to sheets of cake (and occasionally the sculpted cake). They are asking for "wholesale" pricing. How do I go about calculating that? Do I give them a certain $$ amount off (i.e., $5.00/dz or per cake??) or do I give them a percentage discount (i.e., 15% off all orders)??? I usually charge $20/dzn for cupcakes and $30 1/4sheet cake (no bells, whistles or fondant added). Thank you all in advance for ANY advice.
Only thing I can offer is, if you do this discounted work for them, will you lose out on business that pays you full price? That's what I would be concerned with. As long as it didn't interfere with full paying customers, I would consider it. $30 for a sheet cake already sounds like a deal, but I'm no expert in that area.
AIf you could get a term contract with them that would give you a for sure deal with them. You could take 15% off or if you felt that was too high you could lower it, Guess I should note that I'm not in business, but good for you for getting
Thanks for the input. I'm going with a 10% discount on orders of 100 cupcakes or cakepops for right now. If it's a good fit, I'll research "wholesale" numbers and best strategies. thanks so much.
When I think about approaching volume discount and wholesale pricing, you think about efficiencies that are realized when selling a larger quantity. On small orders, say 1 dozen cupcakes, you are going to work on them for 1-hour. If you pay yourself $15 an hour, your cupcake starting price is at least $15. However, does it take much longer to make 4 dozen cupcakes. Not really, so you divide the labor cost of $15.00 across 4 dozen cupcakes, making the labor cost for each dozen $3.75 . Of course there are other factors. You can choose to pass that efficiency on to your customer through wholesale prices. The same would apply to things like delivery and packaging. If it can save you time, material, and effort, you calculate your savings and pass that on. If there are no savings in cost, material, or time realized, then that warrants no discount.
Another thing to look at, if they give you a certain amount of volume, you may be able to purchase your ingredients at a lower cost. The more I buy with my distributor the higher my order % discount. If you get enough business from your client to get larger discounts on your ingredients, then you could also pass some of those savings along as well.
Hope that makes sense.
Awesome info @tdovewings -- thanks so much.
I sell almost 100% wholesale and I use a straight mark up to set my prices. I triple (ideally I try to sell only product I can x4 my costs) the cost of my product (including labor) to set my wholesale price. That's COMPLETELY based on volume, I have minimum order amounts and charge for delivery. No volume it's my retail price.
THAN how ever much they want to mark up my products cost to their customer is up to them. Wal-Mart/big box places live off of small mark ups like 5%. Most restaurants and retailers double the price of the wholesale product to reach their retail price.
No one in my area signs any kind of wholesale contract to buy x amount from a small wholesaler.
Thanks for the info, but I'm not sure I follow. As an example, if your product costs you $5 to make, you charge $15, and then let them mark up to whatever they want? Is that right? Or do you charge them $20 (x4)??? Also, I'm way lost on labor costs. Thanks for your words of advice.
Yes, if your product cost you $5.00 in ingredients and it takes you 1 hour to make that item (You determine how much you need to be paid for that hour) say you need to make $15.00 per hour. You than add $15.00 labor & $15.00 ingredient costs (3X $5.00)...so your product wholesales for $30.00.
The important thing is you have to really know your labor. If it takes you a lot of time to make product, you should not consider selling wholesale as you won't be able to make money doing that. I can make anything a buyer wants to buy but there are A LOT of things I will not sell wholesale because it's too labor intensive for it to be profitable for me to sell that item wholesale.
For example, I will not sell novelty cakes wholesale because each one is custom. I do not have set novelty cake designs. But I do sell wedding cakes wholesale because I sell them as is, and not custom (as in the brides don't get to custom order their cakes. They choose xyz cake design only.)
Wholesale is not for everyone. It's more work for less money in exchange for more volume.