I'm Confused.... Wholesale Pricing Or No Discounts???

Business By CakeDiva73 Updated 24 Apr 2009 , 5:13am by CakeDiva73

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CakeDiva73 Posted 22 Apr 2009 , 2:29am
post #1 of 11

I am trying to figure out how to do wholesale pricing and came across the post about cookies to the dance studio and it seemed like concensus was NO DISCOUNTS. icon_smile.gif

But now I am more confused then ever...how does wholesale pricing work? Do you have one set of prices regardless of who buys them and then if they want to make a profit, they can hike the price?

The reason I ask is because I have a cafe who I am going to trade cookies/etc. for kitchen rental but she asked me what my ingredient cost is to determine wholesale...... icon_twisted.gif which, quite honestly, struck me as odd. She is a lovely woman but I was not a fan of her "math". icon_razz.gif

She said if the brownies cost me $7 to make (ingredients only - no labor, etc.) then throw in an other $7 for labor and then sell the tray for $14. And for other items, she pretty much doubled my ingredient cost saying that was the wholesale price and then said that she likes to double her money too and would sell them for double, lol.

When I got up off the floor after having a laughing fit and then wetting my pants a little bit, it occured to me I better clarify. I (politely) told her I would have to work on creating a wholesale price list and explained that I was not able to buy things in bulk so I wasn't sure my prices would be what she was willing to pay, etc. Basically politely saying I would charge what I wanted.

However, now I am confused because what in the heck am I supposed to charge her? Is it really wholesale we are talking about? Or do 'wholesale' prices only exist in large, recurring orders? I was under the impression that wholesale was 10 - 20% below normal retail.....

I am prepared to write up a price list for her but need to know what I am doing first. If she balks, then she doesn't have to buy them as I am merely going thru her to become legal, not trying to get a lot of business from her... thanks.

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playingwithsugar Posted 22 Apr 2009 , 2:44am
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Write up your regular price list. Then, should you choose to offer a discount, the following terms should be given serious consideration:

No consignment - it must be a flat purchase, not an allotment which can be returned if the items do not sell.

No returns due to expiration - for instance, the cookies sit for a while, humidity gets to them, any decorations melt, or the cookies become soft and crumbly.

Now, about wholesale -

Wholesale is exactly what it sounds like - large quantity orders. An account should be set up with this client (can't afford to do anything on a handshake these days), and a minimum purchase must be established. Wholesale accounts can also provide you with the option to charge interest if the invoice is not paid within 30 days.

Blanket orders are contracted, extremely large orders which are fulfilled, a smaller quantity at a time. Example:
Let's say we order 1200 cookies from you, but we only need 100 per month. We would contract with you for the entire quantity. Because this is a contracted, guaranteed order, we would pay a slightly better-than-wholesale price for the entire order, payment to made each month, after delivery, but within the 30 day window. Payments received after the 30 day window are subject to interest, and no further deliveries would be made until past due money is paid. Future deliveries would be COD. If either of us default on our contractual obligation, the other reserves the right to sue for money/damages.

Theresa icon_smile.gif

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CakeDiva73 Posted 22 Apr 2009 , 4:16am
post #3 of 11

Thank you. I needed that clarification because I was somewhat lost. I was a bit put off by her trying to determine my wholesale prices and I know I am going to run into a bit of trouble since I think she feels like I should sell cheap to her. But like I said, I am ok if she chooses not to order wholesale items from me.

It's just that part of our "exchange" is that I make her a tray of goodies each week and then she can sell them at whatever she wants but I think she wanted to know how much it would cost to order more.

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playingwithsugar Posted 22 Apr 2009 , 4:31am
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The formula for catering used to be 3.5 times your cost, which included ingredients, gas to get ingredients, electricity, gas, water, not just ingredient cost. I do not know if that formula still applies in today's economy.

Ask Indydebi. She does catering. Maybe she has done some wholesale in the past.

Debi, are you out there?

Theresa icon_smile.gif

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cfao Posted 22 Apr 2009 , 11:50am
post #5 of 11

I have 2 halls that purchase their wedding cakes from me, they both get a straight 20% off the wedding cakes, they each order around 40-50 wedding cakes per year. I have another hall that only calls me when their decorator can't accomadate a wedding or the design is too hard for her, they get 10% off and have asked for a larger discount but with only about 4-6 cakes per year, they are not getting the same discount the other halls receive. I don't bother to let the halls know what my costs are to make their cakes, I feel that info is my business, no one elses,, they get a discount and that's their final cost.

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indydebi Posted 22 Apr 2009 , 12:51pm
post #6 of 11

Wholesale is exactly what was stated above ... a LARGE order placed regularly.

An order for 2 dozen that someone is going to resell is not wholesale. It's an order.

An order for 1200 every quarter that someone is going to resell is wholeslae.

Wholesale pricing is determined to be cheaper when the HIGH VOLUME justifies a lower cost based on lower processing expenses. For example, I used to work in a power cord manufacturing company, in charge of sales to our 250 distributors. We sold cords in boxes of 100 to the distributors (bulk packed), who sold them one or two at a time to the end user. Our expense was one box ... their expense was 100 boxes. Our processing costs were lower (fewer boxes) so we could offer that savings to the distributor.

When someone orders 2 dozen cookies, it's an order. Period.

My car dealership cookie order ran 10-15 dozen per DAY. That enabled me to buy ingredients in 50 lbs bags at 1.5 cents per cup instead of 5 lb bags at 15 cents a cup. It enabled me to utilize my oven space with 10 trays of cookies at 24 cookies per tray (240) so I had them baked in 20 minutes instead of 4-5 hours.... labor savings.

And NOBODY gets my ingredient list so THEY can determine what MY profit "should" be! icon_mad.gif Unless they are keeping my books and know what my expenses are and my expectations are, they can take a flying kiss at my big white rear end!

I recently began selling cupcakes to a "sweets" shoppe. My wholesale price was higher than her retail price, but my cupcakes are larger and bluntly, better. She really did have a grocery store across the street from her and I said, "If you're going to sell the same cupcakes they are, then why would people come over here to buy from you when they can buy the same thing cheaper right across the street? You need to offer something different and unique to give them a reason to buy from you."

She placed the order with me.

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playingwithsugar Posted 22 Apr 2009 , 12:54pm
post #7 of 11

There's my business mentor.

Thanks, Debi. I knew you would come through for us.

Theresa icon_smile.gif

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CakeDiva73 Posted 23 Apr 2009 , 5:24am
post #8 of 11

Thanks for all the advice. icon_smile.gif I still am wondering what ratio I should use to determine the prices, say, for brownies. If the ingredient cost is $7.00 for 10 large 2 x 2 brownies in. I need to create a pricelist to give the cafe owner.

I am thinking it doesn't really qualify for "wholesale" so I am not sure if I should charge $15 ( $1.50 each ) or more. I am thinking I need to make it worth my while.... thanks again.

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CakeDiva73 Posted 23 Apr 2009 , 5:45am
post #9 of 11

Forgot to say that I saw the ratio of 3.5 x ingredient cost but wasn't sure if it applied to baked goods as well as catering.

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indydebi Posted 23 Apr 2009 , 11:36am
post #10 of 11
Originally Posted by CakeDiva73

Forgot to say that I saw the ratio of 3.5 x ingredient cost but wasn't sure if it applied to baked goods as well as catering.

If I used "times 3", I'd go bankrupt, because the ingredients are not the most expensive parts of a baked product. It also has to do with scale ... If I figure 10% of the sale will be labor, then it's a big difference if it's a $4000 catering ($400 to play with) or a $50 cake (only $5 in labor allowed .... if you're figuring $10/hour for labor that means you can only allocate 30 minutes MAX to mix/bake/decorate this cake).

An example:
12x18 sheet cake will use 3 cake mixes, 12 eggs, 1 cup of oil, 4 lbs of psugar, 2-3 cups crisco, 1 pkg dream whip, misc ..... let's say about $10-$12 in ingredient costs. If you use the "times 3", then I'm selling this cake for $30.

First of all, you all would go down my throat for selling a cake for 50 for only $30. Second, it's going to take about an hour mixing/baking, and then lets say 2 hours to ice/decorate. 3 hours total x $10/hour = $30.

Bam! You're in the hole because you sold the cake for what it cost you in labor!!

Labor being the most expensive part, let's look at THAT times 3 ... $30 x 3 = $90. My normal price for a 12x18 sheet cake? $80. Out of that $80, I'm paying $10 for ingredients, $30 for labor, leaving $40 to pay for electricity, cleanup supplies, insurance, rent, accountant fees, dumpster rental and all of the other monthly business expenses.

So IF you're going to use the "times 3" theory, be sure you're using "economy of scale" and applying the rate to the most expensive part of the product.....not the cheapest part of the product.

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CakeDiva73 Posted 24 Apr 2009 , 5:13am
post #11 of 11

I totally get what you are saying but I wanted you to know I am not talking about cakes. I have flat rate or per serving (depending on whether they are tiered and delivered or single layered and picked up).

What was throwing me for a loop was the cookies and baked goods I needed to create prices for so I don't leave an opening for the woman at the cafe to use her crazy math on me.

My ingredient alone cost for 1 dozen is $1.50. I was going to charge $5 per dozen. I'm sure she would want me to charge $2.50 but like you said, we determine our wholesale prices, etc.

If I were making 6 dozen, it would be cheaper but since theoretically she could order a dozen of several different flavors, or other people I give the flyer to, I had to price them high enough to make them worth my while but low enough so the businesses would still be able to buy them and re-sell them at a profit.

That was my thinking anyway - thanks for the tips.

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