[MUSIC PLAYING] AMY WELSMAN: Most of you who are watching this lesson have already built a strong direct business online. That said, when adding in a new wholesale channel you will need to alter some of your practices to balance the two. It can be tricky at times and concessions will need to be made. Traditional retailers will be threatened by your direct business, and with good reason. If they have decided to invest in your brand, they won't be happy if you undercut them by selling the same items for less on your online store.
If managed properly both channels can live in harmony. Here are some tips, understand the industry standard for margins, while it can vary depending on the product category most retailers expect at least keystone pricing, which is 50% margin. That means that your wholesale costs are 50% of what the established retail price is. Expect larger retailers to want more margin especially if they're purchasing big volume, expect them to ask for around 10% to 20% additional margin.
Develop a pricing strategy, always establish an MSRP, that means Minimum Advertised Retail Price. Your MSRP should match your online prices, this sets an even playing field and it will help control your brand in the marketplace. Whereas before you had complete control of your brand and your online store, now you are putting it in the hands of retail partners and the more rules and guidelines you can establish, the better your brand integrity will be protected.
The best way to control your brand at retail is by creating a MAP policy, MAP means Minimum Advertised Price, and this policy is a formal set of guidelines for your retail partners. Keep in mind that your online direct marketing plan needs to be in sync with your wholesale marketing plan, and should be clearly laid out in the policy. Here are all the things your policy could include. Number one, a clearly stated MSRP. Number two, a promotional calendar.
For example, the retail can sell your goods up to 40% discount during the following promotional periods, Black Friday, Boxing Day, this usually coincides with your online promotions. Number three, seasonal close out. For brands that produce seasonal items that may become out of date or old season, provide a date at which they can be put on sale and make room for new seasonal styles, again these dates should coincide with your online sales.
Number four, online guidelines. For those retailers who have online stores it's important to set rules. For example, will you allow them to sell on eBay or Amazon, can they even sell your brand online? These are all up to you. When you only do e-commerce, you have a lot of freedom when it comes to your pricing, marketing plans and promotions. Adding a wholesale channel while it can be key to growing your brand and introducing it to the physical world, will limit some of those freedoms.
If managed properly, your direct and wholesale channels can live in harmony, but the key is to plan ahead and have proper guidelines in place for your partners. Now that we're starting to develop our strategy working with retailers, our next lesson is going to look at merchandising and everything you need to do to make your products sell. [MUSIC PLAYING]