Who determines the retail price? How is it determined? Do they have a set markup?
These are key questions, as it gives you insight into their pricing structure. You also want to make sure that you are protecting the value of your goods, although that is rarely an issue. By that I mean that you do not want them to be "low balling" retail prices that could erode your brand as well as detract from how you may be retailing your product for if you also sell from your website or another website.
Who determines the retail price is really up to how the boutique/gallery does business. I would estimate that about 1/2 of the time, they asked me to assign a retail price, the other 1/2 of the time they would determine the retail price. If I were asked to assign the pricing, I would make sure that I walked them through my wholesale pricing and my markup structure. I would make them partners in that process, as sometimes they would have input on the pricing that would be very helpful. For example, they know when they have more tourist traffic, which can boost retail prices. They may have special events in their area that drive up retail pricing as well, like fairs or festivals that bring a great deal of traffic to their boutique and can drive sales and margin.
If they have a set markup, that makes it pretty easy for you to know what your pricing will be! No brainer! Again, if it seems a bit low to you, you can certainly voice your challenge. It may be that they have a lower overhead than you imagined, or they simply know what pricing will work for their customer base. Your expectations will need to match what the outcome is, however. If you truly have a gut feel that the pricing will be too high, you may find that your product does not sell as well as you had hoped. If you truly feel that the pricing is too low, you may have to adjust pricing on other websites, creating a lot of work for you, and a long term evaluation what that margin erosion will do to your overall business. You might just find that that is not going to be the right boutique/gallery for you based off of what will occur with pricing.
If you do find that the pricing structure works, it is a great idea to invoice them with your wholesale, and then document either your "retail" price on the invoice, or their "retail" with the markup that they provide to you. Ask them if they pay to that invoiced retail price. Why???
Do they put the goods on sale (common in the jewelry business!) and are you notified if your product is put on any kind of promotional sale?
With regard to sales, promotions, etc. I have learned from the jewelry industry that product is marked up to be marked down! So, when I have been told what the retail prices would be, early on, I had stars in my eyes! I was going to make what??? Only to find out that they had all jewelry on sale for Valentine’s Day, or another sales event. In consignment, you typically get a percentage of the SELLING PRICE. That is not the RETAIL PRICE in all cases. Make sure that you understand that, how you invoice the retail price can make all of the difference. Clarify this upfront and you will save yourself a lot of confusion, misunderstanding, disappointment and accounting/bookkeeping nightmares!
Do they want you to retail your product for the same price that they are selling it for? This is very common in today’s world where we are retailing our own product; we are selling through other websites (like www.Etsy.com or www.iCraft.com ) and using other methods to sell our goods. This is something that you will have to decide for yourself, and what works for your business plan. Just know this upfront, they can easily “Google” you and find out if and how you are retailing your work, so if you are selling at a lower price, they may sever the relationship. It will make no sense for you to undercut your own retailers!
For me, candidly, the first couple of consignment deals that I made actually helped me to find my own retail prices! For too long I was the one that was pricing my jewelry too low, and not truly understanding what the market could and would bear! Yes, I had done a lot of research, but pricing is something that is a bit of a trial and error process for many designers/artists. You want to use certain benchmarks, but often, I was benchmarking established designers using similar gemstones and metals. In part, you have to take out the fact that an established brand can command more at retail. However, interestingly, I had to factor in my workmanship that was often lacking in the competition. For example, I handknot my necklaces, and found that the competition was often stringing the pearls and/or gemstones. So...figuring out their "mark up" for their established brand but "mark down" for less workmanship...well, you can easily see how difficult it is to price your designs in an accurate way so they will sell, and you are profitable!
Please feel free to contact me at kelly@kamacejewelry.com for more questions about consignment. As always, comments are appreciated!
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