As a maker that sells my own work in independent shops, I understand how mean it feels when a shop/gallery takes their 'cut' of the sale. In fact, there have been times in my career (before owning a shop) where I have openly criticised shops for being so greedy. The memory of that moment makes me cringe and I feel so guilty about the shop I was degrading.
We take 50% of each sale at PRIOR and whilst that may seem high, I would like to share with other makers/small businesses what I have learnt and why it is so important that your prices are calculated to allow for this commission margin.
YOU ARE PAYING THE SHOP TO SELL YOUR WORK FOR YOU
Every shop you have your work in is taking all of the selling, promoting and marketing time off your hands. They are managing the whole customer transaction for you including the postage, the website listing, the gift wrapping, the social media posts and marketing, and everything else in between.
To sell your work, shops will be paying for a website subscription, card reader transaction fees, bank charges, staff sales training, HR companies and much more. They will also likely be undercharging for postage.
If you're RRP does not cover the shop to sell your work for you, it's evident that you are not paying yourself either to do this work. Your RRP price needs to factor in your own selling time to manage the above, weather at a market, on your own e-commerce and social media platforms.
OVERHEADS
A shop has high expenses all year round. On good days and bad days, through rain storms and heat waves, shops continue to pay staff, energy and rent. These overheads are continuing to rise. Small independent shops often have one member of staff and zero Business Rates, whereas others - like PRIOR - have a huge increase in overheads as they will be liable for Business Rates, larger staff teams including staff insurance, pensions and HR, and bigger liabilities.
VAT
Another thing to consider is VAT because larger independent shops are often VAT registered.
VAT is a confusing subject and often really confuses makers, so I will try to explain:
If a shop is VAT registered it has to pay HMRC 20% of all sales taken at the till. Normally a commercial shop will buy their products from VAT registered companies which enable them to claim back from HMRC the VAT they have spent on the products. In summary - you pay 20% of turnover to HMRC but also can claim back the VAT you've spent when buying the stock.
However, if a shop - like PRIOR - is supporting small brands who are not VAT registered, it means they have to pay the VAT to HMRC but cannot claim it back because none of the small brands are registered.
This means that they keep the prices the same as your website (so that customers trust the pricing of handmade goods) but because you aren't VAT registered, shops like PRIOR can pay up to 20% of each sale to HMRC.
DISCOUNTS
Also add to the mix, in our marketing plan to sell your work we offer 10% to students, newsletter subscribers and workshop participants to entice them to shop with us. This comes out of OUR side of the commision.
WHAT YOU ARE PAYING US (PRIOR) TO DO FOR YOU
- We pitch your products to national press in hope that they will be featured in magazine. See our successes here.
- You receive 2 - 3 stock report emails per month. These are x2 stock-on-hand reports (what stock we have left) and also an email when something has sold out.
- You have access to our live sales portal where you can view and download the sales you’ve had over time. You can change the calendar dates to your choosing.
- We add your product to our webshop - which means more visibility for your brand.
- We have meet the maker interviews (social media and our website), you have a dedicated ‘maker’ page on our website, tagged social media posts and staff that learn about your business so they can market your brand's backstory and values (not just the product) whilst talking to customers.
HOW TO PRICE YOUR WORK
As you can see from all of the above, the commision that we (PRIOR) receives is absorbed very quickly in the costs that is needed to SELL YOUR WORK.
We recommend using this formula to price your work: 40% making (time, materials/ingredients/overheads etc), 40% selling (markets, website and promotion) and 20% admin. As larger shops are taking all of the selling time off your hands, half of the admin and have to pay 20% to HMRC - this is why they take 50% (they only keep 30%).
For a full step-by-step method of how to price your work - see my PRIORMADE blog here : https://www.priormade.store/blogs/small-business-help/how-to-price-your-work-and-why-you-need-to-factor-in-your-selling-time
