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I noticed many people have found my site from searching for the phrase wholesale vs retail. So I decided to dedicate an article toward ways of improving your wholesale and retail divisions, plus how you can make it more effective toward your overall business.

The main objective of starting any business is making money on the product that you sell. So ultimately your business success is in the hands of the consumer who purchase your product. If they support your business and return time after time your clothing business may enjoy longevity and with the fashion industry that is definitely out of the norm.

The foundation of your business of course starts from the ground up, one of the first problems many clothing lines encounter is figuring out their wholesale apparel prices and not understanding that they control your clothing’s final retail price not the retailer. Most are forced to either sale their clothing for higher prices (wholesale predicts your retail) or cut deep into their profits (Lowering your prices per unit in order to have lower retail prices) in order to lower prices just to compete with the larger clothing companies how much just depends on the retailers markup. This problem is due to the fact that most new clothing companies have less retail accounts to distribute their garments too, therefore it is harder to meet the minimums of manufacturers and are forced to pay higher prices for less goods (Higher your production, usually mean lower cost per garment). As opposed to a larger brand where they produce a thousand pieces per garment and for a smaller brand it is almost impossible to compete on prices without sacrificing your profit margins, and most of the time they are already barely breaking even.

When you can’t lower your production prices or meet minimums, you need to find ways to lower your overall costs or ways to remove upfront cost without sacrificing the quality your customers expect from your clothing. These are some ways I have tried or either was advice from another clothing entrepreneur:

• Since most can’t afford to increase production to meet high minimums, because they lack in the cash flow department you can use a factor. If your in the middle of a season and cash on hand is short. You can use a factor, which is explained more in this purchase order financing your clothing line with no money up front. This will free up cash while you may be waiting to get paid by stores who you may have setup payment terms with. This is good when you need to refill an order or just short in the middle of the season while you are waiting to be paid. Of course a fee is taking out of the money owed, but the factor will handle payment of the store and can be used again in future transactions.
• Let’s say you just can’t meet the minimums and your not waiting on any stores to pay you, but you have purchase orders from stores waiting to be fulfilled. If the stores are reputable and have good payment history then you should be able to incorporate purchase order financing into your business. They will lend you the money up to 95% of what the retailer will owe you once their order is shipped and you can then go into production, receive your payment and then pay the factor. This gives you cash to meet manufacturers minimums as long as you enforce your minimums while buyers are placing orders.

I’m going to break this post into a series, because I have a good bit of notes on this subject…it will get interesting. Look for part 2 by Monday….

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