So many people ask me how to determine their minimums, if they should have one, and what the point of it is anyhow. Since there are many answers, and you are the only one (perhaps with my help) who can determine this for yourself, I will give you some scenarios and options to help you make the choice wisely.
NOTE: Minimums are what you require a store to purchase each time they order. You may decide to have a larger opening order (meaning the first time they buy from you) and a smaller re-order amount, or keep it the same all the time. There is no right and wrong – just what is right for your company and brand.
The best place to start is by imagining what your product will look like on the shelves of a store. I like to “see” (in my mind) how they might merchandise it and that helps me determine how many items I want to require them to buy. Does yours hang, sit on a shelf, or is it on the floor? I prefer to look at it from a merchandising point of view first, then onward to the financial perspective.
Now that you have your visual, you can determine how many items you want them to buy so that the display represents your brand as you desire. This also gives you a realistic reason to use as well if anyone questions your minimums. You can simply state that you know your product sells better when there are at least XX pieces merchandised together and you want them to be successful with your sales. You can either state your minimums by quantity (ex: 6 items) or by a minimum dollar amount.
If you have a sales rep or showroom(s) that you participate in, they may weigh in on the subject as well. A rep is going to want to make the sale worth their time and effort, as should you, but they are (hopefully) seasoned and know what those numbers should look like. Do keep your head about you if they make suggestions. Be sure to ask questions and really understand the reasoning behind the amount they are recommending. YOU have the final word.
Another part of the process to take into consideration is your shipping costs if this applies to you. For example I use a third party fulfillment house to ship for me. We send them the orders and they pack and ship for us. Obviously there are fees involved so after weighing the options and costs, I decided on a 12 pc minimum because that makes the packing/shipping cost manageable for me when selling wholesale. When stores order a larger quantity, my costs go down even more and my profit goes up.
You may want to consider your own minimums in regards to manufacturing. I know some of you manufacture in quantity while others make to order each time. You just need to sit with it and see what makes it worth it to you financially and spiritually. You may find that while larger orders eat up more of your capital in the moment, they off set your costs over the year so it’s a better choice for your overall financial picture. Equally, it may not make a difference so you might choose to make them to order.
When I had my handbag line we set our opening orders at $350 and reorders at $250. This was based on the quantity of bags for merchandising purposes as well as how many could fit in our shipping cartons. $350 was around 7-8 bags and we could fit 3 in one size box and 4 in another. We tried to maximize our box usage as much as possible for ecological and financial reasons. The other part of the equation in picking $350 as my magic number, was that any store who couldn’t afford a $350 order was not going to have the clientele who were going to purchase my $150-250 handbags. I guess it was sort of a way to “vet” new stores.
Hopefully this is helpful in assisting you to make a wise choice for yourself. Love to hear your comments and give you my 2 cents about your line.
Glad it was helpful for you!
Hi, Sarah! Great post…this was definitely something that I had wondered. I like that how you use your minimum to pre-qualify or vet your retailers. What about companies that choose to have no minimum order amount? What would be the potential drawbacks of that decision?
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This post was very helpful & solidified my reasoning for my minimums – best brand presentation at the retail stores. The feedback from customers at my first tradeshow also helped in determining the initial minimums. Thank you for a straightforward, easy read on minimums.