Sarah from the Boutique Hub explains how boutique owners should evaluate wholesale vendors by comparing cost versus income and by measuring turn rate. Using a numerical example (100 units costing $2,000 with differing sales outcomes), she shows that quantity sold alone can be misleading; instead prioritize vendors that deliver higher return on investment and faster inventory turns. She advises running sales/cost reports before market and using the provided download to guide purchasing decisions.
Chapters
Hey guys, it's Sarah. I'm back with the Boutique Hub today to talk to you about the profitability of your vendors. Why am I talking to you about this? Well, as you get ready to go to market and you decide you need to go invest in inventory, it's really important to look at what vendors have the biggest return for you. Where are you making the most money? And it's really quick to just look at a glance at your sales floor, your warehouse, or your even your point of sale system and look at quantity of items sold for a vendor doesn't always tell you the whole story. Here's an example. Say you run that sales report and you look at quantity sold and you say, ah, I sold a hundred units of XYZ vendor. Well, maybe it costs you $2,000 to get those hundred units, right? What if you only brought in 1750 in sales from that sale of 100 units? That's for a loss, right? But on paper, when you're just looking at quantity, you're thinking, man, so sold 100 of those units. Now let's take vendor two and say for those hundred units you sold, you sold 100 units. Cost you $2,000 to bring those 100 units into your store, but your profitability was $5,500. That's a better return, right? Clearly you sold those almost at full markup. I would suspect that's a huge return on investment that is worthy of your time. When you get to market or you sit down at your on your favorite wholesale marketplace website, you know where to spend your time, because time is money. Ultimately, that is my ask of you before you go to market, run these reports. Identify who is winning and who is losing. As far as vendors in the race for your dollars, there's a few other things that are really important for you guys to take a look at. Cost versus income. That's what we're talking about here. But ultimately, the second thing is turn rate. How fast did you turn over those hundred units? How long did it take you to bring in that $5,500? If we're talking over six months, maybe it was better to just cut your losses, mark those things down, get those to turn faster. Yes, the money is great, but time is money. And if it costs you an opportunity to reinvest cash into something else that's more profitable, you very well may have missed the boat. So your cost versus income, that's what we're talking about. That's very important. But ultimately, next look at how long it took you to do that. All right, guys, I'll be back with more tips. Before you head to market, please take a look at this download. Get the most information you possibly can so you're the best investor of your time and your money.
