# third party on-line retail percentage



## farennikov (Sep 4, 2006)

Anyone has any rough data about what should be an average % off the online retail price online retailer keeps if selling another vendor's merchandise?

I.e. retail price in my store is $16, S&H is $5, and order is fulfilled by the vendor, not me. What should be my interest on this deal?


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## badalou (Mar 19, 2006)

I charge $6.85 to my photographer friend who sells my personalized tees to his customers and he charges $14.95


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## farennikov (Sep 4, 2006)

badalou said:


> I charge $6.85 to my photographer friend who sells my personalized tees to his customers and he charges $14.95


does he buy them from you wholesale or do you ship orders that come from your friend?


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## badalou (Mar 19, 2006)

He sends me picture via email I do the shirts and deliver to him. all our customers for this are local.


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## Rodney (Nov 3, 2004)

> I.e. retail price in my store is $16, S&H is $5, and order is fulfilled by the vendor, not me. What should be my interest on this deal?


So the shirts are already printed and the vendor is storing them for you waiting for you to tell them where to ship the order?

That sounds like fulfillment and I think fufillment fees can sometimes vary depending on volume. $2-$4 per order I would think.


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## Twinge (Apr 26, 2005)

I'd say it's usually anywhere from 5 to 25% of the sale price (generally not counting shipping, I think).


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## farennikov (Sep 4, 2006)

Rodney said:


> So the shirts are already printed and the vendor is storing them for you waiting for you to tell them where to ship the order?
> 
> That sounds like fulfillment and I think fufillment fees can sometimes vary depending on volume. $2-$4 per order I would think.


yes I am talking about fulfillment, I think I mentioned it in the initial post. Maybe not. But yes it's exactly what I am talking about.

But I don't see how $2-$4 can cover store maintenance + marketing, especially for a smaller online store.


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## Rodney (Nov 3, 2004)

> But I don't see how $2-$4 can cover store maintenance + marketing, especially for a smaller online store.


I didn't see those requirements in your original post 

Fulfillment companies don't do marketing. They just fulfill orders that you send them. Some companies may have some way of helping merchants that use their services, but I wouldn't count on any sales coming from that. That would just be a bonus on top of the sales that you generate.



> Anyone has any rough data about what should be an average % off the online retail price online retailer keeps if selling another vendor's merchandise?
> 
> I.e. retail price in my store is $16, S&H is $5, and order is fulfilled by the vendor, not me. What should be my interest on this deal?


From that I assumed that YOU were handling the store hosting and maintenance, the marketing and processing the payments. Then you just sent the order to the fulfillment company the order and they pull the printed shirt from their warehouse and ship it to your customer.

Maybe I should ask it this way: are you talking about a specific fulfillment company? All companies may have different policies and prices for what they do.


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## farennikov (Sep 4, 2006)

Rodney said:


> From that I assumed that YOU were handling the store hosting and maintenance, the marketing and processing the payments. Then you just sent the order to the fulfillment company the order and they pull the printed shirt from their warehouse and ship it to your customer.
> 
> Maybe I should ask it this way: are you talking about a specific fulfillment company? All companies may have different policies and prices for what they do.


I am not talking about any specific fulfillment company. I am talking about a tshirt company who sells tshirts under its own name and from its own online and/or off-line network. Now I come in and also want to sell their tshirts, and they want to fulfill the orders, as they only do that for themselves, but when orders come from me, they put it in my bag and ship with my label on it. While I run the website, do marketing and collect payments.


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## Solmu (Aug 15, 2005)

Sounds a bit backward. In that case you'd basically be a sales affilliate with their own website, but the merchandise is branded as your own. Odd. Normally you'd just take on and sell their line as their line, and they'd get a cut. It sounds like they're too much of a control freak to let that happen.

There's some odd splits in there. It would make more sense for whoever handles payment to handle shipping for example.

Ultimately the thing to remember is that whoever is designing, printing, storing, and shipping the shirts is doing the majority of the work (and taking on the majority of the risk), and the payment schedule will reflect that. The other party also takes on risk (marketing costs, chargebacks), but they're not really bringing that much to the table (aside from a few extra side sales with less profit).


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## farennikov (Sep 4, 2006)

Solmu said:


> Sounds a bit backward. In that case you'd basically be a sales affilliate with their own website, but the merchandise is branded as your own. Odd. Normally you'd just take on and sell their line as their line, and they'd get a cut. It sounds like they're too much of a control freak to let that happen.
> 
> There's some odd splits in there. It would make more sense for whoever handles payment to handle shipping for example.
> 
> Ultimately the thing to remember is that whoever is designing, printing, storing, and shipping the shirts is doing the majority of the work (and taking on the majority of the risk), and the payment schedule will reflect that. The other party also takes on risk (marketing costs, chargebacks), but they're not really bringing that much to the table (aside from a few extra side sales with less profit).


well not quite right, merch will be sold under their names, I will make it clear who is the manufacturer. Same thing as 80spurple.com except I will keep only a little of my vendors stock (for cases when customer buys items that are made by more then 1 vendor) but rest of the orders will be fulfilled by the vendors. They already do that for their own website, they'll just do same for me. 

And yes because it's sold from my store and money come to me, I take most of the risk. Plus all the marketing expenses, too. You know it's much easier to make something then to sell it.


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## Solmu (Aug 15, 2005)

farennikov said:


> well not quite right, merch will be sold under their names, I will make it clear who is the manufacturer.


Sorry, I misunderstood. Sounds more normal than the concoction I invented 



farennikov said:


> And yes because it's sold from my store and money come to me, I take most of the risk.


Whoever holds the inventory takes most of the risk, so in this case that would be both of you, but mostly the other company.

Will you have a different rate for orders you fill vs. the other company? It seems fairer to both of you that way, but also a pain to account for.



farennikov said:


> You know it's much easier to make something then to sell it.


True.


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## farennikov (Sep 4, 2006)

Solmu said:


> Whoever holds the inventory takes most of the risk, so in this case that would be both of you, but mostly the other company.
> 
> Will you have a different rate for orders you fill vs. the other company? It seems fairer to both of you that way, but also a pain to account for.
> True.


I disagree with the above - you can hold inventory forever and not sell anything, so what's the risk exactly? The risk as I understand in this situation is investing into selling something and not actually selling it. That's the real risk. Other then that one can print a ton of tshirts and put them in a warehouse and do nothing with them - that's not risk.

What do you mean fairer - having same pricing or different?


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## Twinge (Apr 26, 2005)

Solmu said:


> Sounds a bit backward. In that case you'd basically be a sales affilliate with their own website, but the merchandise is branded as your own. Odd. Normally you'd just take on and sell their line as their line, and they'd get a cut. It sounds like they're too much of a control freak to let that happen.
> 
> There's some odd splits in there. It would make more sense for whoever handles payment to handle shipping for example.


Not all that odd really. I have a friend that is very successful with that setup, though they are his own shirts he's having made this way, not the printer's. He has the website, the designs, and the promotion of the website, while the printer handles everything else.

This sort of setup works well for international sales - This guy lives in the UK, but doesn't need to charge extra shipping to the US since he has a seperate printer handle US orders.



farennikov said:


> I disagree with the above - you can hold inventory forever and not sell anything, so what's the risk exactly? The risk as I understand in this situation is investing into selling something and not actually selling it. That's the real risk. Other then that one can print a ton of tshirts and put them in a warehouse and do nothing with them - that's not risk.


Sure it is. If they made a bunch of products that aren't selling, they're losing money. In the meantime, they're also taking up space - the warehouse they're stored in costs money too.

Marketing may generally be a bit harder, but the printer/inventory/shipper is generally going to get most of the cut.


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## farennikov (Sep 4, 2006)

Twinge said:


> Marketing may generally be a bit harder, but the printer/inventory/shipper is generally going to get most of the cut.


well yeah, but that's what was my original question - how much should I make on each sell in the above setup


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## Solmu (Aug 15, 2005)

farennikov said:


> I disagree with the above


I haven't been articulating myself particularly well in this thread, so that's fair 



farennikov said:


> you can hold inventory forever and not sell anything, so what's the risk exactly? The risk as I understand in this situation is investing into selling something and not actually selling it.


What else would you call printed inventory sitting in a warehouse?



farennikov said:


> What do you mean fairer - having same pricing or different?


I was thinking having different pricing would be fairer, since it would reflect who was holding the inventory, and who was shipping it out (i.e. labour).


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## farennikov (Sep 4, 2006)

Solmu said:


> What else would you call printed inventory sitting in a warehouse?


That's not called risk, that's called retarded.


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## Solmu (Aug 15, 2005)

farennikov said:


> That's not called risk, that's called retarded.


Haha, touché.


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## farennikov (Sep 4, 2006)

Solmu said:


> I was thinking having different pricing would be fairer, since it would reflect who was holding the inventory, and who was shipping it out (i.e. labour).


Well in general I think it's easier to make something then sell it, as a rule. You can make an unnecessary/unwanted product and I would not call this risk (of not being able to sell it) - it's simply lack of marketing research in the first place. Selling is more of an art, at the other hand.

So no, I don't think that making and handling is actually more of a big deal then selling it. 

Unless manufacturer madkes a product that sells itself (that's so hot that everyone wants it), in this case yes, selling it would be easier then creating the product itself.

But t-shirts - be realistic, the supply on the tshirt market is huge, no matter how good you are it's still harder to sell then to make.


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## Rodney (Nov 3, 2004)

> Now I come in and also want to sell their tshirts, and they want to fulfill the orders, as they only do that for themselves, but when orders come from me, they put it in my bag and ship with my label on it. While I run the website, do marketing and collect payments.


Ok, that makes it clearer now  For some reason I just wasn't understanding what you were asking.

Now that it's clear though, I'm not sure I have a good answer, as I haven't heard of that before with t-shirts.

It would seem, if considering the risk/rewards is that if you pre-purchased the t-shirts from them wholesale, so that YOU would be doing the fulfillment, then you would get a larger cut.

But it does sound more like an "affiliate" relationship where you basically sell their product for a cut. The main difference being that they are private labeling the shipments for you. I've seen t-shirt affiliates paid between 5% (very low) and 25% of the sale. If they are taking the time to private label, that means they are probably losing out on the direct repeat sale, so I'm guessing your percentage might be on the lower side. But I could be totally wrong.

For example, with the tshirthell affiliate program, they pay $4 per t-shirt sold and their shirts retail on their site for $18 (not including shipping). They don't do any private labeling, but they have one of the larger cuts for t-shirt affiliate programs (about 22%).

Is this an actual negotiation that is happening? If so, have they made a suggestion as to your cut?


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## farennikov (Sep 4, 2006)

Rodney said:


> For some reason I just wasn't understanding what you were asking.


Sorry about that, English is not my first language.


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## farennikov (Sep 4, 2006)

Rodney said:


> Is this an actual negotiation that is happening? If so, have they made a suggestion as to your cut?


Well they ask me what I want. Most of the companies I contacted are interested in the idea though.

See my point is that it costs vendors same to ship same item in their bag as it is in my bag, their cost is same especially if they are fairly small. Now if I don't make a sell of their item, they're not going to make up for that extra sell on their website. See, if I don't sell for them then the demand/supply curve goes toward less demand and as a result devalues their product. Basically what I am saying is that either they don't win (and inventory stays in their warehouse) or I make a sell for them, this way they make a sell too and their cost isn't any different from if they made that same sell.

And especially at first it doesn't make any sense for me to buy their stuff first, especially if I don't know if it's going to sell or not. They, at the other hand, made some forecasts obviously and decided to print their product. Once they made that decision, they took all the risk for selling it.

Does it make sense now?


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## Rodney (Nov 3, 2004)

> See my point is that it costs vendors same to ship same item in their bag as it is in my bag, their cost is same especially if they are fairly small. Now if I don't make a sell of their item, they're not going to make up for that extra sell on their website. See, if I don't sell for them then the demand/supply curve goes toward less demand and as a result devalues their product. Basically what I am saying is that either they don't win (and inventory stays in their warehouse) or I make a sell for them, this way they make a sell too and their cost isn't any different from if they made that same sell.


I understand the pitch from your end. You've covered the objections they might have very well (I can tell you have some sales experience )

I just don't know if they would buy into it.


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## farennikov (Sep 4, 2006)

Rodney said:


> I understand the pitch from your end. You've covered the objections they might have very well (I can tell you have some sales experience )
> 
> I just don't know if they would buy into it.


well they seem to like the idea, some of them, the issue is how much each of us will get.


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## farennikov (Sep 4, 2006)

I look at it this way basically - I sell your hard selling product, you got to be interested in that. (That's if I can sell it). If I can't sell it, vendor loses nothing. If I can sell it, vendor incurs no extra costs on my sell, only profit without even marketing his/her own product. So it's win-or-nothing, no risk for the vendor.


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## Solmu (Aug 15, 2005)

But their point of view is: You haven't invested in the equipment, the inventory, the designing, etc. If you sell, you make money. If you don't, you lose nothing (I know you lose advertising costs, etc., but that's not necessarily going to be considered - it's also not as high a cost as equipment, etc.)

Both parties are going to think they're doing the majority of the work (which is perfectly normal ), and both parties can probably come up with reasons why that is the case. 

If they are an established company, they may think they need people selling for them less than the people selling need something to sell.


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## farennikov (Sep 4, 2006)

Solmu said:


> But their point of view is: You haven't invested in the equipment, the inventory, the designing, etc. If you sell, you make money. If you don't, you lose nothing (I know you lose advertising costs, etc., but that's not necessarily going to be considered - it's also not as high a cost as equipment, etc.)
> 
> Both parties are going to think they're doing the majority of the work (which is perfectly normal ), and both parties can probably come up with reasons why that is the case.
> 
> If they are an established company, they may think they need people selling for them less than the people selling need something to sell.


Solmu, not every tshirt company invests in equipment. Actually, a lot more of them user professional printers instead of messing around with equipment and inks. Printing should not necessarily be expertise of designers. 
You are also right, I don't risk by investing in the inventory. But think about it - if someone already invested in the inventory, he/she belives that the product will sell, and it doesn't depend on me at all. As I said before, if they invested in a lousy design, then it's totally their problem and I am not supposed to share that risk as a retailer. Unless I personally believe that a certain design will sell.
Designing? Same thing. See, if I designed something and went to a company and asked them to invest their money into printing it - it's a one thing, another thing is that thay do it for themselves already and despite the fact that there maybe someone else trying to market that design.
I don't claim that my part of work is the majority of work, but it's work and and also investment. As well as investment into the brand of the vendor. Think about it - if you see on a respectable website among other respectable brands a new and unknown brand for example - wouldn't it help you trust that it's something good if you see it on the same page with stuff that you're already sure is good? This way this new brand even if it does not sell at the moment, gains from being displayed among other, let's say more established brands? And on my terms they would not pay anything for this kind of exposure unless I made sales of that brand.


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## Solmu (Aug 15, 2005)

farennikov said:


> Solmu, not every tshirt company invests in equipment. Actually, a lot more of them user professional printers instead of messing around with equipment and inks.


True. I guess it was fairly irrelevent. Whether they print in house or outsource, they have a fixed printing cost per item. That cost needs to be taken into account when calculating net (and therefore what money can get split), but that's about it.



farennikov said:


> But think about it - if someone already invested in the inventory, he/she belives that the product will sell, and it doesn't depend on me at all.


While true, it doesn't really matter if they printed the inventory for you to sell, or had it lieing around anyway and allowed you to also sell it. Either way they're holding inventory (whether it's extra or not) and that's a liability. Even if they are confident it will sell, it's still a liability until it's sold.



farennikov said:


> As I said before, if they invested in a lousy design, then it's totally their problem and I am not supposed to share that risk as a retailer.


You are if you're not selling on consignment. Retailers pick and choose what items they will stock based on what they think will sell, because if it doesn't sell it's their loss. If they're selling on consignment it's not their problem, but traditionally consignment doesn't earn the retailer much money.

Essentially you're taking the consignment model online, except that in addition the creator is going to have to pay for storage, and shipping labour. That may not be a big deal, but you can expect it to cut into your profits a little.

The reason I'm harping on about, and trying to define, the risk is because it's the biggest factor in deciding who gets the money. It's semantic and a bit silly, but still relevant.



farennikov said:


> I don't claim that my part of work is the majority of work, but it's work and and also investment.


Yup, I do agree that it is both of those. If you/we/they could somehow put a figure on it ("I am doing 28% of the work") you'd know exactly how much of a cut you should make though.



farennikov said:


> Think about it - if you see on a respectable website among other respectable brands a new and unknown brand for example - wouldn't it help you trust that it's something good if you see it on the same page with stuff that you're already sure is good?


Me personally? No, I know what's good and bad when I see it. But I take your point  If you are bringing a respectable website to the bargaining table (as opposed to the intention of building up such a thing) then that may be worth something to them.

Is having a devil's advocate helping you at all here? Or would you rather I just shut up?


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## farennikov (Sep 4, 2006)

Solmu said:


> Yup, I do agree that it is both of those. If you/we/they could somehow put a figure on it ("I am doing 28% of the work") you'd know exactly how much of a cut you should make though.


You just have me an idea Solmu. I am pretty sure there is a way to assess these risks/liabilities, or value of effort put into a sale. You know if we price our products in dollar value, then we should be able to account this dollar value for all the steps in the process. I have to research that.

But here's somthing, think about it: I have heard from people who worked in designer glasses stores that the wholesale price for those designer glasses are like 5 times less then retail price. I understand that these retailers buy them in bulk, not consignment, but still look, it's a huge margin. You you can't get that kind of a margin on a regular tshirt, but still the fact is that sometimes it seems that retailer makes more money on an item then the wholesaler, except that wholesaler's volume is significantly higher.



Solmu said:


> Me personally? No, I know what's good and bad when I see it. But I take your point  If you are bringing a respectable website to the bargaining table (as opposed to the intention of building up such a thing) then that may be worth something to them.


No I don't say that I have a respectable online store, I don't have it yet, but I will. I just used that as an example. And maybe I should have put it differently: Let's say in that store among with brands that you know (not necessarily like), there's a NEW brand. At least new for you. Like T-BOT mentioned And1 today. Same example is if you walk into Nordstrom, you don't know all the brands there, but you trust that Nordstrom buyers select only the best. And when you see some t-shirt that looks like mine, but you never heard about it before, even if you don't buy it you'll think Huh, that must be a good brand if it's sold here'.



Solmu said:


> Is having a devil's advocate helping you at all here? Or would you rather I just shut up?


It's cool, I like discussing this, I am sure some of the vendors I am talking with will mention some of these concerns.


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## Twinge (Apr 26, 2005)

farennikov said:


> Well in general I think it's easier to make something then sell it, as a rule. You can make an unnecessary/unwanted product and I would not call this risk (of not being able to sell it) - it's simply lack of marketing research in the first place. Selling is more of an art, at the other hand.
> 
> So no, I don't think that making and handling is actually more of a big deal then selling it.


Well I think in this case the "general knowledge", so to speak, is that printing, storing, and shipping the shirts is the majority of the work - wheter this is actually true or not is second to the perception of the people involved. Obviously you can try to convince the people you will be working with your services are worth more, but I would not expect more than a 20% cut for this type of work.



farennikov said:


> Think about it - if you see on a respectable website among other respectable brands a new and unknown brand for example - wouldn't it help you trust that it's something good if you see it on the same page with stuff that you're already sure is good? This way this new brand even if it does not sell at the moment, gains from being displayed among other, let's say more established brands? And on my terms they would not pay anything for this kind of exposure unless I made sales of that brand.


It really depends on the products. With t-shirts, I would actually trust the site LESS - The biggest selling point for t-shirts for me specifically is originality (though of course not the only one). If I see a shirt that's been copied across 10 different websites, the chances of me getting one are quite low (though still theoretically possible, if it's a really sweet shirt).

Of course, this will vary between different people.


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## mljohn99 (Feb 22, 2006)

To break it down in dollar figures what I think is more than fair for what you are proposing:

Online Store
Selling Price: $20 + tax if applicable
S&H: $ 4
Total Collected: $24 (excluding tax for simplification)

Wholesaler
Wholesale Price: $12 (Based on 60/40 Consignment)
S&H: $ 6 (S&H + Fullfillment charge)
Total Collected: $18

Profit to Retailer: $ 6 (30%)

This is very generous for online retailers with low overhead utilizing vendor fullfillment. This would definitely be on the high end. Yes there are marketing, web development and hosting costs, etc. but nothing like that of a brick and mortar store. Most large stores carry large amounts of inventory they pay for up front or at best net 30. 

You are right that a wholesaler carries inventory because he expects it to sell. Part of that inventory is what he would expect you to sell. You are as much of a player in generating sales for that supplier as he is. That is why you earn a commission. If you are not making sales of his product, he is left holding on to inventory he calculated you to sell. 

The supplier holds a majority of the risk. He has to hold a certain amount of inventory ready to ship in case you receive an order. If he waited to make the product after you received an order, your customers may be waiting a long time to receive their purchase which only makes your online store look bad because it can't deliver in a timely manner. Remember, a supplier that drop ships carries extra inventory for your benefit as well. 

What you are proposing is not typical for the clothing industry. However, it is not unheard of either. Moreso with startup independent clothing lines. However, many startups operate out of their homes and are ill prepared to handle fullfillment services. This could reflect negatively on your company. 

If you have the attitude that you feel you are doing people a favor by offering their product on your website, then you will probably be out of business soon or are dealing only with clothing companies that won't sell product anyway. 

Anybody can create a website, or ten, to sell their t-shirts for a very low startup cost. Even the t-shirt supplier. Many suppliers will see you as a marketing expense just to get their product in front of more faces since they will be doing a majority of the process. 

If you truly treat this as a business partnership, then there is much to gain for both of you. It's easier to have a partnership when you can see the other person's side of things. 

I hope this informaton came across as positive. Your business model is not flawed as long as you have the proper perspective. 

With that being said, feel free to contact me.

I may be interested in you carrying some of my product in your online store.


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## farennikov (Sep 4, 2006)

mljohn99 said:


> If you have the attitude that you feel you are doing people a favor by offering their product on your website, then you will probably be out of business soon or are dealing only with clothing companies that won't sell product anyway.
> 
> Anybody can create a website, or ten, to sell their t-shirts for a very low startup cost. Even the t-shirt supplier. Many suppliers will see you as a marketing expense just to get their product in front of more faces since they will be doing a majority of the process.


Hey man, great thoughts. But her's what I wanna say. You are fundamentally wrong in the two points I am quoting, at least for the most suppliers. Most suppliers are stronger making something, not selling something. Unless it's a product that everyone needs, retailers do "do them a favor" by selling their stuff. That's why companies hire sales stuff - in order to compete and sell their products to dealers/retailers. As I mentioned before, manufactring and marketing are two very different sides of business, and what's true especially for smaller companies, they're stronger in either of them, not both usually. 
And second objection - yes, making a site is relatively easy. But marketing, promoting a site is not. It's not easy and not free. And let me tell you, I work in IT, I know that most people, including established businesses, have NO idea about how to do any of this. Most of our clients are small-cap corporations, and most of them have no idea what they are doing on-line, and what they should be doing. 

And look, unless you are selling to Nordstrom and department stores, or you are a prodigy like Threadless, you can't be selling "enough".


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## farennikov (Sep 4, 2006)

PS Mark, so what do you make, can I see?


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## T-BOT (Jul 24, 2006)

farennikov said:


> Anyone has any rough data about what should be an average % off the online retail price online retailer keeps if selling another vendor's merchandise?
> 
> I.e. retail price in my store is $16, S&H is $5, and order is fulfilled by the vendor, not me. What should be my interest on this deal?


Thats up to you and your vendor to determine since it will vay in every case.

One thing is for sure, your goods are converted to $$$$$ only when they are sold. So perhaps take what you can until your goods are in strong demand. 

No major player likes dealing with start-ups that are money greedy, when in fact there is NO demand for the designs. Or they look like what everybody else is doing and year too late on the trend cycle. 

If you are not able to sell your own shirts, what makes you think someone else would be able to ? ..... excluding their capability to mega promote/market/budget the goods and such.


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