Playing Hardball: How Indie Beauty Brands Negotiate Wholesale Contracts On Their Terms
In this edition of Beauty Independent’s ongoing series posing questions to beauty entrepreneurs, we ask 14 founders and executives: What’s an aspect of a wholesale contract you negotiated hard on, and how did it go?
- Elena Goldstein Director of Business Development, Busy Beauty
We’ve negotiated on price before and have gotten better margins than the standard pricing model. Some aspects of agreements are nonnegotiable, but price is always one that can be discussed. If a partner really wants your products, you have a little bit of room to play with.
It’s always a give and take with wholesale partners and, when negotiating, you have to understand that the terms have to make financial sense for both sides. So, maybe you get a better price, but they get net 60 terms, or maybe you split shipping costs. The goal is to make the partnership attractive.
- Julie Longyear Chemist and Founder, Blissoma Holistic Skincare
We set very firm terms with sample box companies. We are approached by quite a few of them each year asking for large volumes of products. We inform each of them that we require our cost of production be covered by the box program. Meaning, they must be willing to cover the raw materials, labor costs and basic overhead that it takes us to make the items. If they cannot cover those costs, we cannot proceed.
We say no to a lot of programs, but it leaves us the time and space to work with the few that are respectful of our needs as an independent manufacturer. The ones we do work with have smart, sustainable businesses and extend a lot of respect to their manufacturers.
- Kristen Bowen Founder and CEO, Living The Good Life Naturally
The first wholesale account that we got for bath bombs was so exciting. It was a $10,000 monthly contract and facilitated hiring more people, our biggest contract to-date at that point of the company. They wanted us to put up a $7,000 retail display before the contract would be finalized. I would have had to go into debt to pull it off.
I have always stayed debt-free. By doing that, I have been able to truly serve customers to their needs instead of what can I upsell them to make payroll or taxes. I like that feeling. No, let me restate that. I love that feeling.
So, I put my big-girl panties on and played hardball, and got the contract without having to supply the overpriced retail display. I was so empowered with that negotiation that I went on to close several other contracts that week. It was an amazing high. This middle-aged entrepreneur was fist pumping to her beloved Bon Jovi for the rest of the day.
- Helena Zaludova Founder and CEO, Hyascent
Negotiating exclusivity with retail partners, as well as with international distributors over territory, is tricky. It’s a balance between the need to grow and the need to be in the right type of store. In our case, we settled on exclusivity for a limited time and tied it to minimum order quantities.
- BRIAN OH Founder and CEO, Venn Skincare
Given that our products are in the prestige/luxury category, we’ve been very selective in terms of who carries and sells our products such as prestige retailers like Neiman Marcus and Net-a-Porter. The two provisions we require always in a wholesale contract are: 1) price protection or a minimum price being never below the recommended retail price, and 2) territory limitation, including not selling on Amazon and any auction/discount stores or sites. These two provisions become more important when it involves an international wholesale, where you’d have less control and visibility since the sale would occur abroad.
- Feisal Qureshi Founder, Raincry
The margins and shipping costs are usually where things will go back and forth. You have to present a true partnership to the prospective retailer. Let them know what your sales support strategies are and how you are going to help them drive business. That obviously cuts into your margins and costs, and they understand that. Most retailers are fair and will reconsider to find a more suitable common ground.
- Drea Gunness Groeschel Founder and CEO, Beautiac
If a larger retailer, I always try to lean on terms. As a supplier, the cash flow is always most important on any sizable order and asking to be paid sooner rather than later is always good practice. The worst that will happen is they will say no, but it’s worth the try!
- Michelle Shaffer Founder and CEO, TwinMedix
When we had a big account with Target, it was difficult to both agree on a price and quantity. They wanted products sent to them in increments of six. We had to have special boxes made just for their stores so that six of our products could fit accordingly to their request.
- Chris Cabrera Founder, Naturally London
I find working with certain wholesale customers, like subscription boxes, they have a cutoff on how much they are willing to spend per item in their boxes. Instead of simply saying yes to their terms, I explained the value in our price point and how we wern't able to move forward unless they agreed to our price point. It was a gamble, but the company agreed to our terms, and we have moved forward with several recurring purchase orders.
- Aisha Shannon-Bates Founder, Coil Beauty
Honestly, when we began, we accepted all the contracts our vendors gave us as is. We did not know we could negotiate. Since, we’ve started bringing on other products we have our own standard contract that we use, which addresses some areas of opportunity we saw as a retail store with some of our vendors.
- Ellen Rucker Co-Owner, Rucker Roots
Going into a retail store can be very tricky. We just got into a retail space in October 2018, so we are fresh to the game. Unfortunately and fortunately, we have not had any contracts that we have had to negotiate. Most contracts have been standard terms.
- Mandi Nyambi CEO, Baalm
All of our contracts are based on a drop-ship model, which was very important to us. As our customer needs and desires change, we want to be nimble with our inventory. It allows us to test out relationships with all kinds of brands without putting a strain on their businesses either. This makes negotiating with brands very simple, and lowers the risk they take on.
- Calvin Quallis CEO and Founder, Scotch Porter
Although I cannot name the retailer, we were able to negotiate pretty good margins with a retailer in the past. We were able to do this, I believe, because we built a loyal following online as a DTC business and had a little more leverage than maybe a new brand that has little traction at the moment.
- Anya Kudrjasova Creative Director, Glowdust Beauty
When calculating our wholesale and distributor pricing, we focused on being fair rather than trying to make the most money or margins possible. That made conversations with wholesalers a lot easier as the initial pricing we gave was already fair.
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