Thursday, March 21, 2013
Last year, I wrote a story for the Huffington Post called “The Agony and Ecstasy of a Small Business.”
It dealt with economies of scale, which is something I’ve also discussed on this blog here, here and here. In manufacturing, economies of scale means that the bigger the order (of widgets, iPhones, pens or jewelry), the lower the cost per item is. It might be easier to understand if you flip the concept around: to manufacture lower-cost widgets/iPhones/pens/jewelry, you must order A LOT of widgets/iPhones/pens/jewelry.
I’m well aware of this issue, but I periodically explore my options anyway, hoping for a miracle. Recently, I researched an 18K-gold design that I produce in New York City for $150 a unit. (I’m giving you the real-life, honest-to-God dollar amounts and order minimums here; I’m just keeping the name of the design to myself.)
If I need one of those $150 pieces now, I order one from my local factory and pay a total of $150. A piece that costs $150 to make should retail for at least $675. This week, I determined that I could make the same design overseas for a mere $40 per unit, which means the piece could retail for as little as $180. The catch? The minimum order is 860 pieces, so my upfront cost would be $34,400. Put it this way: in order to save you, my customer, $495 on a single purchase, I have to spend an extra $34,250. (That production minimum is low for overseas. When I tried to make a custom jewelry box in China a few years ago, the minimum order was 8,000 units.)
The minimum production requirement wouldn’t be too bad if I had orders for a hundred units each from a few different stores. By orders, I mean an agreement to pay for the goods the standard 30 days after delivery. If I had guaranteed future revenues, it might be possible to get a loan against that income to cover the manufacturing costs. But the same retailers who are always asking me for lower prices generally sell fine jewelry on consignment, which means they don’t pay anything at all on delivery. They only pay for each individual item if/when it sells … which could be next year or never.
I’ve done plenty of consignment over the past eight years, and I still do it with a couple of very special retailers who have proven themselves worthy. But going forward, I’ve decided my new philosophy is #PhuckYoConsignment. Because I’ve sold more of my own product than anyone else, I’m going to invest some of the money I could blow on making a single 18K-gold piece in Asia into overhauling my own storefront: expect to see a gorgeous redesign of my website and blog later this year. My prices will stay the same, starting at $35 for a single, sterling-silver stud earring from my WENDYB by Wendy Brandes diffusion line and ranging to $25,000 and beyond for my signature line.
If that price range isn’t in your budget, you’re still welcome to look at the pretty jewelry pictures and correspond with me here, on Twitter, Facebook and Pheed. I still love ya even if you’re not a paying customer. And if you’re getting married, you’re a special case — I do my very best to assist brides or grooms-to-be even if they don’t have much to spend. Don’t be shy about emailing me at wbjewelry at hotmail dot com to inquire about engagement rings and wedding bands.
For those of you who really want the $10 version of my styles, badger your favorite fast-fashion chain into collaborating with me instead of copying my designs, because I would love it if a company with deep pockets came along to finance a widely accessible version of my line. If that kind of deal is good enough for Missoni and Versace, it’s good enough for me!