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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.)

Frog-Ring_Z1__51383_std

My ornate 18K-gold frog ring is definitely NOT the design in question!

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.

bunny_single_silver_Z__52907_std

Click to order your Easter-appropriate bunny earring for $35.

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!

FOR FURTHER EXPLANATION OF ECONOMIES OF SCALE, CLICK TO READ MY HUFFPOST STORY.

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22 Responses to “The Agony and Ecstasy of a Small Business, Revisited”

  1. Megan Mae says:

    I have a ton of respect for you. One because you’re willing to be incredibly transparent that you’re running a business, two because you’re awesome to people (even if we are too poor to afford your super luxe pieces), and three because you’ve got major style.

    I started following your blog despite being totally anti-jewelry, but find myself accessorizing and even enjoying my own WendyB “M” earring. I can only hope to add more when no longer on a college kid budget.

    • WendyB
      Twitter: WendyBrandes
      says:

      I appreciate your support and you sure do have an awesome hairstyle for showing off earrings these days ;-)

  2. Lyosha says:

    Oh Wendy, you pieces totally worth your work. I hope you’ll be able to get through this all.

  3. Paula says:

    I think you are fabulous( ok that might be a bit excessive)! You are prepared to explain how business works, along with the fact you have major style and a great attitude to life.

  4. Jet aka Punk Glam Queen
    Twitter: PunkGlamQueen
    says:

    Go Wendy! I never suggest consignment. When I had my indie design biz that’s what people wanted. They loved the designs, wanted them in their shops, but didn’t want to pay outright. Fuck that. I had already invested my time and money and needed to sell if I was to go forward. So I found a few select shops willing to pay net 30. Unfortunately I had to keep tabs otherwise net 30 turned into net 60 or 90, and one very high profile shop STILL owes me money from about 20 years ago. Not a lot and not worth pursuing, but it can still be a pain. You are right, you sell more than any shop on your own, and think of it this way: You get to be our personal designer! As always best of luck! XXX

    • WendyB
      Twitter: WendyBrandes
      says:

      Even the ones that say Net 30 pay Net 60, 90 and 180. I know a national retailer that put someone out of business by not paying for a full year even as the retailer tried to order a next season from the designer….

      Net 20 years definitely sucks.

  5. Lynn says:

    I didn’t know what FIERCE really meant til I started reading you.

    True to one’s principles, honest, courageous, always forging ahead; also, kind. Photo of red-lipped WendyB.

  6. PattM says:

    You are my girl crush/hero—I’ve run a small business in the past and am currently starting a new one and really enjoy your posts relating to small business and the barriers that exist. Your words give me the courage and strength to know that I will succeed. When my business turns a decent profit, I’m gonna buy a WendyB design!

  7. Debbie Baker Burns
    Twitter: DebbieBBurns
    says:

    Excellent post. I understand better what you’re up against after reading. And TARGET needs to listen up! Debbie @ ilovemylemonadelife.com

  8. stacy says:

    It’s absolutely impossible for small businesses to fill these kind of orders. We’re in a world of exclusive vs. mass, there’s almost nothing in between. I’ll take exclusive any day! I am hopeful, however, that somebody (some smart, domestic factory maybe?) will find a way to accommodate the smaller guys because that would create a whole new playing field! And they will be filling a huge need, so it would be a good business for them.

  9. Tina says:

    Love getting the real dirt on the business production side of things. Looking forward to the updated sites!

  10. Congratulations on deciding to move on from selling on consignment!

    • WendyB
      Twitter: WendyBrandes
      says:

      Oh, I’m sure I’ll end up doing more of it but it’s going to be only for the really, really special places with national reach who actually help me promote my brand. I don’t need to do this stuff willy-nilly anymore.

  11. déjà pseu
    Twitter: DejaPseu
    says:

    Totally understandable. And anyone who’s ever fondled one of your signature pieces of fine jewelry (especially with the precisely engineered moving parts) would understand the pricing. The design and execution is a world away from what you’ll find at mall jewelers.

    • WendyB
      Twitter: WendyBrandes
      says:

      I always figure the mall jewelers are there for the people who want that kind of look, and I’m there for the people who want something different. There’s an 18K-gold lid for every pot!