Sell to shops or sell to a wholesale supplier (middle man)

[Rotawee]

I have been making a few products for tobacco smokers out of exotic wood for over a year now and am now motivated to go full steam ahead after recieving 5k inheritance. I sell on Etsy.com and to local shops currently. I'm wondering if it would be a good idea to sell to try and sell my products to the handful of companies that supply these shops at a lower cost but higher quantity. Or contacting the shops myself and getting as much as I can per piece and hopefully having more orders come in after the initial sale. I get in between 4-6 per piece selling in quantity to shops 30 or more pieces at a time average.

Does anyone manufacter a product that sells retail in a niche market? If so which route do you use? If you supply wholesalers what is a typical number of items they purchase?

I like the idea of going to a wholesaler to get my name out there, establish a reputation for excellent quality, then sell my customer base custom or unique pieces through a website.

Any input on how to go about this is much appreciated :-)

[Fulcrum]

I've been debating this myself. I've pretty much come to the decision that factory direct is the way to go. After comparing supply prices through local distributors vs direct from manufacturer I've seen middle man markups of over 250% from MSRP.

Are you in a position to manufacture locally at a reasonable cost and go direct to retailers with them selling on a consignment basis (they'll make about a 30% discount from your suggested price)?

[Freelancier]

Initially, your problem with a wholesaler is going to be cash flow. They will want you to ramp up fast so they can push product out through their channel and you won't get paid for maybe 45 days on that product, so a big influx of cash is needed to get over that initial hump. So before you go that route with a wholesaler, let them know you want to roll it out region by region with tighter terms until cash flow at that new level stabilizes (which can take 2-3 months).

If you go direct, it goes slower, but your ramp-up is also slower and cash flow requirements are more manageable. And you get to better control who is selling your product and how it's being sold. But it's slower and requires more sales effort on your part.

What price point does the wholesaler sell the product selling at? Can that be raised to create more margin for you? How long does the wholesaler want a contract and is it exclusive for those products over a particular territory? Can you make up the profit with the lower margin but increased volume (which also can cost more if the volume requires a fixed manufacturing cost increased at certain levels)?