Quilt Biz #5 – Retail Products

It’s Sunday and time for another Quilting Business post!  Looking at the comments of last week’s post on selling patterns, it seems many of you are feeling a bit unsatisfied with the advice to write your own patterns and sell them to make money.

In truth, the example of patterns was simply a way to introduce the idea of creating products which can pay you multiple times, for multiple years.  In a craft world, it’s very easy to get stuck in the mindset of stitching individual products, which as we learned in Quilt Biz #3, might not be the best way to make a living with your craft.

So to directly answer those in the comments of last week’s post, yes, it’s definitely a learning process to dissect a pattern down into simple steps, to write and organize it into logical progression, and ensure that no matter whether you’re teaching a simple log cabin or a complex applique, any quilter could take that pattern and make a quilt with it.

This is a learning process very similar to learning how to quilt in general.  Just as it took a few months to learn how to prepare, cut, and piece blocks accurately, it’s probably going to take a few months to design, organize, write, and test a pattern before trying to sell it. 

But there are many quilting business owners that don’t know how to write patterns.  It sounds extremely odd, but I’ve met owners of quilt shops that literally have no clue how to quilt!  While this lack of knowledge might seem limiting, sometimes it’s better to have a solid foundation in business, rather than in skill.

So today let’s learn about another way you can make a living with quilting: By wholesaling products and retailing them to customers.

This is the most common way to run a business if you don’t have a lot of skill at writing your own patterns, if you know you don’t want to individually stitch items, and if you have a set of favorite products you’d like to share with customers.

Now it sounds silly, but I feel the need to add a small warning here as I explain how the typical distribution chain works.  The simple fact is, this is how almost ALL products (at least 99%) are sold to consumers every day.  Whether you’re buying socks from Walmart, or a new rotary cutter from JoAnn Fabrics, all of those items come from a distribution chain that brings products from the manufacturer to the customer.

Essentially the product distribution chain looks like this:

Manufacturers —> Distributor —> Wholesaler (business owner) —> Customer

With each layer of the chain, the price of the product doubles.  So let’s say a manufacturer creates a product for $3.00.  They are going increase the price to $5.00 when they sell it to a distributor so they make money above the manufacturing cost.

So the distributor works as a giant Walmart for all the products in that particular category.  For quilting, the biggest distributors are Checker, Brewer, and Moda / United Notions.  They try to buy the widest variety of quilting products from manufacturers and stock them in warehouses across the country.

In order for them to make a profit on the sale of the products, distributors add a percentage to the price as well.  Let’s say for this example, they add $5.00 to our product, so it’s now $10.00.

If you are a business owner, whether you own a store front shop or online business, you can open an account with any of these distributors and purchase that item for $10.00.

From wholesale to retail, the price typically doubles, so you will sell that item in you shop for $20.00.

It’s very easy to see how you can make a living with quilting once you take advantage of this distribution system.  You will need to first invest in products, but for every product sold, you will make 50% of the purchase price. 

It might be easy to run away thinking that this system takes advantage of the customer.  It actually doesn’t.

Even at 50% profit, many storefront quilt shops barely make a profit because they are paying an enormous amount of overhead expenses.  This includes rent, utilities, employees, insurance, and investing in more stock.

Also keep in mind the enormous amount of money it must require in order to stock a shop in the first place, before any customers walk in the door.  I would guesstimate that the typical storefront quilt shop is carrying around $20,000 – $50,000 worth of stock at any given time, and far more if they sell machines.

Regardless, the system was set up this way because it works.  Everyone in the distribution line makes a profit, and so long as the manufacturers keep the products coming, the distributors never run out, and the wholesalers always have the ability to stock their shops with the necessary items to bring in customers.

But looking at the typical storefront, I’m sure you’re already blanching at the numbers I’ve mentioned so far.  How in the world could a brand new, starting out business owner be able to spend even $20,000 to stock the shop with products?

There seems to be three answers for this problem:

1. Loans and deep, soul crushing debt.
2. A lifetime of saving for the start up capital.
3. Don’t start so big.

Let’s explain each one in depth:

1. Loans are a pretty common way to get a storefront off the ground.  If you’re not up to your eyeballs in debt already, and you’re a good prospect for a business owner, and you have some ability to explain what you want to do, how you want to do it, and how much time it will take to pay the loans back, then chances are a bank will give you the start up capital you need.

However, nothing in this world is guaranteed.  You may live in a great town with loads of quilters and no dedicated quilt shop, but that does not guarantee you will be successful.  Even a $50,000 loan does not guarantee you will be an instant success.

A storefront business is really dependent on excessive amounts of foot traffic.  A brand new shop has essentially no content (no ads, no word of mouth, no experience) in that area, and therefore, no traffic.  You will need to be very careful about where you locate the business, how visible it is to the public, how accessible it is to major highways, and how easy it is to get into and out of.

Whatever you do, be very, very careful about taking out a huge loan when you have no capability of paying it back without the business being a success.  Make sure that whatever amount you borrow, you will have some plan for paying it back if everything goes south.

2. With all the doom and gloom of taking out a loan, it seems to make far more sense to spend time saving for the day you open your business.

However, as much as it would suck to get buried in a sea of debt, it would equally stink to wait you whole life saving scrupulously to open your business, only to lose it if the business fails.

As before, you have to have a plan, have seriously and HONESTLY considered the pros and cons before jumping in.  It’s very hard to be honest with yourself when you’re so excited about opening the shop and selling fabric, but cold hard truth is far better than giddy, blinded excitement.

Why am I being so down and depressing?

Because the fact is, both of these options stink.  Waiting your whole life to save up $50,000 in capital, or getting a loan for the same amount, is just such a monumental goal, it’s almost in the nature of unattainable.

Which is why I strongly advise you to consider #3:

#3. Don’t start so big.  What the heck do I mean by this?

Walk into any storefront shop and you’ll find a little bit of everything: fabric, tools, thread, specialty art stuff, precuts, machines, embroidery software, etc.  Thousands of dollars go into stocking every square foot of that shop with as much stuff as they can so hopefully customers that come in will find what they are looking for, and a few other things as well.

This is what I call a Full Service Quilt Shop.  In order to cater to the largest number of potential customers, a physical shop will try to carry a bit of everything to try to make everyone happy.

Unfortunately this is such a common model, many people think it’s the ONLY way to run a shop.

But it’s absolutely not.

You don’t have to run a full service quilt shop.  You can instead open a Specialty Shop.

A specialty shop is a store that specializes in one thing: one technique, one idea, one focus.  Rather than trying to carry a little bit of everything, you instead will carry all the products focused in one small niche.

A great example would be a shop dedicated to only precut fabric.  All you carry is layer cakes, jelly rolls, charm packs, and turnovers.  That’s it.  Nothing else.

Another example would be my online quilt shop, which only carries items focused on free motion quilting.  You won’t find rotary cutters or rulers in my shop because it doesn’t fit with the focus on quilting.

To be straight up truthful, this probably won’t work as easily in a storefront business.  Too many quilters are used to walking into full service quilt shops that it might throw them off to walk into a shop carrying only precuts.

However, with the right amount of content, traffic will come, no matter how niche your focus.

You may have to work harder to bring in traffic to your specialty business, but once people in your area know that’s the place to go for THAT particular thing, they won’t even consider going somewhere else.

So rather than thinking you must start with $50,000 worth of physical products to sell in you shop, why not instead start with $300?

Select 5-10 products you love and want to share with your customers.  Only order 5 of each, or whatever the minimum is required.

This way, your risk is minimized because your investment is not so high.  

If you have traffic, created by the content you’ve been sharing, it should be no problem to sell the items you’ve selected.  Once you sell out, order more.  Keep your orders small initially until you’re sure your traffic is steady to be able to stock larger quantities of products.

Keep in mind that signing up with a distributor isn’t a simple or overnight process.  You will need to have some proof that you are a real business owner and have a resale tax identification number. 

This number proves you’re a real business that is paying sales tax in your state.  Most states now have the ability to apply for this number online, but different states have different rules so you should spend some time looking into the steps to starting your business in your state.

Don’t be intimidated by this process.  It’s easy to get intimidated and scared off by the idea.  Going back to post #1 – if you’re serious about owning and running a successful business, you shouldn’t let applying for a simple sales tax ID number scare you off from starting your business.

Also the distributors themselves can be scary to deal with.  I’ve personally dealt with a lot of run around to get my accounts set up, mostly because they don’t make it instantaneous or easy.  They want to make sure you’re an actual business, and will need to do checks to ensure you’re legitimate.

Count for at least 1 month to get your account created, and you will have to purchase a set amount for your first order, usually around $300 – $500 in products, and also order a minimum amount every year.

Again, it’s nothing to be afraid of.  These distribution companies and your state’s Department of Revenue are both designed to help you start your business successfully and legitimately because they both make a cut on your success.   That might sound a bit cold hearted, but that’s capitalism!

So now that you understand three ways to make money with quilting, what will you do?  Continue to stitch out individual handbags, or make a pattern to sell?  Or will you find a handbag pattern created by another quilter and become a retailer of that product?

There’s definitely a lot of ways to run a business and I hope I’ve opened your eyes to many new ideas.

Here’s the complete list of all 10 Quilting Business Posts:

Let’s go quilt,

Leah Day