Episode 004: Product Sourcing Online: Retail vs Trade
I’ve seen this debate brought up OFTEN during my time as an e-designer, and I know personally it is something I’ve always wondered about myself — when it comes to specifying product as an online designer, do I do trade, retail, or both?
Now there are pros & cons to both — which we will get into — but as an e-designer I have seen it come up a lot, with designers just like me not really sure of which way to turn, and this conversation is usually predicated by the assumption that e-designers only source retail and/or they can’t can’t source trade.
This opens up a bigger questions that I see come up very often — which one is better for e-design, how to you source trade online, what’s the value add in one over the other… and then how does this compare to when you’re specifying for full service design.
IF NO ONE’S SAID IT TO YOU BEFORE THEN LET ME BE THE FIRST — E-DESIGNERS DO NOT ONLY SOURCE RETAIL.
AT THE VERY LEAST, THEY DON’T HAVE TO.
I know lots of designers who simply choose to only specify retail, because that is what they’ve determined to make the most sense for their business model, but overall, e-designers do have a choice!
It comes down to your business model — how you’re trying to make money & what fits the way you operate.
Are you designing online exclusively?
Is e-design simply a service you offer?
The decision of how & where to source is a personal one, so while I’m going to break down some of the pros & cons so that you can make an informed decision when deciding which is the best fit for you.
RETAIL
Sourcing retail means that you’re using retailers that are easily accessible or common place — they’re not exclusive to the trade industry, and they’re client facing; so with or without you, the designer, they Ould easily shop that retailer.
Suzie Q. Customer can walk into said retailer or go onto their website & start shopping — she doesn’t need a rep, an account, or any other fancy setup to buy her sofa, rug, lighting, bedding. If she has the money, she can buy the things.
PROS
Convenience — for the consumer & the designer because they aren’t any steps to go through to start shopping. You go in the store or on the site & you shop. The end.
Accessibility — for the consumer & the designer, especially for a retailer that also has a brink & mortar presence. While this may not be the case for an e-commerce retailer, clients can easily take your recommendations & test them out for themselves — sit on the sofa, see the swatches in person, etc. — and, even though you’re working virtually, the client is not brought into the design process & can be as hands on as they want to me.
Familiarity — for the consumer, because they know the name, and that familiarity gives them comfort & peace of mind. You can recommend some of your favorite vendors & they might very well look at you like you have 10 heads & all 10 are speaking a foreign language. But you make those VERY same recommendations that a retailer happens to carry & they’re sold! They know & trust these names, and so they’re suddenly more confident in the virtual design process.
CONS
Accessibility — because guess what: there’s nothing to stop them from going rogue & shopping without you. They happen to have recognized the sofa you recommended because they pass it everyday on their commute, and now they just buy it. The design is officially derailed because while you may have presented it as part of the mood board, maybe you were still working on the space plan. Or maybe this was an approved piece but now that they’re in the store, they’re having a field day with the in-store associate, buying all the things.
Profitability — or lack thereof for the designer, because while many retailers fo offer trade discounts, they’re hardly ever anything to write home about. They vary, but typically the average hangs around the 10-20% mark. As retailers, their holiday sales can often run deeper than that — easily as high as 50% off! And since the trade discount can almost never be combined with any promotional offers, there really isn’t any value add, especially not if part of your business model is to make profit from products.
TRADE
Sourcing trade, on the other hand, means that the vendor is exclusive to you as a designer or another industry professional; so without an intermediary (like a designer), clients/consumers have no access to that vendor or brand.
As a designer, you’re working with vendor reps or a design center to bring these products to your clients.
PROS
Exclusivity — which opens up a whole world of benefits from preventing rogue shopping to providing a curated, creative design for the client. Even with vendors that also wholesale to retailers, what they make available to designers is almost always a wider assortment than what’s available via retail, so you can really create a special client experience.
Profitability — with deep enough discounts, you can easily make a profit on products, whether you choose to share your discount with the client or not (which is a whole other debate for a whole other episode). This can serve to be its own revenue stream, separate from your design fees, and for many designers, has proven to be very lucrative.
CONS
Accessibility — because not every vendor is e-design friendly! And this isn’t to say the vendor themselves won’t work with e-designers, but instead, that the way they operate, may not work well in the e-commerce space. It’s not always as easy as “shop, add to cart, pay, deliver” but now you may have to factor in things like order minimums & drop shipping to facilitate the order. Impossible? No. But depending on your model, it may not make sense to go down this route.
Entry Point — translation: do you make enough, or specify enough, as an e-designer to sustain these accounts? If the minimum order it $1,000 but you only average about half of that in terms of the products you specify from that particular vendor. While this may be all the more reason to consider limiting the number of sources you use for 1 project, it can still be a deterrent. It is worth noting, however, that if you also offer full-service design, this may never effect you because you can supplement the orders your placing with your full-service projects.
HOW DO YOU DO IT?
The short answer is to really consider, again, your business model & how you want to make money! But you do have options.
IF YOU’RE SPECIFYING RETAIL, YOU CAN…
choose to charge a flat fee for your shopping services. We already know that the discounts tend to be pretty shallow, so in doing this, you’ve already ensured that you’ve made a fair profit on the time it takes you to execute the purchases — and this gives you the flexibility to extend the discount to them, reminding them of one of the benefits of working with you.
use affiliate links in the shopping list that you hand over to the client, so that when they make their purchases, you’ll earn a commission on the products. I imagine you’re providing them with a clickable shopping list, so if you’re part of an affiliate program, you can covert those links. Short of them simply ignoring your list altogether, there’s nothing extra for them to do &. You’ve earned an extra couple of dollars, depending on the commission rate (I’ve seen anywhere from 2 to 10%) an item total.
Math Time:
Let’s say you’ve created a shopping list that totals $10,000 for your client. And let’s say for the sake of the conversation every retailer on that list happens to offer a 5% commission. For simply using affiliate links, versus the regular links, you’ve earned an additional $500.
Let’s take that same $10,000 list, but instead you’ve chosen to do the shopping for them. And again, for the sake of the conversation, we’ll say all the retailers on said list offer a $10% discount. That’s a savings of $1,000. If you choose to split your discount 50/50 with the client, they’ve saved $500 & you’ve earned $500… not counting the flat fee you may have charged for shopping. Or maybe you’ve extended the full discount to them, because your flat rate offsets the difference.
When it comes to trade, there are a few more factors to consider — upholstery vs. window treatments vs. wallpaper vs. lighting can all be very separate beasts in their own way, but in general, you have a few ways to may it work for you as an e-designer.
IF YOU’RE SPECIFYING TRADE, YOU CAN…
use a larger retailer that also carries trade vendors. So a retailer that is consumer facing, but also trade/designer friendly, also allows you to take advantage of a much deeper discount on more exclusive pieces. You now have an opportunity to earn a profit on the back end while also saving your client money on the front end. And because they’re set up to work with consumers & designers alike, it eliminates the need for receivers, drop shipping, etc.
use a design center and/or collaborative. While there are key differences between design centers & design collaboratives, here’s why I am placing them in one category — with both you are essentially benefiting from the collective of discounts available. Two different models but the idea is the same, you don’t have to go through the initial set up of multiple vendor accounts; and these centers/collectives aren’t consumer facing but you as an individual designer can still be a member.
set up your own trade accounts. If you’re a full service designer, there’s a strong chance you already have accounts set up with vendors, so as I mentioned earlier, using these vendors as part of your e-design is business as usual; but if you’re offering e-design exclusively, you simply have to do a little bit more research on your part to see which of the vendors you’d love to work will accommodate your business needs. Set up meetings at market. Reach out to your local rep. follow their social media platforms. Whatever it is that you need to do to start a conversation & build that relationship. Because, particularly for the ones that aren’t set up for e-commerce, the hesitation tends to come from wondering, “how much are you really making as an e-designer…what’s your volume?” But if you know that you’re attracting the clientele that is a fit for trade specifications, have those conversations, because it’s not impossible! This requires more leg work, more networking, and more in person engagement, but I can totally be done.
WHY SOURCE RETAIL AND/OR TRADE
At the risk of seeming redundant, I will say it again — it comes down to your entire business model!
How do you want to make money?
Do you want to sell product?
Do you prefer affiliate marketing?
Do you want to build trade relationships?
Does retail better suit your desired clientele?
How much of your time & talent do you want to invest in e-design, and then specifically, sourcing product for e-design?
What are you charging? Are your fees reflective of a “retail” designer or a “trade” designer — because there is a difference.
Who are your clients?
ASSESS WHERE YOU ARE CURRENTLY, WHERE YOU WANT TO BE, AND WHAT YOU’RE MOST COMFORTABLE WITH.
There are ways to make money no matter which route you choose, but this isn’t the kind of thing you want to just “wing it”. If you are getting regular e-design clients & this is a healthy part of your business, use that historical data to determine where you land when it comes to retail versus trade.
If you’ve been doing one over the other & it’s been working, how can you build on that?
If it hasn’t been working, where are they opportunities for you to improve or is it time to consider the alternative?
Can you use both models, but on a case by case basis?
Look at your numbers, and go from there.
And if you’re just starting out, reverse engineer what you would LIKE to your business model to produce. Put some numbers into a spreadsheet, think through your tangible results, and think through your best fitting model.
No one will know better than you which is a “right” fit, but the point here is to know you have options. Because this was a lot to dissect. The biggest takeaway here is that you don’t only have to do it one way or another. If you’ve been that e-designer whose been sitting on the fence, wondering where you fit in, I just want you to know that you fit in wherever you make a place for yourself.
If I would love it if you take screenshot while you’re listening & tag @thedesigninfluence on Instagram or on our Facebook Page, so that we can keep the conversation going.
If you’re already a practicing e-designer, how & where do you tend to specify products for your projects? And if you’re not a practicing e-designer, yet, share if this has helped you maybe think through some challenges you were anticipating.
I hope you’ll subscribe join me every week, and if you haven’t already, be sure to let me know what you think with with a rating & review, and share the show with your design bestie, so we can all hang out.
Talk to you soon!
Today’s episode is brought to you by Gather.
Gather is a visual platform that helps you source product, communicate with clients, and eliminate hours of admin headaches. Head over to thedesigninfluence.com/gather to get started with a free extended trial, and to start treating your business better.
