How to Handle Customer-Supplied Goods: Part 2

November 23, 2009
By Steven Batts, Contributing Writer

Last time, I shared tips on handling customer-supplied goods that are to be embroidered. It is important to have policies in place to handle such situations. After reading e-mails from many customers during the last two weeks, I've found that the best — and most important — solution to this problem is to have a written policy that is either posted in your shop or given to the customer. Many embroiderers make their customers sign this policy as a release from any liability.

As with many industries, big-box stores and the Internet are changing the rules to how business is done. It used to be that there were only two ways a customer could get garments: from you, the embroiderer, or by purchasing them from a store. If they chose the latter, they would end up paying the same — if not more — as they would if they bought from you. Now, with big-box stores like Wal-Mart, customers can often get goods at the same price as that which you pay when buying from wholesalers. While this is sometimes frustrating, it is not too difficult to work around.

Selling Service and Convenience
First of all, the price of embroidery on customer-supplied goods should be higher than that of embroidery on goods that you supply. Accepting customers' goods presents a risk and, therefore, requires the higher price — not to mention the fact that you need to make up for the lost profit margin.

Secondly, sell customers on the idea that you are a one-stop shop. They don’t have to worry about finding 12 different-sized polos by visiting three stores to get all they can. Yes, they will pay a buck or two more from you, but it is worth the time and effort you are saving them from having to visit multiple stores. Also, remind them that they would have to do the same thing again if they re-order. And the second time may be tougher, as stores change inventory and styles from season to season.

By coming to you, the one-stop embroidery shop, the first order is simplified and re-orders are even easier. Thus, you are selling service and convenience.

One emerging obstacle is the ability to order goods online. Web sites are popping up that carry the same brands that a typical apparel decorator carries. Some of these Web sites carry the goods at the same retail price that the average decorator would pay at wholesale. Other sites offer these goods at prices lower than retail, but higher than case pricing offered by wholesalers. It is hard to tell if the wholesalers back these Web sites, and sometimes, their only purpose is to take orders and then drop-ship the goods from the wholesalers to the end user.

While this presents a huge problem for promotional products distributors, it also can present a problem for decorators. Many embroiderers and screen printers count on the revenue generated by garments. Losing such revenue can hurt their bottom line. Those who embroider customer-supplied goods won’t be affected as much, but could still miss out on the larger margins created by selling the embroidered garments.

Is the Price (Structure) Right?
How should you handle this new wrinkle in the supply chain? It mostly depends on your perspective. If you count on the sale of the garment as a revenue stream and consider the embroidery as only a cost center, you will lose out in this scenario. This is why it is important to charge more for customer-supplied goods.

Even with this new wrinkle, most customers still wouldn't want to deal with getting all the garments themselves. The same selling tactic works, albeit with smaller margins. They still have to order the goods and deliver them to you. I have already had a customer tell me that if I could supply the goods at the same price as, say, a local store or Web site, he would rather buy them from me.

The other option is to become a contract embroiderer, even if it is only temporarily. Contract embroiderers only decorate customer-supplied goods. They have strong policies in place regarding damaged goods. They also structure their prices so that all the profit is based on the embroidery, not on the goods.

The upside is that you don't have to worry about ordering goods, carrying inventory or having credit lines to cover the orders. I find the hassle of ordering goods for customers is equal (not more profitable) to the additional profit received from the goods in most cases. In some cases, it isn’t even worth the hassle. For example, I would rather have a customer bring me three T-shirts to embroider rather than having to source and order such a small quantity myself.

Hopefully, these ideas will help you sort through this situation and come up with a plan that works for you.

Steven Batts, a consultant with 17 years experience in the embroidery industry, owns Righteous Threads, Greensboro, N.C., which offers digitizing, embroidery and machine maintenance services. Steven regularly leads seminars at ISS shows and is an industry speaker and consultant. For more information or to comment on this article, e-mail Steven at righteousthreads@gmail.com.

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