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Wholesale order dilemma


#1

Hello everybody,

Sometimes things happen, good things, that you are just not prepared
for. My wife and I was at a wholesale show a couple of weeks ago.
One of the vendors spotted my wife’s ring while she was looking at
some of their work. They asked her about the ring and she told them
that I made it. Well to make a long story short they want me to
supply 40-50 rings to them. Now a little about the ring. It is what
is called a slider ring, one where the diamond will slide back and
forth. it is basically two square gold plates spaced apart to hold
the diamond and connect on the four corners with gold tubes. It
looks like a little piece of art when sitting on the table.

So I contacted them the following week because I did not have a card
with me. My major problem is that they are wholesalers and I would
have to supply them. I am use to supplying the retailer where it is
2.0 to 2.5 mark up.

Here read the e-mails below and let me know what you think.

My e-mail to them:

It was nice talking with you guys Sunday at the show. I have to
sit down and have a look at the ring and figure out the
production and cost. Cost is my biggest concern. I am typically
the wholesaler selling to the retail end of the business. Now I
would be the one selling to the wholesaler.

At what price point would you be thinking of selling this at?

Their e-mail to me:

Hello Rodney, thanks for getting back with us. Regarding the
production of the square sliding diamond ring, our thinking was
that we would supply you with the gold and diamonds and we would
incur any loss of gold in the manufacturing process. We would pay
you for your labor for the manufacture of the ring and I would
assume that we would get a price break proportioned on how large
the order may be. We don’t know what we would be selling the
rings for as it would depend on what part of the country we
would market them. I hope this proposal is reasonable with you.
If
you would like to discuss in detail you can call us at XXX-XXXX
or stop in the office.

Here are some of my concerns on this labor and materials. To start
the process, the side plates are cast from CAM cut waxes that cost
$75 a pair. So I figure I could do a set of masters from silver and
then make molds from really hard rubber. I forgot to mention this
design does not allow for sizing. I can size up alittle but not much
so I would need full and half sizes for ladies and they think men
too. So I am looking at 12 masters to be made. So there is one start
up cost. This ring is mathematical. So depending on the diamond size
your have to adjust the “head room” for the diamond. At this time I
do not have all the equipment the be self sufficient in completing a
ring from start to finish. Not a major item because I have someone
who has all the equipment with “low mileage” on it. I have just been
looking for a reason to buy, but it still takes money. Then I still
have to do the casting so there is electricity and casting materials
that have to be paid for.

One other concern I have is this statement off their website:

“design and manufacture diamond and fine colored stone jewelry
utilizing our overseas facility, selling to retailers across the
country”

What do I have to do to try to protect myself from them walking away
with a few rings and then sending them overseas. I know my options
are limited but I want to look professional when doing this and not
just the lamb headed for slaughter. Will a copyright help me as well
as establishing my trademark.

My mind is just all over the place on this and I am half tempted to
just walk away from this. I have to figure I spend form 7:45 to 6:30
at my w2 job, that includes travel time of about 1hr 20mins each
way. What is it worth for me to work 7pm to Midnight to build rings.
And the way my luck runs the qty would just go up. I thought about
cutting my work week back at my other job by one day.

I know I have rambled on long enough and thank you for taking the
time to read this. Any and all ideas would be a great help.

Thanks
Rodney
RC Gems


#2

Hi Rodney,

What worries me about all this is that it seems they want to take
your design, buy the gold, and sell your product under their name. I
don’t know much about copyrighting or trademarking, but I don’t think
I would even consider this option unless I could protect MY design.
And as you mentioned, what would keep them from sending it to
China…whatever overseas and making it theirs.

Just my 2 cents,

Jennifer Friedman
in Ventura, where the sun as come out again.


#3

HOLD ON RODNEY! Their proposal is not reasonable whatsoever. read
between the lines. they are asking for a price break on your labour,
they want to give you materials that you have no idea from whence
they came, they also want to supply the stones, again- you have no
idea of their origins which can be among other things, as far as the
FTC is concerned and the IRS, illegal. Don’t make a move with these
people before

A) getting some contracts ready for them to sign, particularly a
standard NON-COMPETITION form., a testament and copies of their
purchase orders for the materials they are handing over to you, an
agreement that they will not violate any trademark and/or copyright
s you hold exclusively, that you alone will own the rights to
reproduce the design and any subtle modifications thereof, etc. (the
list is quite long)

B). there are about six reasons I can see right off the bat from
their email and web site’s statement why I would gracefully bow out
unless they are willing to give you about - and I am not kidding-
$225, 000. 00 up front and a clear contract that spells out that the
design is trademarked, copyrighted and is not for reproduction
(unless you are the contractor that does the reproducing!) and future
orders are to be placed solely with you for that design and including
minor modifications thereof. that would be a fair wholesaling
contract binder and represents to you their serious intention to
retain you as a manufacturing vendor of that specific design to be
produced until x amount of the retainer is used as proved through the
labour costs and until that period is expired *OR * At which time YOU
alone reserve the right to renew the agreement and at which time they
are bound ( by a bond or escrow account - a bond is better!) to pay
you x amount for a period of time that you state that you are willing
to re release that design in a limited edition of x number of
pieces… I could go into great detail on the stipulations you must
spell out to achieve absolute clarity and to consider all the
legalities of this but Orchid is not the place, nor is that type of
consulting quick or free.

Secondly, DO NOT LET THEM PROVIDE THE MATERIALS. you will not only
get better prices when buying in the quantities you need from the
supplier(s) you have established accounts with, but you can control
the materials from their arriving at your studio until packaged for
transportation via MJSA’s Fed EX system or the equivalent. I would
find it very suspect if someone, were casually going to hand over
about 15 ounces of gold and 50 plus IF or at least VVS diamonds. As
for buying the diamonds, you have many options there, and because of
the size of the parcel you need, you will be in a position to
negotiate with your favourite vendors for the quality your new found
"associates" want to specify for use, as they are essentially
commissioning you to produce x, which is in effect copying your
design, and perhaps modifying the quality to meet the price point
they want to sell it at- which should be, in my opinion the only
element you are willing to compromise on regarding your design
quality and modifications to accommodate them… That is- BEYOND the
price you are charging them for copies of your design/ring- and
whether or not you are willing to compromise the quality of the
stones to fit their pricing. The entire wholesale/retail venture
should be moot- ( if you are at all willing to compromise your
standards to make a deal that sounds very suspect to me in the first
place !).

You are the goldsmith and the designer, and your terms are
X-:(hopefully) that you will supply 50 rings- 10 each of five sizes
(womens 6, 7, 8, men’s 9, &10) at a cost to them of about (just for
approximation’s sake, and this is a lowball estimation at best:-)
1,850. 00 each for women’s sizes and 2, 150.00 each for men’s sizes.
they are then free to resell the rings at any price they wish and to
whomever, wherever they wish, as long as they do not infringe on the
non-compete and other design rights agreements, do not send your
design off to be modified sightly and reproduces then, legally (there
are a lot of contract negotiations you will have to consider in
dealing with these people because you are not a wholesaler).

Your proverbial bread and butter is that 2.0 or 2.5 mark-up, in
letting that go, you loose not only the creative control you have
over your product, but leave your design open to “reinterpretation”.
I would seriously rethink getting involved with these people. It is
not how you do business in the first place, and like I mentioned,
unless they are willing to put you on retainer, and in exchange they
have you waiting to fill reorders in specific sizes of the same
quality as you first supplied, I think you are in for a battle of
international copyright and trade agreements not to mention potential
losses if they resell your design to a third party in China, for
instance, in which case you have very little recourse as the trade
laws are in the favor of the lets say Chinese producers that will
have ultimately -

a receipt in their hands, from the couple you met at the show, that
sold it to them. therefor the non-competition clause is with the
couple not the fabricators in China.

They already have the “square sliding diamond ring” concept in their
mind. Trademark and copyright it as fast as your counsel can do it,
and run away- If you aren’t looking to set a long or short term goal
to enter into wholesaling even a few designs. This is not the deal to
break ground with, given what you have gleaned already from their
site and I from their email…

Feel free to contact me offlist if my advise is what you’d like or
some exemplary non-competition and design rights management type
forms to have in your attache’ when you visit their offices ( which,
if you are even remotely considering going ahead with dealing with
this entire new division of your business after reading what I have
to say and no doubt others will as well- I would definitely at least
set up a meeting, or drop by unannounced to check it out, then decide
after seeing what is there, whether or not you want to press on with
the entire thing). good luck and trust your instincts and add on at
least 20 hours to any projections of time you have in your head
already. and I’m betting in that time vision you have not allowed for
initial consultations, and how much time you are willing to spend
re-negotiating the fine tuning of any contracts, design and
production details, and just the time it takes to establish a
working relationship in general, as a few faxes may do it if you are
used to your designs being available for reproduction, however since
you are asking for advise here, I’m betting this is not standard and
you haven’t begun to consider all the things that it takes to bring
what sounds like it should be a direct process ( they pay you x and
you deliver x- they play fair and don’t reproduce your designs
illicitly and your name is used as the designer /artisan goldsmith
and ultimately that they are essentially asking to pay you for
fabricating your design and then they want to take your design to
market)…

Bottom line: do not bend on your position. Selling to retailers.
that is what you do, that is what you want to do and entering into
any new contracted agreement and business structure is not a breezy
thing to be treated lightly when your design is on the line. They
already have a name for it… that should tell you a bit about them,
they aren’t referring to it as" “your design” that we would like to
discuss buying the rights to or we would like to market your work and
will help finance it’s production ", or anything remotely like that.
They want to take it, reproduce it at as little cost to them as is
possible and produce it overseas with wholesalers with whom they have
already established a relationship. run away, free your head of it
and protect your design as it is!

R. E. R.


#4

Rodney,

I don’t know what you should do, but here is a caution. Some large
retailers play a very nasty game. Let’s say you make widgets. Large
retailer comes to you and says “I’ll buy all my widgets from you.”
(or a huge order, much larger than you currently produce.) You
dedicate capital and time and stop servicing other buyers. (since
large retailer sucks up all your attention) The 2nd year the large
retailer says “I’m still going to buy all my widgets from you, but
you are going to sell them to me for X each.” (X turns out to be a
very slim margin.) You are now between a rock and a hard place. You
invested money in equipment and you have stopped servicing other
buyers. So if you don’t sell the widgets to the large retailer you
have a bank breathing down your neck for repaying equipment costs and
no steady customers. On the other hand, you are not making much money
selling the widgets to the large retailer.

Ikea handles this by guarrenteeing that they will buy so much each
year for a 5 year period. (so the manufacture can modernize and
recoup their cost.)

Maybe it would be good to sell them the design. Either a flat fee or
a royalty on each one or a combination of the two. You show them how
to make it etc.

Just suggestions; I don’t know what you should do. It sounds like a
beautiful ring.

Sincerely,
Jim Kennedy
(not a jewler, my wife is)


#5

Dear Rodney:

I hate to actually say this, but have you thought about having this
ring manufactured overseas yourself?

This way you can cut down significantly on your expenses. About
copyrighting your design, maybe you can get advise from the Jewelers
Vigilance Committee http://www.jvclegal.org

It is easy enough to copyright in USA, but you may need an
international copyright. Even with copyrights, all they have to do is
make a minor change and it may be considered a new design.

Diane
Dikra Gem Inc.


#6

Rodney, why don’t you do this on your own? You seemingly already
sell to retailers so you have a base, really, what do you need this
wholesaler for?

There will be price pressure from them and you’d need to make a
whole bunch more rings to make up the profit difference. How many
should be determined before you pull the trigger. You could project
out what quantity and what profit you can reasonably expect by
marketing it to your existing clients vs using this wholesaler. Let
the dollars and the lifestyle make the decision.

From the sounds of it they want to basically just pay you labor.
Sell it on your own and you get that $omething extra. But, can you/
will you actually market the thing properly?

Good Luck


#7
why don't you do this on your own? You seemingly already sell to
retailers so you have a base, really, what do you need this
wholesaler for? 

You are right. After reading R.E.R.'s post it really sank in. What
it is about this ring was I made it for my wife as a gift. I had not
thought about making more because I like her stuff the be one of a
kind. Since this has all happened she has blessed the idea of making
more of them. So I am going to do this on my own and collect the
money to be made rather than someone making it off my back.

Thanks,
Rodney


#8

Diane,

I hate to actually say this, but have you thought about having
this ring manufactured overseas yourself? 

I don’t know you and you sure don’t know me but is would be a cold,
cold day in hell when I let my stuff go outside the USA. If you was a
man and you said that to my face it would be on. This will be made by
me or some help from an apprentice, if not they will not be made at
all.

Disclaimer: I do not intend to insult any of the other members that
are overseas. I am a craftsman not a mass marketing company trying to
exploit cheap labor.

Rodney
RC Gems


#9

Also in addition to this they won’t pay you on time either they will
pay on what I call “net whenever” and you will still have to pay all
of your obligations on time like employees etc. Avon was famous for
that, and they ruined alot of sterling manufacturers here in
Albuquerque QVC and HSN are also very dangerous too, just remember
everything is negotiable especially return percentages. This is a
category called majors and thier price points are between wholsale
and distributors.

Good luck…Frankenstein


#10

Hi Rodney,

I’m glad you posted this topic because I’m very interested on how
different jewelers would handle this. I’m not saying you should or
should not do it, but here are some things I think I would be
concerned about if it were me faced with this decision:

You asked for a price point and they didn’t give you one because “it
would depend on what part of the country we would market them"
Doesn’t it seem reasonable that they, at very least, give you a
range of prices they might sell them for” I would be hesitant to
spend another minute on this if they can’t even give you an estimate
(after asking a second time.)

They said they’ll “supply you with the gold and diamonds”. Does this
mean you’ll buy what you need and send the bill to them, or does it
mean they will literally supply you the diamonds and metals" Now, you
can call me a paranoid, distrustful person, but if they are going to
supply the diamonds and metals, I wonder where they came from and if
they are what they say they are. Are they really diamonds, or are
they actually something pretending to be a diamond. If they are
diamonds, are they in fact the actual color and clarity they claim
they are" Is the metal actually the karat they say it is" Do you have
the equipment or resources to test these things yourself" How much
time/money would it take you if you did test the quality of what
they provide you. Is your name going to be attached to the rings" If
you name is attached to the work, I’d want to be 100% sure the
materials are what they are marketed as so you don’t get into hot
water and a bad reputation later.

They said they’d pay for your labor. Perhaps they haven’t thought
about what else you’re going to have spend your money on, like you
said, casting materials, molds, and electricity. I think they need
to compensate you in some fashion for these things, lest you be
working at a loss, right" And since they’re already asking you for
volume discounts… they can at least be fair in paying you!

You mentioned thinking about cutting your other job’s work week back
by one day in order to work on the rings. In the end, would you be
making the same amount of money, or more making rings for
"(wholesale) of wholesale" than you’d be making at your other job,
or if you’d be making less, is it still worth doing to get your work
and name in front of more people"

… which leads me to ask: how sure are you that your name would
actually be carried with your work as it travels from your hands, to
the wholesaler’s, to the retailers" Will this wholesale company keep
you up to date and provide accurate lists of which retail locations
are carrying the rings" I don’t know if they will feel obligated to
do this, but I’d really want to know which retail locations my work
was being carried in so I could check up on it to make sure my name
was being advertised with the rings if they say it will be
advertised with the rings.

As for copyright, isn’t it such that if someone wants to take(steal)
your design, they can somewhat easily do so by very slightly
changing part of the design, thereby making it legal" I’m certainly
no expert on this. Feel free to contact me off list if you like, I
may be able to put you in contact with a friend who’s a lawyer
specializing in intellectual property who may be of some assistance
to you.

I’d love to hear others thoughts, and Rodney, I wish you the very
best of luck in whichever path you choose.

Alexis Romeo
www.alexisromeo.com


#11

The “overseas facility” is a large warning to me. I would say thank
you but I’m not interested in sharing my design at this time.

Good luck.
Mary A.