“Help, a jeweller is undercutting us”. A gallery owner’s perspective

Dear The Design Trust 

I run a successful gallery and I want to share something with you.

I recently discovered that one of our jewellery designers is selling her own work via her own website at only a few pounds above her wholesale price, which is obviously a lot lower than what we are charging for her work in our gallery. We have tried to speak with her on the phone but she will only respond by email.   

We are struggling to find the right tone to deal with this as she is a small business, but we are on the point of returning all her work.  She has loads of different outlets and all the pieces we can find online are selling at different prices.   

We asked her if she had a recommended retail price but she declined to answer. She has said it is ‘not her problem’ what other retailers charge for the work and she has indicated our mark up of x2.2 is excessive (50% from the retail plus VAT on our commission).    

I have thought about sending her a link to your pricing articles but I know she will respond badly.  Any tips?

This real-life question is answered by Patricia van den Akker, Director of The Design Trust:

‘Thank you so much for your email. It’s great to hear this story from a gallery’s perspective, as so often we only get to hear the maker’s perspective.

I don’t blame you for wanting to stop working with her.

This jeweller sounds very unprofessional in my opinion, as she doesn’t seem to want to learn or listen, doesn’t take responsibility for her actions, and is obviously underselling her work. I think you have tried your best here and have shown a lot of care and patience.

And no … your commission rate of 2.2 is NOT excessive!

It’s best practice for galleries to charge between 200 – 300% commission on a wholesale price to calculate their retail price.

No, gallery owners are not ‘raking it in’. It’s what galleries need to charge to cover their high costs; to pay for their overheads (including rent, staff, insurance, business rates, VAT). Think about it this way: If a shop sells something for £100, then around:

• 40% or £40 goes to you the creative supplier
• 20% is VAT, which goes directly to HMRC
• about 20% is mortgage/rent and business rates
• about 25% is staff costs
• so that leaves less than 5% profit!

If you want to learn more about why galleries and shops charge high commission then click here. 

What retail price should makers be charging?

Ideally, a maker’s retail price would be more or less the same regardless of where they sell: their products need to be at a similar price level on their website or online shops, as it does in retail outlets and galleries.

However, there can be a little bit of fluctuation (say 10%) or so, and some retailers might have to charge much more (especially London-based ones because their space and staff costs are higher!) and a maker can charge a little less (for example at an Open Studio, or to compensate for additional postage costs).

But charging very similar price levels to both retailers and consumers (as this jeweller is doing) is not correct. It’s simply not sustainable.

The retailer HAS to charge their commission on top and therefore would be 250% more expensive than the maker’s prices.

It’s a very common challenge for new makers that their work is too expensive to sell via retailers and galleries in the first couple of years, due to this mark up. 

Indeed that’s the reason that I often recommend that new creatives do not sell to retailers in the first couple of years because their prices simply won’t stack up. If you want to learn more about what to do if your work is too expensive then read this blog post.

Makers at the start of their business career should focus on being creative about how and where they sell and find alternative ways to sell their work in larger quantities. For example by:

• Focusing on online retailers rather than bricks and mortar shops because they often can charge less commission (as the overheads of online retailers are far lower!). See our list of online retailers here.
• Selling to interior designers as they are a good ‘middleman’ to get started with. They hopefully will order more and more regularly, but at lower quantities and they would be expecting a trade discount rather than wholesale prices.
• Doing more marketing and selling to get started. Focusing mostly on selling directly to consumers in the first couple of years e.g. through craft fairs, selling events, their own site, ‘Tupperware parties’ etc. A big advantage of this is that makers’ profit margins can be higher (between the anticipated wholesale price and anticipated retail price) then when makers are only selling direct to consumers.
• Negotiating a better commission rate with retailers. For example: if makers are selling on a sale or return basis, or if the gallery or online shop is very new.

I hope this is a lesson for other creatives on what will happen if you are unprofessional and undersell to galleries:

• You will lose trade clients rapidly (and they are very unlikely to come back to you – ever)
• You will very likely get a bad reputation (with both trade and other designer-makers)
• You are not supporting galleries, who continue to play a crucial role in introducing new & existing audiences to crafts
• You are actually undercutting the sector as a whole’

(Postscript: The gallery contacted me after this correspondence, and indeed they dropped this jeweller. They were very upset to have to do this, but felt that they could no longer work with her.)

Are you a gallery or shop owner? Have you got similar issues like the one described above?

Are you a maker who sees other designer makers undersell their work? Do you think that galleries and shops don’t do enough to earn their commission?

Feel free to add your own experience below in the comments box.